EXHIBIT 10(u)
STOCK PURCHASE AGREEMENT
Dated as of January 13, 1998, by and among
United Rentals, Inc.
Mission Valley Rentals, Inc.
▇▇▇▇▇▇▇ ▇. Journey
and
▇▇▇▇▇▇ ▇. Journey
TABLE OF CONTENTS
Page
1. PURCHASE OF CORPORATION'S STOCK.......................... 1
1.1 Shares to be Purchased.............................. 1
1.2 Purchase Price...................................... 1
1.3 Adjustments to Purchase Price....................... 1
1.4 Hold Back........................................... 3
1.5 Excluded Assets..................................... 5
2. CLOSING TIME AND PLACE................................... 5
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
AND THE SHAREHOLDERS..................................... 5
3.1 Organization, Standing and Qualification............ 5
3.2 Capitalization...................................... 5
3.3 All Stock Being Acquired............................ 5
3.4 Authority for Agreement............................. 6
3.5 No Breach or Default................................ 6
3.6 Subsidiaries........................................ 6
3.7 Financial Statements................................ 6
3.8 Liabilities......................................... 7
3.9 Rental Asset Listing................................ 8
3.10 Permits and Licenses................................ 8
3.11 Certain Receivables................................. 9
3.12 Fixed Assets and Real Property...................... 9
3.13 Acquisition/Disposal of Assets...................... 10
3.14 Contracts and Agreements; Adverse Restrictions...... 11
3.15 Insurance........................................... 11
3.16 Personnel........................................... 11
3.17 Benefit Plans and Union Contracts................... 12
3.18 Taxes............................................... 13
3.19 Copies Complete..................................... 14
3.20 Product Quality, Warranty Claims, Product Liability. 14
3.21 No Change With Respect to Corporation............... 14
3.22 Closing Date Debt; Closing Date Current Assets and
Closing Date Current Liabilities.................... 16
3.23 Bank Accounts....................................... 16
3.24 Compliance With Laws................................ 16
3.25 Powers of Attorney.................................. 17
3.26 Underground Storage Tanks........................... 17
3.27 Patents, Trademarks, Trade Names, etc............... 18
3.28 Assets, etc., Necessary to Business................. 18
3.29 Condemnation........................................ 18
3.30 Manufacturers, Suppliers and Customers.............. 18
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Page
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3.31 Absence of Certain Business Practices............... 18
3.32 Related Party Transactions.......................... 19
3.33 Disclosure Schedules................................ 19
3.34 No Misleading Statements............................ 19
3.35 Accurate and Complete Records....................... 19
3.36 Knowledge........................................... 19
3.37 Brokers; Finders.................................... 20
4. REPRESENTATIONS AND WARRANTIES OF UNITED................. 20
4.1 Existence and Good Standing......................... 20
4.2 No Contractual Restrictions......................... 20
4.3 Authorization of Agreement.......................... 20
4.4 No Misleading Statements............................ 20
4.5 Brokers; Finders.................................... 20
4.6 Disclosure Schedules................................ 21
5. CLOSING DELIVERIES....................................... 21
5.1 United Deliveries................................... 21
5.2 Shareholders Deliveries............................. 21
6. ADDITIONAL COVENANTS OF UNITED, THE CORPORATION AND
THE SHAREHOLDERS......................................... 22
6.1 Further Assurances and Additional Conveyances....... 22
6.2 Release of Guaranties............................... 22
6.3 Confidentiality..................................... 22
6.4 Brokers and Finders Fees............................ 22
6.5 Taxes............................................... 22
6.6 Short Year Tax Returns.............................. 23
6.7 General Release by Shareholders..................... 23
6.8 Shareholders' Representative........................ 24
7. INDEMNIFICATION.......................................... 25
7.1 Indemnity by the Shareholders....................... 25
7.2 Limitations on Shareholders' Indemnities............ 26
7.3 Notice of Indemnity Claim........................... 26
7.4 Survival of Representations, Warranties and
Agreements.......................................... 28
7.5 No Exhaustion of Remedies or Subrogation; Right of
Set Off............................................. 28
8. OTHER POST-CLOSING COVENANTS OF THE SHAREHOLDERS AND
UNITED................................................... 28
8.1 Restrictive Covenants............................... 28
8.2 Rights and Remedies Upon Breach..................... 30
9. GENERAL.................................................. 31
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9.1 Assignment.......................................... 31
9.2 Counterparts........................................ 31
9.3 Notices............................................. 31
9.4 Attorneys' Fees..................................... 32
9.5 Applicable Law...................................... 32
9.6 Payment of Fees and Expenses........................ 32
9.7 Incorporation by Reference.......................... 32
9.8 Captions............................................ 32
9.9 Number and Gender of Words; Corporation............. 32
9.10 Entire Agreement.................................... 32
9.11 Waiver.............................................. 33
9.12 Construction........................................ 33
10. ARBITRATION AND DISPUTE RESOLUTION....................... 33
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of January 13, 1998, is entered into
by and among United Rentals, Inc., a Delaware corporation ("United"), Mission
Valley Rentals, Inc., a California corporation (the "Corporation"), and ▇▇▇▇▇▇▇
▇. Journey ("▇▇▇▇▇▇▇") and ▇▇▇▇▇▇ ▇. Journey ("▇▇▇▇▇▇") (▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
collectively the "Shareholders").
WHEREAS, the Corporation is engaged in the equipment rental, sales and
service business in ▇▇▇▇▇▇▇, ▇▇▇▇▇ and Dublin, California;
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of the Corporation (the "Corporation's Stock");
WHEREAS, United wishes to acquire from the Shareholders all of the
issued and outstanding capital stock of the Corporation owned by the
Shareholders;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto, each intending to be bound hereby, agree as
follows:
1. PURCHASE OF CORPORATION'S STOCK
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1.1 SHARES TO BE PURCHASED. At the Closing (as hereinafter defined),
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the Shareholders sold and delivered to United all of the issued and outstanding
Corporation's Stock; being the number of shares of the Corporation set forth on
Schedule 3.2 opposite each Shareholder's name. At the Closing, United purchased
the Corporation's Stock and in exchange therefor delivered to the Shareholders
at the Closing or shall deliver thereafter as provided by this Agreement the
purchase price described in Section 1.2 (the "Purchase Price").
1.2 PURCHASE PRICE. The Purchase Price is twenty million dollars one
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hundred ninety one thousand ($20,191,000), subject to adjustment as provided in
Section 1.3. The Purchase Price, as so adjusted, less the Hold Back (as defined
in Section 1.4) was paid in cash at the Closing by wire transfer to the account
of the Shareholders as set forth on Schedule 3.2.
1.3 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price was or shall
-----------------------------
be adjusted as follows:
(a) The Closing Date Debt was subtracted from the Purchase
Price. The Closing Date Debt is set forth on Schedule 1.3(a) and
includes: (i) the amount of the aggregate debt (excluding trade
payables) of the Corporation outstanding on the Closing Date to be
repaid by United at or immediately after the Closing Date and all
prepayment penalties incurred or to be incurred by United in connection
with the repayment of any such debt; (ii) the amount of the aggregate
debt (excluding trade payables) of the Corporation outstanding on the
Closing Date which will remain outstanding obligations
1
of the Corporation after the Closing Date, including in each case all
interest accrued through and including the Closing Date; (iii) the
aggregate amount of the present value of all capitalized lease
obligations (determined in accordance with generally accepted
accounting principles) of the Corporation and (iv) the aggregate amount
of the present value, discounted at the lease rate factor, if known,
inherent in the lease or, if the lease rate factor is not known, at the
rate charged to the Corporation by a third party lender in connection
with its most recent borrowing to finance equipment, of all lease
obligations of the Corporation that are not capitalized lease
obligations. Schedule 1.3(a) includes wire transfer instructions for
creditors whose Closing Date Debt will be repaid by United, and
attached to Schedule 1.3(a) are pay-off letters or instructions from
such creditors.
(b) The amount by which the Closing Date Working Capital was
greater or less than zero was added to or subtracted from the Purchase
Price, as the case may be. The Closing Date Working Capital was
determined by subtracting the Closing Date Current Liabilities from the
Closing Date Current Assets. The Closing Date Current Assets consist of
the amount of the aggregate current assets of the Corporation as of the
Closing Date (other than accounts receivable), including prepaid
expenses, plus the accounts receivable (including unbilled receivables)
of the Corporation earned prior to January 1, 1998, and collectible on
or after January 1, 1998 (valued as set forth below), minus the
Inventory Value of the fuel and merchandise set forth on Schedule
1.3(c). The Closing Date Current Liabilities consist of the amount of
the aggregate current liabilities (including any reserve for unpaid
taxes and excluding the current portion of long-term debt to the extent
such current portion is included in Closing Date Debt) and trade
payables of the Corporation as of January 1, 1998, plus $70,000
attributable to the costs of monitoring and remediating the UST cleanup
with respect to ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ described on Schedule 3.26. The
Closing Date Working Capital, the Closing Date Current Assets and the
Closing Date Current Liabilities are set forth on Schedule 1.3(b). For
purposes of valuing the accounts receivable of the Corporation in
determining Closing Date Current Assets, such accounts receivable will
be valued at ninety eight percent (98%) of their face value.
(c) There was added to the Purchase Price the Inventory Value
(as defined below) of the fuel and merchandise held for sale, which is
set forth on Schedule 1.3(c).
(d) There was added to the Purchase Price the invoice value of
any new Equipment listed on Schedule 1.3(d), which Equipment was not
included in the Rental Asset Listing described in Section 1.4(b)
because it was acquired by the Corporation after the date of the Rental
Asset Listing with United's consent.
(e) Prior to the Closing, United inspected the Equipment
included on the Rental Asset Listing (as described below) and the
Purchase Price payable pursuant to Section 1.2 was adjusted for
Equipment that was not Rental Ready. For purposes of this Agreement, an
item of Equipment was "Rental Ready" only if all required maintenance
had been performed and it did not require any repairs in excess of $200
per item for
2
those items having a net book value of $5,000 or greater and $100 per
item for those items having a net book value less than $5,000 per item.
(f) Schedule 1.3(f) lists accounts receivable of the
Corporation which have been written off and which have not been
included in the Closing Date Current Assets. To the extent the
Corporation collects any such accounts after the Closing Date, the
amount collected shall first be applied to the costs of collection and
one-half of the remainder shall be paid to the Shareholders.
(g) If and when the Corporation receives reimbursement of up
to $25,000 from the State of California for remediating the UST cleanup
described on Schedule 3.26, the Corporation shall promptly pay one-half
of the amount received to the Shareholders.
1.4 HOLD BACK.
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(a) United held back from the Purchase Price the sum of two
million dollars ($2,000,000) (the "Hold Back"), which amount was
deposited by United with First Trust of California (the "Escrow Agent")
to be held pursuant to an Escrow Agreement (the "Escrow Agreement") for
later distribution pending the determination of the amount of the
Equipment Adjustment, Inventory Adjustment and Working Capital
Adjustment pursuant to Sections 1.4(b), 1.4(c) and 1.4(d),
respectively. United and the Shareholders' Representative will use
reasonable efforts to complete the Equipment Adjustment, the Inventory
Adjustment and the Working Capital Adjustment within 90 days after the
Closing Date, whereupon United shall notify the Shareholders'
Representative of the amount of such Adjustments. If there is no
disagreement between United and the Shareholders' Representative
regarding the Equipment Adjustment, the Inventory Adjustment and the
Working Capital Adjustment, United will adjust the Hold Back by the
amount of such Adjustments and will instruct the Escrow Agent to
release the Hold Back, as adjusted, to the Shareholders' Representative
90 days after the Closing Date. In the event of any disagreement
between United and the Shareholders' Representative regarding the
dollar amount of any such adjustment, United shall nevertheless adjust
the Hold Back by the amount of such Adjustments not in dispute and will
instruct the Escrow Agent to release to the Shareholders any portion of
the Hold Back, as adjusted, that is not in dispute. Promptly upon
resolution of any such disagreement in accordance with the terms
hereof, United shall adjust the remaining portion of the Hold Back and
shall instruct the Escrow Agent to release to the Shareholders any
remaining portion of the Hold Back, as adjusted, to which the
Shareholders are entitled. Notwithstanding the foregoing, United shall
not be limited to the Hold Back as a sole remedy in the event that any
Purchase Price adjustment exceeds the Hold Back.
(b) The Rental Asset Listing attached as Schedule 1.4(b) sets
forth the asset description, make, model, original cost and net book
value of all equipment held for rent to customers as of September 30,
1997. Within 30 days following the Closing Date, United and the
Shareholders' Representative jointly shall complete a physical
inventory
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of each item of Equipment on the Rental Asset Listing, including by
visiting renters' locations as necessary to inspect such Equipment. The
Purchase Price shall be reduced (the "Equipment Adjustment") for each
item of Equipment listed on the Rental Asset Listing which has been
sold, is missing, or is otherwise not available for rent to customers
by the Corporation, but only to the extent the aggregate fair market
value of all such Equipment exceeds $25,000. The reduction in the
Purchase Price shall be calculated by the aggregate fair market value
(as determined by United and the Shareholders' Representative) of all
missing or unavailable Equipment, and by the net proceeds to the
Corporation received from the sale of Equipment sold between the date
of the Rental Asset Listing and the Closing Date. In the event of a
Purchase Price reduction due to an Equipment Adjustment, United shall
be entitled to retain a portion of the Hold Back equal to such
reduction. Any disputes as to the physical count or fair market value
of any item of Equipment will, if possible, be resolved while the
physical inventory of such Equipment is being taken. Any disputes not
so resolved will be resolved by arbitration in accordance with Section
10.
(c) The Purchase Price shall be adjusted (the "Inventory
Adjustment") on a dollar-for-dollar basis pursuant to the procedures
set forth below by the amount, if any, by which the Inventory Value of
the fuel and merchandise included on Schedule 1.3(c) as of the Closing
Date is greater or less than the amount set forth on Schedule 1.3(c).
"Inventory Value" shall mean the lower of (x) vendor cost as last
received (including all freight) and (y) market value (excluding any
non-salable or obsolete merchandise, parts or supplies) as of the
Closing Date, as determined in accordance with generally accepted
accounting principles. Inventory Value shall be determined pursuant to
a physical inventory to be taken promptly following the Closing Date,
and shall be finalized within 90 days following the Closing Date. Any
disputes as to the physical condition, salability or obsolescence of
any item of Inventory will, if possible, be resolved by representatives
of United and the Shareholders' Representative while such physical
inventory is being taken. Any disputes regarding the foregoing not so
resolved will be resolved by arbitration in accordance with Section 10.
(d) The adjustment made to the Purchase Price wired on the
Closing Date pursuant to Section 1.3(b) is based on Schedule 1.3(b) as
delivered at the Closing, which the parties understand includes only an
estimate of the Closing Date Working Capital. Within 90 days after the
Closing Date, United will determine the actual Closing Date Working
Capital and will advise the Shareholders' Representative of such actual
amount. If the Purchase Price increases, United will promptly pay any
additional amount due to the Shareholders within 90 days after the
Closing Date; if the Purchase Price declines, United may deduct the
amount by which the Purchase Price declines from the Hold Back. To the
extent the parties disagree on such amount, United and the
Shareholders' Representative will attempt to resolve such dispute and,
if they are unable to do so, such dispute shall be decided by
arbitration in accordance with Section 10. The adjustments pursuant to
this Section 1.4(d) are herein called the "Working Capital Adjustment."
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1.5 EXCLUDED ASSETS. The Assets of the Corporation listed on
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Schedule 1.5 (the "Excluded Assets") shall be distributed to the Shareholders
prior to the Closing, and United shall acquire no interest in or claim to any of
the Excluded Assets.
2. CLOSING TIME AND PLACE
----------------------
The closing of the transactions contemplated herein (the "Closing")
took place simultaneous with the execution of this Agreement (the "Closing
Date"). The Closing took place at the Law Offices of Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. At the
Closing, United and the Shareholders delivered to each other the documents,
instruments and other items described in Section 5 of this Agreement. For
accounting and tax reporting purposes, the Closing was deemed effective as of
January 1, 1998.
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND
-----------------------------------------------------
THE SHAREHOLDERS
----------------
The Corporation and the Shareholders, jointly and severally, (i)
represent and warrant that each of the following representations and warranties
is true as of the Closing Date with respect to the Shareholders and the
Corporation, as the case may be, and (ii) agree that such representations and
warranties shall survive the Closing.
3.1 ORGANIZATION, STANDING AND QUALIFICATION. The Corporation is
----------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of California. The Corporation has full corporate power and authority to
own and lease its properties and to carry on its business as now conducted. The
Corporation is not required to be qualified or licensed to conduct business as a
foreign corporation in any other jurisdiction.
3.2 CAPITALIZATION. Schedule 3.2 sets forth, as of the Closing Date,
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the authorized and outstanding capital stock of the Corporation, the name,
addresses and social security numbers or taxpayer identification numbers of the
record and beneficial owners thereof, and the number of shares so owned, and
wire transfer instructions for each Shareholder relating to the bank account to
which the Purchase Price should be sent. On the Closing Date, all of the issued
and outstanding shares of the capital stock of the Corporation were owned of
record and beneficially by the Shareholders, as set forth in Schedule 3.2, and
were free and clear of all liens, security interests, encumbrances and claims of
every kind. Each share of the capital stock of the Corporation is validly
authorized and issued, fully paid and nonassessable, and was not issued in
violation of any preemptive rights of any past or present shareholder of the
Corporation. Except as disclosed on Schedule 3.5, no option, warrant, call,
conversion right or commitment of any kind (including any of the foregoing
created in connection with any indebtedness of the Corporation) exists which
obligates the Corporation to issue any of its authorized but unissued capital
stock or other equity interest, or which obligates any Shareholder to transfer
any Corporation's Stock to any person.
3.3 ALL STOCK BEING ACQUIRED. The Corporation's Stock being acquired
------------------------
by United hereunder constitutes all of the outstanding capital stock of the
Corporation.
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3.4 AUTHORITY FOR AGREEMENT. The Corporation and each of the
-----------------------
Shareholders have full right, power and authority to enter into this Agreement
and to perform its or his obligations hereunder. The execution and delivery of
this Agreement by the Corporation has been duly authorized by its Board of
Directors. This Agreement has been duly and validly executed and delivered by
the Corporation and the Shareholders and, subject to the due authorization,
execution and delivery by United, constitutes the legal, valid and binding
obligation of the Corporation and the Shareholders enforceable against the
Corporation and the Shareholders in accordance with its terms.
3.5 NO BREACH OR DEFAULT. Except as disclosed on Schedule 3.5, the
--------------------
execution and delivery by the Corporation and the Shareholders of this
Agreement, and the consummation by the Shareholders of the transactions
contemplated hereby, do not and will not:
(a) result in the breach of any of the terms or conditions of,
or constitute a default under, or allow for the acceleration or
termination of, in any manner release any party from any obligation
under, require any consent under, or will result in any lien, claim, or
encumbrance on the Corporation's Stock or the assets of the Corporation
under, any mortgage, lease, note, bond, indenture, or material
contract, agreement, license or other instrument or obligation of any
kind or nature to which the Corporation or any of the Shareholders is a
party, or by which the Corporation, or any of its assets, is or may be
bound or affected; or
(b) violate any law or any order, writ, injunction or decree
of any court, administrative agency or governmental authority, or
require the approval, consent or permission of any governmental or
regulatory authority; or
(c) violate the Articles of Incorporation or Bylaws of the
Corporation.
3.6 SUBSIDIARIES. Schedule 3.6 lists as of the Closing Date any and
------------
all subsidiaries of the Corporation and any securities of any other corporation
or any securities or other interest in any other business entity owned by the
Corporation or any of its subsidiaries.
3.7 FINANCIAL STATEMENTS. The Corporation has delivered to United,
--------------------
as Schedule 3.7, copies of the following financial statements ("Financial
Statements"): financial statements for the fiscal year ended June 30, 1996 and
1997, compiled by ▇▇▇▇▇▇ ▇. ▇▇▇▇ and unaudited interim Financial Statements for
the Corporation for the period ended November 30, 1997 (the "Balance Sheet
Date"). The Financial Statements are true and correct and fairly present (i) the
financial position of the Corporation as of the respective dates of the balance
sheets included in said statements, and (ii) the results of operations for the
respective periods indicated. The Financial Statements have been prepared in
accordance with generally accepted accounting principles, applied consistently
with prior periods. Except to the extent reflected or reserved against in the
Corporation's balance sheet as of the Balance Sheet Sate, or as disclosed on
Schedule 3.7 or Schedule 3.8, the Corporation had as of the Balance Sheet Date,
and had, as of the Closing Date, no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, including, without limitation, tax
liabilities due.
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3.8 LIABILITIES. Schedules 3.8(a), (b), (c) and (d), are accurate
-----------
lists and descriptions of all liabilities of the Corporation required to be
described below in the format set forth below.
(a) Schedule 3.8(a) lists, as of the Closing Date, other than
with respect to trade payables and as of the end of the month prior to
the Closing Date with respect to trade payables, all indebtedness for
money borrowed and all other fixed and uncontested liabilities of any
kind, character and description (excluding all real and personal
property leasehold interests included in Schedule 3.8 (d)), whether
reflected or not reflected on the Financial Statements and whether
accrued or absolute, and states as to each such liability the amount of
such liability and to whom payable. From the date as of which trade
payables are listed through the Closing Date, trade payables have been
incurred only in the ordinary course of business consistent with
comparable prior periods.
(b) Schedule 3.8(b) lists, as of the Closing Date, all claims,
suits and proceedings which are pending against the Corporation, all
contingent liabilities and, to the knowledge of the Corporation and the
Shareholders, all claims, suits and proceedings threatened or
anticipated against the Corporation. For each such liability, the
following is provided in Schedule 3.8(b):
(i) a summary description of such liability together
with copies of all material documents, reports and other
records relating thereto;
(ii) all amounts claimed or relief sought with
respect to such liability and the identity of the claimant;
and
(iii) without limitation of the foregoing, (A) the
name of each court, agency, bureau, board or body before which
any such claim, suit or proceeding is pending, (B) the date
such claim, suit or proceeding was instituted, (C) the parties
to such claim, suit or proceeding, (D) a description of the
factual basis alleged to underlie such claim, suit or
proceeding, including the date or dates of all material
occurrences, (E) the amount claimed and other relief sought,
and (F) all material pleadings, briefs and other documents
relating thereto to the extent the same are in the possession
or under the control of the Corporation or the Shareholders.
(c) Schedule 3.8(c) lists, as of the Closing Date and to the
extent not otherwise included in Schedule 3.8(a), all liens, claims and
encumbrances secured by or otherwise affecting any asset of the
Corporation (including any Corporate Property, as hereafter defined),
including a description of the nature of such lien, claim or
encumbrance, the amount secured if it secures a liability, the nature
of the obligation secured, and the party holding such lien, claim or
encumbrance.
(d) Schedule 3.8(d) lists, as of the Closing Date and to the
extent not otherwise included in Schedules 3.8(a) and (c), all real and
personal property leasehold interests to which the Corporation is a
party as lessor or lessee or, to the knowledge of the Corporation or
the Shareholders, affecting or relating to any Corporate Property,
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including a description of the nature and principal terms of such
leasehold interest and the identity of the other party thereto.
Except as described on Schedules 3.8(a), (b), (c) and (d),
neither the Corporation nor the Shareholders has made any payment or committed
to make any payment since the Balance Sheet Date on or with respect to any of
the liabilities or obligations listed on Schedule 3.8(a), (b), (c) and (d)
except, in the case of liabilities and obligations listed on Schedule 3.8(a),
(c) and (d), periodic payments required to be made under the terms of the
agreements or instruments governing such obligations or liabilities.
3.9 RENTAL ASSET LISTING. The Rental Asset Listing attached as
--------------------
Schedule 1.4(b) lists all of the Equipment owned by the Corporation for lease or
rent to customers, other than Equipment acquired after the date of the Rental
Asset Listing and included on Schedule 1.3(d) or disposed of since the date of
the Rental Asset Listing.
3.10 PERMITS AND LICENSES.
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(a) Schedule 3.10(a) is a full and complete list, and includes
copies, of all material permits, licenses, titles (including motor
vehicle titles and current registrations), fuel permits, zoning and
land use approvals and authorizations, including, without limitation,
any conditional or special use approvals or zoning variances, occupancy
permits, and any other similar documents constituting a material
authorization or entitlement or otherwise material to the operation of
the business of the Corporation (collectively the "Governmental
Permits") owned by, issued to, held by or otherwise benefiting the
Corporation or the Shareholders as of the Closing Date. Any material
conditions to the Governmental Permits and, if applicable, the
expiration dates thereof, are also described in Schedule 3.10(a).
Schedule 3.10(a) also sets forth the name of any third party from whom
the Shareholders, the Corporation or United must obtain consent (the
"Required Governmental Consents") in order to effect a direct or
indirect transfer of the Governmental Permits required as a result of
the consummation of the transactions contemplated by this Agreement.
Except as set forth on Schedule 3.10(a), all of Governmental Permits
enumerated and listed on Schedule 3.10(a) are adequate for the
operation of the business of the Corporation and of each Corporate
Property as presently operated and are valid and in full force and
effect. All of said Governmental Permits and agreements have been duly
obtained and are in full force and effect, and there are no proceedings
pending or, to the knowledge of the Corporation or the Shareholders,
threatened which may result in the revocation, cancellation, suspension
or adverse modification of any of the same. Neither the Corporation nor
the Shareholders has any knowledge of any reason why all such
Governmental Permits and agreements will not remain in effect after
consummation of the transactions contemplated hereby.
(b) Schedule 3.10(b) lists, as of the Closing Date, each
facility owned, leased, operated or otherwise used by the Corporation,
the ownership, lease, operation or use of which is being transferred
to, assumed by or otherwise acquired directly or indirectly by United
pursuant to this Agreement (each, a "Facility" and collectively, the
"Facilities"). Except as otherwise disclosed on Schedule 3.10(b):
8
(i) Each Facility is fully licensed, permitted and
authorized to carry on its current business under all
applicable federal, state and local statutes, orders,
approvals, zoning or land use requirements, rules and
regulations and there is no non-conforming use or other
activities subject to any restrictions regarding
reconstruction.
(ii) All activities and operations at each Facility
are being and have been conducted in compliance in all
material respects with the requirements, criteria, standards
and conditions set forth in all applicable federal, state and
local statutes, orders, approvals, permits, zoning or land use
requirements and restrictions, variances, licenses, rules and
regulations.
(iii) Each Facility is located on real property
leased by the Corporation ("Facility Property") and is legally
described on the surveys or site plans attached to Schedule
3.10(b) (the "Facility Surveys/Site Plans"), which when
delivered will accurately depict the respective Facility
Property.
(iv) There are no circumstances, conditions or
reasons which are likely to be the basis for revocation or
suspension of any Facility's site assessments, permits,
licenses, consents, authorizations, zoning or land use
permits, variances or approvals relating to such Facility
owned by the Corporation or owned by the Shareholders or an
Affiliate (as hereinafter defined) of the Shareholders and
leased to the Corporation, and to the knowledge of the
Corporation and the Shareholders there are no circumstances,
conditions or reasons which are likely to be the basis for
revocation or suspension of any site assessment, permits,
licenses, consents, authorizations, zoning or land use
permits, variances or approvals relating to the Facility.
3.11 CERTAIN RECEIVABLES. Schedule 3.11 is an accurate list as of
-------------------
the Closing Date of the accounts and notes receivable of the Corporation from
and advances to employees, former employees, officers, directors, the
Shareholders and Affiliates of the foregoing. For purposes of this Agreement,
the term "Affiliate" means, with respect to any person, any person that directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with such person, and in the case of the Corporation
includes directors and officers, in the case of individuals includes the
individual's spouse, father, mother, grandfather, grandmother, brothers,
sisters, children and grandchildren and in the case of a trust includes the
grantors, trustees and beneficiaries of the trust.
3.12 FIXED ASSETS AND REAL PROPERTY.
------------------------------
(a) Schedule 3.12(a) lists, as of the Closing Date,
substantially all the fixed assets (other than real estate, inventory
subject to the Inventory Adjustment and Equipment included in the
Rental Asset Listing or on Schedule 1.3(d)) of the Corporation,
including, without limitation, identification of each vehicle by
description and serial number, identification of machinery, equipment
and general descriptions of parts, supplies and inventory. Except as
shall be described on Schedule 3.12(a), all of
9
the Corporation's vehicles, machinery and equipment necessary for the
operation of its business and all of the Equipment listed on Schedule
1.3(d) and the Rental Asset Listing are in operable condition, and are
in material compliance with all applicable laws, rules and regulations.
All such vehicles and equipment (including such Equipment) are
substantially free of known defects that would cause them to fail. All
leases of fixed assets are in full force and effect and binding upon
the parties thereto; neither the Corporation nor any other party to
such leases is in breach of any of the material provisions thereof.
(b) Each parcel of real property leased, owned or being
purchased by the Corporation as of the Closing Date (the "Corporate
Property"), including the street address and, in the case of Corporate
Property owned or being purchased, the legal description thereof, is
listed on Schedule 3.12(b) and attached to said Schedule 3.12(b) are
copies of all leases, deeds, outstanding mortgages, other encumbrances
and existing title insurance policies relating to each Corporate
Property, as well as a current commitments for title insurance issued
by a title insurance company satisfactory to United with respect to
each Corporate Property owned or being purchased by the Corporation
together with copies of all of the title exceptions referred to in said
commitments. All leases listed on Schedule 3.12(b) are in full force
and effect and binding on the parties thereto; neither the Corporation
nor any other party to such leases is in breach of any of the material
provisions thereof. Except as described on Schedule 3.12(b) there are
no material physical or mechanical defects in or any Facility located
on any Corporate Property and each such Facility is in good condition
and repair.
(c) The Corporation has good, valid and marketable title to
all properties and assets, real, personal, and mixed, tangible and
intangible, actually used or necessary for the conduct of its business,
free of any encumbrance or charge of any kind except: (i) liens for
current taxes not yet due; (ii) minor imperfections of title and
encumbrances, if any, that are not substantial in amount, do not
materially detract from the value of the property subject thereto, do
not materially impair the value of the Corporation, and have arisen
only in the ordinary course of business and consistent with past
practice; and (iii) the liens identified on Schedule 3.8(c)
(collectively, the "Permitted Liens"). Except as described on Schedule
3.12(b) there are no leases, occupancy agreements, options, rights of
first refusal or any other agreements or arrangements, either oral or
written, that create or confer in any person or entity the right to
acquire, occupy or possess, now or in the future, any Facility, any
Corporate Property, or any portion thereof, or create in or confer on
any person or entity any right, title or interest therein or in any
portion thereof.
3.13 ACQUISITION/DISPOSAL OF ASSETS. Except as indicated on
------------------------------
Schedule 3.13, since the date of the Rental Asset Listing attached as Schedule
1.4(b) (September 30, 1997), the Corporation has not acquired or sold or
otherwise disposed of any properties or assets which have a value in excess of
$25,000 in the aggregate, or which are material to the operation of the
Corporation's business as presently conducted, without the prior written consent
of United.
10
3.14 CONTRACTS AND AGREEMENTS; ADVERSE RESTRICTIONS.
----------------------------------------------
(a) Schedule 3.14(a) lists, as of the Closing Date, and
includes copies of, all material contracts and agreements (other than
standard rental agreements with customers, leases included with
Schedule 3.12(b) and documents included with Schedule 3.12(b)) to which
the Corporation is a party or by which it or any of its property is
bound (including, but not limited to, joint venture or partnership
agreements, contracts with any labor organizations, promissory notes,
loan agreements, bonds, mortgages, deeds of trust, liens, pledges,
conditional sales contracts or other security agreements). Except as
disclosed on Schedule 3.14(a), all such contracts and agreements
included in Schedule 3.14(a) are in full force and effect and binding
upon the parties thereto. Except as described or cross referenced on
Schedule 3.14(a), neither the Corporation nor, to the Shareholders'
knowledge, any other parties to such contracts and agreements is in
breach thereof, and none of the parties has threatened to breach any of
the material provisions thereof or notified the Corporation or the
Shareholders of a default thereunder, or exercised any options
thereunder. None of such contracts, agreements and licenses requires
notice to, or consent or approval of, any third party to any of the
transactions contemplated hereby, except such consents and approvals as
are listed on Schedule 3.14(a).
(b) Except as set forth on Schedule 3.14(b), there is no
outstanding judgment, order, writ, injunction or decree against the
Corporation, the result of which could materially adversely affect the
Corporation or its business or any of the Corporate Properties, nor has
the Corporation been notified that any such judgment, order, writ,
injunction or decree has been requested.
3.15 INSURANCE. Schedule 3.15 is a complete list and includes
---------
copies, as of the Closing Date, of all insurance policies in effect on the
Closing Date or, with respect to "occurrence" policies that were in effect,
carried by the Corporation in respect of the Facilities, the Corporate
Properties or any other property used by the Corporation specifying, for each
policy, the name of the insurer, the type of risks insured, the deductible and
limits of coverage, and the annual premium therefor. During the last five years,
there has been no lapse in any material insurance coverage of the Corporation.
For each insurer providing coverage for any of the contingent or other
liabilities listed on Schedule 3.8(b), except to the extent otherwise set forth
in Schedule 3.8(b), each such insurer, if required, has been properly and timely
notified of such liability, no reservation of rights letters have been received
by the Corporation and the insurer has assumed defense of each suit or legal
proceeding.
3.16 PERSONNEL. Schedule 3.16 is a complete list, as of the Closing
---------
Date, of all officers, directors and employees (by type or classification) of
each Corporation and their respective rates of compensation, including (i) the
portions thereof attributable to bonuses, (ii) any other salary, bonus, stock
option, equity participation, or other compensation arrangement made with or
promised to any of them, and (iii) copies of all employment agreements with
non-union officers, directors and employees. Schedule 3.16 shall also lists the
driver's license number for each driver of the Corporation's motor vehicles who
is required to have a
11
commercial, chauffeur's, or other special class of drivers license in order to
operate commercial or heavy vehicles used in the Corporation's business.
3.17 BENEFIT PLANS AND UNION CONTRACTS.
---------------------------------
(a) Schedule 3.17(a) is a complete list as of the Closing
Date, and includes complete copies (or, in the case of oral
arrangements, descriptions), of all employee benefit plans and
agreements (written or oral) currently maintained or contributed to by
the Corporation, including employment agreements and any other
agreements containing "golden parachute" provisions, retirement plans,
welfare benefit plans and deferred compensation agreements, together
with copies of such plans, agreements and any trusts related thereto,
and classifications of employees covered thereby as of the Closing
Date. Except for the employee benefit plans described on Schedule
3.17(a), the Corporation has no other pension, retirement, welfare,
profit sharing, deferred compensation, stock option, employee stock
purchase or other employee benefit plans or arrangements with any
party. Except as disclosed on Schedule 3.17(a), all employee benefit
plans listed on Schedule 3.17(a) are fully funded and in substantial
compliance with all applicable federal, state and local statutes,
ordinances and regulations. All such plans that are intended to qualify
under Section 401(a) of the Internal Revenue Code have been determined
by the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 3.17(a). Except
as disclosed on Schedule 3.17(a), all reports and other documents
required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to,
actuarial reports, audits or tax returns) have been timely filed or
distributed, and copies thereof are included as part of Schedule
3.17(a). All employee benefit plans listed on such Schedule have been
operated in accordance with the terms and provisions of the plan
documents and all related documents and policies. The Corporation has
not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or U.S. Department of Labor nor any liability
to the Pension Benefit Guaranty Corporation for any employee benefit
plan, nor has the Corporation, nor party-in-interest or disqualified
person, engaged in any transaction or other activity which would give
rise to such liability. The Corporation has not participated in or made
contributions to any "multi-employer plan" as defined in the Employee
Retirement Income Security Act of 1974 ("ERISA"), nor would the
Corporation or any affiliate be subject to any withdrawal liability
with respect to such a plan if any such employer withdrew from such a
plan immediately prior to the Closing Date. No employee pension benefit
plan is under funded on a termination basis as of the date of this
Agreement.
(b) Schedule 3.17(b) is a complete list, as of the Closing
Date, and includes complete copies of all union contracts and
agreements between the Corporation and any collective bargaining group.
The Corporation is in compliance in all material respects with all
applicable federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, and is not engaged in any unfair labor
practice. There is no charge pending or, to the Corporation's or the
Shareholders' knowledge, threatened, against the Corporation before any
court or agency and alleging unlawful discrimination in
12
employment practices and there is no charge of or proceeding with
regard to any unfair labor practice against it pending before the
National Labor Relations Board. There is no labor strike, dispute, slow
down or stoppage as of the Closing Date, existing or threatened against
the Corporation; no union organizational activity exists respecting
employees of the Corporation not currently subject to a collective
bargaining agreement; the union contracts or other agreements delivered
as part of Schedule 3.17(b) constitute all agreements with the unions
or other collective bargaining groups, and there are no other
arrangements or established practices relating to the employees covered
by any collective bargaining agreement; and Schedule 3.17(b) will
contain as of the date it is delivered a list of all arbitration or
grievance proceedings that have occurred since the Balance Sheet Date.
No one has petitioned within the last five years, and no one is now
petitioning, for union representation of any employees of the
Corporation. The Corporation has not experienced any labor strike,
slow-down, work stoppage, labor difficulty or other job action during
the last five years.
(c) No payment made to any employee, officer, director or
independent contractor of the Corporation (the "Recipient") pursuant to
any employment contract, severance agreement or other arrangement (the
"Golden Parachute Payment") will be nondeductible by the Corporation
because of the application of Sections 280G and 4999 of the Code to the
Golden Parachute Payment, nor will a Corporation be required to
compensate any Recipient because of the imposition of an excise tax
(including any interest or penalties related thereto) on the Recipient
by reason of Sections 280G and 4999 of the Code.
3.18 TAXES.
-----
(a) The Corporation has timely filed all requisite federal,
state, local and other tax and information returns due for all fiscal
periods ended on or before the Closing Date. All such returns are
accurate and complete. Except as set forth on Schedule 3.18, there are
no open years, examinations in progress, extensions of any statute of
limitations or claims against the Corporation relating to federal,
state, local or other taxes (including penalties and interest) for any
period or periods prior to and including the Closing Date and no notice
of any claim for taxes has been received. Copies of (i) any tax
examinations, (ii) extensions of statutory limitations and (iii) the
federal income, and state franchise, income and sales tax returns of
the Corporation for its last three fiscal years are attached as part of
Schedule 3.18. Copies of all other federal, state, local and other tax
and information returns for all prior years of the Corporation's
existence have been made available to United and are among the records
of the Corporation which will accrue to United at the Closing. The
Corporation has not been contacted by any federal, state or local
taxing authority regarding a prospective examination.
(b) Except as set forth on Schedule 3.18 (which schedule also
includes the amount due with respect to such Corporation) the
Corporation has duly paid all taxes and other related charges required
to be paid prior to the Closing Date. The reserves for taxes contained
in the Financial Statements of the Corporation are adequate to cover
their tax liability as of the Closing Date.
13
(c) The Corporation has withheld all required amounts from its
employees for all pay periods in full and complete compliance with the
withholding provisions of applicable federal, state and local laws. All
required federal, state and local and other returns with respect to
income tax withholding, social security, and unemployment taxes have
been duly filed by the Corporation for all periods for which returns
are due, and the amounts shown on all such returns to be due and
payable have been paid in full.
3.19 COPIES COMPLETE. Except as disclosed on Schedule 3.19, the
---------------
certified copies of the Articles of Incorporation and Bylaws of the Corporation,
both as amended to the Closing Date, and the copies of all standard form rental
agreements, leases, instruments, agreements, licenses, permits, certificates or
other documents that have been delivered to United in connection with the
transactions contemplated hereby are complete and accurate as of the Closing
Date and are true and correct copies of the originals thereof. Except as
specifically disclosed on Schedule 3.19, the rights and benefits of the
Corporation will not be adversely affected by the transactions contemplated
hereby, and the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions thereof. None of such leases,
instruments, agreements, licenses, permits, site assessments, certificates or
other documents requires notice to, or consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby,
except such consents and approvals as are listed on Schedule 3.19 and which have
been given or obtained prior to the Closing.
3.20 PRODUCT QUALITY, WARRANTY CLAIMS, PRODUCT LIABILITY. All
---------------------------------------------------
products and services sold, rented, leased, provided or delivered by the
Corporation to customers on or prior to the Closing Date conform to applicable
contractual commitments, express and implied warranties, product and service
specifications and quality standards, and the Corporation has no liability (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Corporation giving
rise to any liability) for replacement or repair thereof or other damages in
connection therewith. No product or service sold, leased, rented, provided or
delivered by the Corporation to customers on or prior to the Closing Date is
subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale, rent or lease. Except as set forth on
Schedule 3.20, the Corporation has no liability (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against the Corporation which might give rise to any
liability) arising out of any injury to a person or property as a result of the
ownership, possession, provision or use of any Equipment, product or service
sold, rented, leased, provided or delivered by the Corporation on or prior to
the Closing Date. All product liability claims that have been asserted against
the Corporation since January 1, 1992, whether covered by insurance or not and
whether litigation has resulted or not, are listed and summarized on Schedule
3.20.
3.21 NO CHANGE WITH RESPECT TO CORPORATION. Except as set forth on
-------------------------------------
Schedule 3.21, since the Balance Sheet Date, the business of the Corporation has
been conducted only in the ordinary course there has been no change in the
condition (financial or otherwise) of the assets, liabilities or operations of
the Corporation other than changes in the ordinary course of business, none of
which either singly or in the aggregate has been materially adverse.
Specifically, and
14
without limiting the generality of the foregoing, except as set forth on
Schedule 3.21, with respect to the Corporation, since the Balance Sheet Date,
there has not been:
(a) any change in its financial condition, assets, liabilities
(contingent or otherwise), income, operations or business which would
have a material adverse effect on the financial condition, assets,
liabilities (contingent or otherwise), income, operations or business
of the Corporation, taken as a whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting any material portion of its properties
or business;
(c) any change in or agreement to change (i) its shareholders,
(ii) ownership of its authorized capital or outstanding securities, or
(iii) its securities;
(d) any declaration or payment of, or any agreement to declare
or pay, any dividend or distribution in respect of its capital stock or
any direct or indirect redemption, purchase or other acquisition of any
of its capital stock;
(e) any increase or bonus or promised increase or bonus in the
compensation payable or to become payable by it, in excess of usual and
customary practices, to any of its directors, officers, employees or
agents, or any accrual or arrangement for or payment of any bonus or
other special compensation to any employee or any severance or
termination pay paid to any of its present or former officers or other
key employees;
(f) any labor dispute or any other event or condition of any
character, materially adversely affecting its business or future
prospects;
(g) any sale or transfer, or any agreement to sell or
transfer, any of its material assets, property or rights to any other
person, including, without limitation, the Shareholders and their
Affiliates, other than in the ordinary course of business;
(h) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to it, including,
without limitation, any indebtedness or obligation of the Shareholders
or any Affiliate thereof;
(i) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of its
assets, property or rights or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or any agreement, plan or
arrangement to purchase or acquire, any of its property, rights or
assets outside the ordinary course of its business;
(k) any waiver of any of its material rights or claims;
15
(l) any new or any amendment or termination of any existing
material contract, agreement, license, permit or other right to which
it is a party;
(m) any decline in the stockholders equity of the Corporation
to an amount less than the stockholders equity of the Corporation as of
the Balance Sheet Date;
(n) any increase in the amount of indebtedness owed by the
Shareholders or their Affiliates to any person other than the
Corporation and secured by one or more Corporate Properties;
(o) any increase in the amount of aggregate indebtedness owed
by the Shareholders or their Affiliates to the Corporation; or
(p) any other transaction outside the ordinary course of its
business.
3.22 CLOSING DATE DEBT; CLOSING DATE CURRENT ASSETS AND CLOSING
----------------------------------------------------------
DATE CURRENT LIABILITIES. Schedule 1.3(a) accurately sets forth the Closing Date
------------------------
Debt of the Corporation. Schedule 1.3(b) accurately sets forth the Closing Date
Current Assets and Closing Date Current Liabilities of the Corporation.
3.23 BANK ACCOUNTS. Schedule 3.23 is a complete and accurate
-------------
list, as of the Closing Date, of:
(a) the name of each bank in which the Corporation has
accounts or safe deposit boxes;
(b) the name(s) in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have
access thereto.
3.24 COMPLIANCE WITH LAWS. Except as disclosed on Schedule 3.24,
--------------------
the Corporation has complied with, and the Corporation is presently in material
compliance with, federal, state and local laws, ordinances, codes, rules,
regulations, Governmental Permits, orders, judgments, awards, decrees, consent
judgments, consent orders and requirements applicable to it (collectively
"Laws"), including, but not limited to, the Americans with Disabilities Act, the
Federal Occupational Safety and Health Act, and Laws relating to the public
health, safety or protection of the environment (collectively, "Environmental
Laws"). Except as disclosed on Schedule 3.24, there has been no assertion by any
party that the Corporation is in violation of any Laws. Specifically and without
limiting the generality of the foregoing, except as disclosed on Schedule 3.24:
(i) except as permitted under Environmental Laws, the Corporation has not
processed, handled, transferred, generated, treated, stored or disposed of any
Hazardous Material (as defined below), (ii) no Hazardous Material, other than
that allowed under Environmental Laws has been disposed of, or otherwise
released on any Corporate Property, and (iii) no Corporate Property has ever
been subject to or received any notice of any private,
16
administrative or judicial action, or notice of any intended private,
administrative or judicial action relating to the presence or alleged presence
of Hazardous Material in, under, upon or emanating from any Corporate Property
or any real property now or previously owned or leased by the Corporation. As
used in this Agreement, "Hazardous Material" shall mean the substances defined
as "Hazardous Waste" in 40 CFR 261, substances defined in any comparable
California statute or regulation and any substance the presence of which
requires remediation pursuant to any Environmental Laws.
3.25 POWERS OF ATTORNEY. The Corporation has not granted any power
------------------
of attorney (except routine powers of attorney relating to representation before
governmental agencies) or entered into any agency or similar agreement whereby a
third party may bind or commit the Corporation in any manner.
3.26 UNDERGROUND STORAGE TANKS. Except as set forth on Schedule
-------------------------
3.26, no underground storage tanks containing petroleum products or wastes or
other hazardous substances regulated by 40 CFR 280 or Environmental Laws are
currently or have been located on any Corporate Property. Except as set forth on
Schedule 3.26, the Corporation has never owned or leased any real property not
included in the Corporate Property having any underground storage tanks
containing petroleum products or wastes or other hazardous substances regulated
by 40 CFR 280. As to each such underground storage tank ("UST") identified on
Schedule 3.26, the Corporation has provided to United, on Schedule 3.26:
(a) the location of the UST, information and material,
including any available drawings and photographs, showing the location,
and whether the Corporation currently owns or leases the property on
which the UST is located (and if the Corporation does not currently own
or lease such property, the dates on which it did and the current owner
or lessee of such property);
(b) the date of installation and specific use or uses of the
UST;
(c) copies of tank and piping tightness tests and cathodic
protection tests and similar studies or reports for each UST;
(d) a copy of each notice to or from a governmental body or
agency relating to the UST;
(e) other material records with regard to the UST, including,
without limitation, repair records, financial assurance compliance
records and records of ownership; and
(f) to the extent not otherwise set forth pursuant to the
above, a summary description of instances, past or present, in which,
to the Corporation's, or the Shareholders's knowledge, the UST failed
to meet applicable standards and regulations for tightness or otherwise
and the extent of such failure, and any other operational or
environmental problems with regard to the UST, including, without
limitation, spills,
17
including spills in connection with delivery of materials to the UST,
releases from the UST and soil contamination.
Except to the extent set forth on Schedule 3.26, the Corporation has
complied with Environmental Laws regarding the installation, use, testing,
monitoring, operation and closure of any UST described on Schedule 3.26.
3.27 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Schedule 3.27 lists all
-------------------------------------
patents, tradenames, fictitious business names, trademarks, service marks, and
copyrights owned by the Corporation or which it is licensed to use (other than
licenses to use software for personal computer operating systems that were
provided when the computer was purchased and licenses to use software for
personal computers that are granted to retail purchasers of such software). No
patents, trade secrets, know-how, intellectual property, trademarks, trade
names, assumed names, copyrights, or designations used by the Corporation in its
business infringe on any patents, trademarks, or copyrights, or any other rights
of any person. Neither the Corporation nor any of the Shareholders knows or has
any reason to believe that there are any claims of third parties to the use of
any such names or any similar name, or knows of or has any reason to believe
that there exists any basis for any such claim or claims.
3.28 ASSETS, ETC., NECESSARY TO BUSINESS. The Corporation owns or
-----------------------------------
leases all properties and assets, real, personal, and mixed, tangible and
intangible, and, except as disclosed on Schedules 3.5, 3.10(a), 3.10(b), 3.14(a)
and 3.19, is a party to all Governmental Permits and other agreements necessary
to permit it to carry on its business as presently conducted. All of said
Governmental Permits and agreements have been duly obtained and, except as
disclosed on Schedules 3.5, 3.8(b), 3.10(a), 3.10(b), 3.14(a) and 3.19, are in
full force and effect and there are no proceedings pending or threatened which
may result in the revocation, cancellation, suspension or adverse modification
of any of the same. Neither the Corporation nor any of the Shareholders has any
knowledge of any reason why all such Governmental Permits and agreements will
not remain in effect after consummation of the transactions contemplated hereby.
3.29 CONDEMNATION. No Corporate Property owned or leased by the
------------
Corporation is the subject of, or would be affected by, any pending condemnation
or eminent domain proceedings, and, to the knowledge of the Corporation and the
Shareholders, no such proceedings are threatened.
3.30 MANUFACTURERS, SUPPLIERS AND CUSTOMERS. The relations between
--------------------------------------
the Corporation and its customers are good. Neither the Corporation nor any of
the Shareholders has knowledge of any fact (other than general economic and
industry conditions) which indicates that any of the manufacturers or suppliers
supplying products, components or materials to the Corporation intends to cease
providing such items to the Corporation, nor does the Corporation or any of the
Shareholders have knowledge of any fact (other than general economic and
industry conditions) which indicates that any of the customers of the
Corporation intends to terminate, limit or reduce its business relations with
the Corporation.
3.31 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Corporation
-------------------------------------
nor any of the Shareholders has directly or indirectly within the past five
years given or agreed to give any gift
18
or similar benefit to any customer, supplier, governmental employee or other
person who is or may be in a position to help or hinder the business of the
Corporation in connection with any actual or proposed transaction which (a)
might subject the Corporation to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (b) if not given in the past, might have
had an adverse effect on the financial condition, business or results of
operations of the Corporation, or (c) if not continued in the future, might
adversely affect the financial condition, business or operations of the
Corporation or which might subject the Corporation to suit or penalty in any
private or governmental litigation or proceeding.
3.32 RELATED PARTY TRANSACTIONS. Except as disclosed in the
--------------------------
Financial Statements, none of the Shareholders nor their respective Affiliates
owns any direct or indirect interest of any kind in, or controls or is a
director, officer, employee, shareholder or partner of, or consultant to or
lender to or borrower from or has the right to participate in the profits of,
any Person which is a competitor, supplier, customer, landlord, tenant, creditor
or debtor of the Corporation.
3.33 DISCLOSURE SCHEDULES. Any matter disclosed on any Schedule to
--------------------
this Agreement shall be deemed to have been disclosed on every other Schedule
that refers to such Schedule by cross reference so long as the nature of the
matter disclosed is obvious from a fair reading of the Schedule on which the
matter is disclosed.
3.34 NO MISLEADING STATEMENTS. The representations and warranties
------------------------
of the Corporation and the Shareholders contained in this Agreement, the
Exhibits and Schedules hereto and all other documents and information furnished
to United and its representatives pursuant hereto are complete and accurate in
all material respects and do not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements made and to
be made not misleading.
3.35 ACCURATE AND COMPLETE RECORDS. The corporate minute books,
-----------------------------
stock ledgers, books, ledgers, financial records and other records of the
Corporation:
(a) have been made available to United and its agents at the
Corporation's offices or at the offices of United's attorneys or the
Corporation's attorneys;
(b) have been, in all material respects, maintained in
accordance with all applicable laws, rules and regulations; and
(c) are accurate and complete, reflect all material corporate
transactions required to be authorized by the Boards of Directors
and/or shareholders of the Corporation and do not contain or reflect
any material discrepancies.
3.36 KNOWLEDGE. Wherever reference is made in this Agreement to the
---------
"knowledge" of the Shareholders, such term means the actual knowledge of any of
the Shareholders or any knowledge which should have been obtained by any of the
Shareholders upon reasonable inquiry by a reasonable business person. Wherever
reference is made in this Agreement to the "knowledge" of the Corporation, such
term means the actual knowledge of any management
19
employee, officer or director of the Corporation or any knowledge which should
have been obtained by any such person upon reasonable inquiry by a reasonable
business person.
3.37 BROKERS; FINDERS. Except as set forth on Schedule 3.37, no
----------------
person has acted directly or indirectly as a broker, finder or financial advisor
for the Corporation or the Shareholders in connection with the transactions
contemplated by this Agreement and no person is entitled to any broker's,
finder's, financial advisory or similar fee or payment in respect thereof based
in any way on any agreement, arrangement or understanding made by or on behalf
of the Corporation or the Shareholders.
4. REPRESENTATIONS AND WARRANTIES OF UNITED
----------------------------------------
United represents and warrants to the Shareholders that each of the
following representations and warranties is true as of the date of this
Agreement and will be true as of the Closing Date, and agrees that such
representations and warranties shall survive the Closing:
4.1 EXISTENCE AND GOOD STANDING. United is a Corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 NO CONTRACTUAL RESTRICTIONS. No provisions exist in any
---------------------------
article, document or instrument to which United is a party or by which it is
bound which would be violated by consummation of the transactions contemplated
by this Agreement.
4.3 AUTHORIZATION OF AGREEMENT. This Agreement has been duly
--------------------------
authorized, executed and delivered by United and, subject to the due
authorization, execution and delivery by the Shareholders, constitutes a legal,
valid and binding obligation of United. United has full corporate power, legal
right and corporate authority to enter into and perform its obligations under
this Agreement and to carry on its business as presently conducted. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and the fulfillment of and compliance with the
terms and conditions hereof do not and will not, after the giving of notice, or
the lapse of time or otherwise: (a) violate any provisions of any judicial or
administrative order, award, judgment or decree applicable to United; (b)
conflict with any of the provisions of the Certificate of Incorporation or
Bylaws of United; or (c) conflict with, result in a breach of or constitute a
default under any material agreement or instrument to which United is a party or
by which it is bound.
4.4 NO MISLEADING STATEMENTS. The representations and warranties
------------------------
of United contained in this Agreement, the Exhibits and Schedules hereto and all
other documents and information furnished to the Shareholders pursuant hereto
are materially complete and accurate, and do not include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements made and to be made not misleading as of the Closing Date.
4.5 BROKERS; FINDERS. No person has acted directly or indirectly
----------------
as a broker, finder or financial advisor for United in connection with the
transactions contemplated by this Agreement and no person is entitled to any
broker's, finder's, financial advisory or similar fee
20
or payment in respect thereof based in any way on any agreement, arrangement or
understanding made by or on behalf of United.
4.6 DISCLOSURE SCHEDULES. Any matter disclosed by United on any
--------------------
Schedule to this Agreement shall be deemed to have been disclosed on every other
Schedule that refers to such Schedule by cross reference so long as the nature
disclosed is obvious from a fair reading of the Schedule on which the matter is
disclosed.
5. CLOSING DELIVERIES
------------------
At the Closing, the respective parties made the deliveries
indicated:
5.1 UNITED DELIVERIES.
-----------------
(a) United delivered to the Shareholders the portion of the
Purchase Price required to be delivered on the Closing Date pursuant to
Section 1.2.
(b) United executed and delivered the Escrow Agreement.
(c) United entered into a Consulting Agreement with ▇▇▇▇▇▇▇ on
terms and conditions satisfactory to ▇▇▇▇▇▇▇ and United.
5.2 SHAREHOLDERS DELIVERIES.
-----------------------
(a) The Shareholders delivered to United the certificates
representing the outstanding Corporation's Stock, free and clear of all
liens, security interests, claims and encumbrances, accompanied by
stock powers duly executed in blank.
(b) The Shareholders delivered to United an opinion of counsel
for the Shareholders, dated as of the Closing Date.
(c) The Shareholders delivered evidence reasonably
satisfactory to United that all required third party consents to the
transactions contemplated hereby, including without limitation all
Required Governmental Consents and all required consents of the
landlords under all real estate leases to which the Corporation is a
party, were obtained.
(d) Except as provided in Sections 5.1(e) and 5.1(f), the
Corporation delivered to United evidence satisfactory to United showing
that all written employment contracts and all oral employment contracts
other than those that are terminable "at will" without payment of
severance (other than normal severance benefits approved by United) or
other benefits with non-union employees of the Corporation (including,
without limitation, stock options or other rights to obtain equity in
the Corporation) have been terminated, effective on or before the
Closing Date.
(e) The Shareholders caused each officer and director of the
Corporation to deliver a resignation as an officer and/or director of
the corporation together with a
21
general release releasing the Corporation from all obligations under
any indemnification agreements, the charter documents of the
Corporation, or otherwise, arising out of or relating to this Agreement
or the consummation of the transactions contemplated thereby, other
than obligations arising after the Closing Date under this Agreement.
(f) The Shareholders executed and delivered the Escrow
Agreement.
6. ADDITIONAL COVENANTS OF UNITED, THE CORPORATION AND
---------------------------------------------------
THE SHAREHOLDERS
----------------
6.1 FURTHER ASSURANCES AND ADDITIONAL CONVEYANCES. Following the
---------------------------------------------
Closing, the Shareholders and United shall each deliver or cause to be delivered
at such times and places as shall be reasonably agreed upon such additional
instruments as United or the Shareholders may reasonably request for the purpose
of carrying out this Agreement. The Shareholders will cooperate with United
and/or the Corporation on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
6.2 RELEASE OF GUARANTIES. United shall use reasonable efforts to
---------------------
obtain the termination and release promptly after the Closing Date of the
personal guaranties of the Shareholders listed on Schedule 6.2, all of which
relate to indebtedness of the Corporation included in the Financial Statements
as of the Balance Sheet Date. United shall indemnify the Shareholders and hold
them harmless from and against all losses, expenses or claims by third parties
to enforce or collect indebtedness owed by the Corporation as of the Closing
Date which is personally guaranteed by the Shareholders pursuant to such
guaranties. The Shareholders may notify the obligees under such guaranties that
they have terminated their obligations under such guaranties. The Shareholders
shall cooperate with United in obtaining such releases.
6.3 CONFIDENTIALITY. Neither the Corporation nor the Shareholders
---------------
shall disclose or make any public announcements of the transactions contemplated
by this Agreement without the prior written consent of United, unless required
to make such disclosure or announcement by law, in which event the party making
the disclosure or announcement shall notify United at least 24 hours before such
disclosure or announcement is expected to be made.
6.4 BROKERS AND FINDERS FEES. Each party shall pay and be
------------------------
responsible for any broker's, finder's or financial advisory fee incurred by
such party in connection with the transactions contemplated by this Agreement.
6.5 TAXES. United shall reasonably cooperate, at the expense of
-----
the Shareholders, with the Shareholders with respect to any matters involving
the Shareholders arising out of the Shareholders' ownership of the Corporation
prior to the Closing, including matters relating to tax returns and any tax
audits, appeals, claims or litigation with respect to such tax returns or the
preparation of such tax returns. In connection therewith, United shall make
available to the Shareholders such files, documents, books and records of the
Corporation for inspection and
22
copying as may be reasonably requested by the Shareholders and shall cooperate
with the Shareholders with respect to retaining information and documents which
relate to such matters.
6.6 SHORT YEAR TAX RETURNS. After the Closing Date, the
----------------------
Shareholders shall prepare at their sole cost and expense, all short year
federal, state, county, local and foreign tax returns required by law for the
period beginning with the first day of the Corporation's fiscal year in which
the Closing occurs and ending December 31, 1997. Such return shall be prepared
in a financially responsible and conservative manner and shall be delivered to
United together with all necessary supporting schedules within 90 days following
the Closing Date for its approval (but such approval shall not relieve the
Shareholders of their responsibility for the taxes assessed under these
returns). The Shareholders shall be responsible for the payment of all taxes
(including without limitation any taxes arising as a result of the conversion of
the Corporation from a cash to an accrual basis of reporting) shown to be due or
that may come to be due on such returns or otherwise relating to the period
prior to January 1, 1998 in excess of the amount of any reserve for taxes
included in Closing Date Current Liabilities and, at the time of the delivery of
the returns, shall contemporaneously deliver to United checks payable to the
respective taxing authorities in amounts equal to that shown as being due on the
returns. United shall sign tax returns and cause such returns to be timely filed
with the appropriate authorities. The Shareholders shall be entitled to receive
all refunds shown on said returns and any such refunds received by the
Corporation or United shall be remitted to the Shareholders. United shall be
responsible for federal, state, county and foreign taxes of the Corporation from
and after January 1, 1998.
6.7 GENERAL RELEASE BY SHAREHOLDERS. Each of the Shareholders
-------------------------------
hereby fully releases and discharges the Corporation and its directors,
officers, agents and employees from all rights, claims and actions, known or
unknown, of any kind whatsoever, which any of such Shareholders now has or may
hereafter have against the Corporation and its directors, officers, agents and
employees, arising out of or relating to events arising prior to or on the
Closing Date, except (a) as may be described in written contracts disclosed in
Schedule 6.7 and expressly described and specifically excepted from this release
in Schedule 6.7, (b) compensation as an employee of the Corporation for current
periods expressly described and excepted from such release on schedule 6.7, and
(c) for the obligations of the Corporation arising after the Closing Date under
this Agreement. Specifically, but not by way of limitation, each of the
Shareholders waives any right of indemnification, contribution or other recourse
against the Corporation which he now has or may hereafter have against the
Corporation with respect to representations, warranties or covenants made in
this Agreement by the Corporation.
Each of the Shareholders hereby waives and relinquishes all
rights and benefits afforded by Section 1542 of the California Civil Code, which
states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS TO WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
23
Each of the Shareholders understands and acknowledges the significance and
consequence of this waiver of Section 1542 and nevertheless elects to, and does,
release those claims described in this Section 6.7, known or unknown, that it
may have now or in the future arising out of or relating to any event arising on
or prior to the date of this Agreement.
6.8 SHAREHOLDERS' REPRESENTATIVE.
----------------------------
(a) In order to administer efficiently the rights and
obligations of the Shareholders under this Agreement, the Shareholders
hereby designate and appoint ▇▇▇▇▇▇▇ as the Shareholders'
Representative, to serve as the Shareholders' agent and
attorney-in-fact for the limited purposes set forth in this Agreement.
(b) Each of the Shareholders hereby appoints the
Shareholders' Representative as such Shareholder's agent, proxy and
attorney-in-fact, with full power of substitution, for all purposes set
forth in this Agreement, including, without limitation, the full power
and authority on such Shareholder's behalf (i) to consummate the
transactions contemplated by this Agreement, (ii) to disburse any funds
received hereunder to the Shareholders, (iii) to execute and deliver on
behalf of each Shareholder any amendment or waiver under this
Agreement, and to agree to resolution of all Adjustments pursuant to
Section 1.4 or 10, and of all Claims hereunder, (iv) to retain legal
counsel and other professional services, at the expense of the
Shareholders, in connection with the performance by the Shareholders'
Representative of this Agreement, and (v) to do each and every act and
exercise any and all rights which such Shareholder or Shareholders are
permitted or required to do or exercise under this Agreement and the
other agreements, documents and certificates executed in connection
herewith. Each of the Shareholders agrees that such agency and proxy
are coupled with an interest, are therefore irrevocable without the
consent of the Shareholders' Representative and shall survive the
death, bankruptcy or other incapacity of any Shareholder.
(c) Each of the Shareholders hereby agrees that any
amendment or waiver under this Agreement, and any action taken on
behalf of the Shareholders to enforce the rights of the Shareholders
under this Agreement, and any action taken with respect to any
Adjustment or Claim (including any action taken to object to, defend,
compromise or agree to the payment of such Adjustment or Claim), shall
be effective if approved in writing by the Shareholders' Representative
and the holders of a majority of the Corporation's Stock (including any
Corporation's Stock held by the Shareholders' Representative), or, in
the case of any amendment or waiver made or given or action taken after
the Closing, if so approved by persons who were the holders of a
majority of the Corporation's Stock immediately prior to the Closing,
and that each and every action so taken shall be binding and conclusive
on every Shareholder, whether or not such Shareholder had notice of, or
approved, such amendment or waiver.
(d) ▇▇▇▇▇▇▇ shall serve as the Shareholders'
Representative until he resigns or is otherwise unable or unwilling to
serve. In the event that a Shareholders' Representative resigns from
such position or is otherwise unable or unwilling to serve, the
remaining Shareholders shall select, by the vote of the holders of a
majority of the
24
Corporation's Stock immediately prior to the Closing, a successor
representative to fill such vacancy, shall provide prompt written
notice to United of such change and such substituted representative
shall then be deemed to be the Shareholders' Representative for all
purposes of this Agreement.
7. INDEMNIFICATION
---------------
7.1 INDEMNITY BY THE SHAREHOLDERS. Each of the Shareholders,
-----------------------------
subject to the limitations set forth in Section 7.2, covenants and agrees that
he will indemnify and hold harmless United, the Corporation and their respective
directors, officers and agents and their respective successors and assigns (the
"United Indemnitees"), from and after the date of this Agreement, against any
and all losses, damages, assessments, fines, penalties, adjustments,
liabilities, claims, deficiencies, costs, expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation),
expenditures, including, without limitation, any "Environmental Site Losses" (as
such term is hereinafter defined) identified by a United Indemnitee in a Claims
Notice (as defined in Section 7.3(a)), or asserted by a United Indemnitee in
litigation commenced against the Shareholders provided that in either case any
such Claims Notice shall be given or the litigation commenced prior to the
expiration of the periods set forth in Section 7.2(c) (irrespective of the date
of discovery), with respect to each of the following contingencies (all, the
"Indemnity Events"):
(a) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of the
Shareholders or the Corporation pursuant to the terms of this Agreement
or any misrepresentation in or omission from any Exhibit, Schedule,
list, certificate, or other instrument furnished or to be furnished to
United pursuant to the terms of this Agreement, regardless of whether,
in the case of a breach of a representation or a warranty, United
relied on the truth of such representation or warranty or had any
knowledge of any breach thereof.
(b) "Environmental Site Losses," which shall mean any and all
losses, damages (including exemplary damages and penalties),
liabilities, claims, deficiencies, costs, expenses, and expenditures
(including, without limitation, expenses in connection with site
evaluations, risk assessments and feasibility studies) arising out of
or required by an interim or final judicial or administrative decree,
judgment, injunction, mandate, interim or final permit condition or
restriction, cease and desist order, abatement order, compliance order,
consent order, clean-up order, exhumation order, reclamation order or
any other remedial action that is required to be undertaken under
federal, state or local law in respect of operating activities on or
affecting any Facility, any UST (other than the UST formerly installed
at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ to the extent described on Schedule 3.26) or any
other site, including, but not limited to (i) any actual or alleged
violation of any law or regulation respecting the protection of the
environment, or any other law or regulation respecting the protection
of the air, water and land occurring prior to the Closing Date and (ii)
any remedies or violations, whether by a private or public action,
alleged or sought to be assessed as a consequence, directly or
indirectly, of any Release of pollutants (including odors) or Hazardous
Materials from any Facility, any UST or any other environmental site
resulting from activities thereat occurring prior
25
to the Closing Date, whether such Release is into the air, water
(including groundwater) or land and whether such Release occurring
before, during or after the Closing Date. The term "Release" as used
herein means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the ambient environment.
(c) Any liability arising from the matters described on
Schedule 3.8(b).
(d) All actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation)
incident to any of the foregoing.
7.2 LIMITATIONS ON SHAREHOLDERS' INDEMNITIES.
----------------------------------------
(a) The obligations of the Shareholders to indemnify the
United Indemnitees as provided in Section 7.1 shall be equal to the
amount by which the cumulative amount of all such liabilities, claims,
damages deficiencies, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses, expenditures and
Environmental Site Losses with respect to any or all Indemnity Events
exceed $100,000 (the "General Deductible Amount"); provided, that the
amount of any obligation of indemnity arising pursuant to Section 7.1
with respect to any representation, warranty or covenant contained in
Sections 3.1 through 3.5; and 3.12(c) hereof shall not be subject to
the General Deductible Amount and the amount of any indemnity
obligation arising pursuant to Section 3.9 or 3.22 with respect to
Claims based on the Inventory Value and the Equipment included on the
Rental Asset Listing shall be subject to the applicable amounts set
forth in Sections 1.4(b) and 1.4(c) in lieu of the General Deductible
Amount.
(b) The maximum amount which United can recover as a result of
one or more Indemnity Events pursuant to the provisions hereof for
Claims shall not in the aggregate exceed the Purchase Price.
(c) The obligations of the Shareholders under Section 7.1
shall expire, unless a Claims Notice is given or litigation is
commenced, on or prior to the expiration of the applicable statute of
limitations.
7.3 NOTICE OF INDEMNITY CLAIM.
-------------------------
(a) In the event that any claim ("Claim") is hereafter
asserted against or arises with respect to any United Indemnitee as to
which such Indemnitee may be entitled to indemnification hereunder, the
United Indemnitee shall notify the Shareholders (collectively, the
"Indemnifying Party") in writing thereof (the "Claims Notice") within
10 days after (i) receipt of written notice of commencement of any
third party litigation against such United Indemnitee, (ii) receipt by
such United Indemnitee of written notice of any third party claim
pursuant to an invoice, notice of claim or assessment, against such
United Indemnitee, or (iii) such United Indemnitee becomes aware of the
existence of any other event in respect of which indemnification may be
sought from the
26
Indemnifying Party (including, without limitation, any inaccuracy of
any representation or warranty or breach of any covenant). The Claims
Notice shall describe the Claim and the specific facts and
circumstances in reasonable detail, and shall indicate the amount, if
known, or an estimate, if possible, of the losses that have been or may
be incurred or suffered by the United Indemnitee.
(b) The Indemnifying Party may elect to defend any Claim for
money damages where the cumulative total of all Claims (including such
Claims) do not exceed the limit set forth in Section 7.2 at the time
the Claim is made, by the Indemnifying Party's own counsel; provided,
however, the Indemnifying Party may assume and undertake the defense of
such a third party Claim only upon written agreement by the
Indemnifying Party that the Indemnifying Party is obligated to fully
indemnify the United Indemnitee with respect to such action. The United
Indemnitee may participate, at the United Indemnitee's own expense, in
the defense of any Claim assumed by the Indemnifying Party. Without the
written approval of the United Indemnitee, which approval shall not be
unreasonably withheld, the Indemnifying Party shall not agree to any
compromise of a Claim defended by the Indemnifying Party.
(c) If, within 30 days of the Indemnifying Party's receipt of
a Claims Notice, the Indemnifying Party shall not have provided the
written agreement required by Section 7.3(b) and elected to defend the
Claim, the United Indemnitee shall have the right to assume control of
the defense and/or compromise of such Claim, and the costs and expenses
of such defense, including reasonable attorneys' fees, shall be added
to the Claim. The Indemnifying Party shall promptly, and in any event
within 30 days after demand therefor, reimburse the United Indemnitee
for the costs of defending the Claim, including attorneys' fees and
expenses.
(d) The party assuming the defense of any Claim shall keep the
other party reasonably informed at all times of the progress and
development of its or their defense of and compromise efforts with
respect to such Claim and shall furnish the other party with copies of
all relevant pleadings, correspondence and other papers. In addition,
the parties to this Agreement shall cooperate with each other and make
available to each other and their representatives all available
relevant records or other materials required by them for their use in
defending, compromising or contesting any Claim. The failure to timely
deliver a Claims Notice or otherwise notify the Indemnifying Party of
the commencement of such actions in accordance with this Section 7.3
shall not relieve the Indemnifying Party from the obligation to
indemnify hereunder but only to the extent that the Indemnifying Party
establishes by competent evidence that it has been prejudiced thereby.
(e) In the event both the United Indemnitee and the
Indemnifying Party are named as defendants in an action or proceeding
initiated by a third party, they shall both be represented by the same
counsel (on whom they shall agree), unless such counsel, the United
Indemnitee, or the Indemnifying Party shall determine that such counsel
has a conflict of interest in representing both the United Indemnitee
and the Indemnifying Party
27
in the same action or proceeding and the United Indemnitee and the
Indemnifying Party do not waive such conflict to the satisfaction of
such counsel.
7.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
------------------------------------------------------
representations and warranties of the parties contained in this Agreement and in
any certificate, Exhibit or Schedule delivered pursuant hereto, or in any other
writing delivered pursuant to the provisions of this Agreement (the
"Representations and Warranties") and the liability of the party making such
Representations and Warranties for breaches thereof shall survive the
consummation of the transactions contemplated hereby.
7.5 NO EXHAUSTION OF REMEDIES OR SUBROGATION; RIGHT OF SET OFF.
----------------------------------------------------------
Each of the Shareholders waives any right to require any United Indemnitee to
(i) proceed against the Corporation; (ii) proceed against any other person; or
(iii) pursue any other remedy whatsoever in the power of any United Indemnitee.
United may, but shall not be obligated to, set off against any and all payments
due the Shareholders pursuant to the Hold Back or under any other agreement, any
amount to which any United Indemnitee is entitled to be indemnified hereunder
with respect to any Indemnity Event. Such right of set off shall be separate and
apart from any and all other rights and remedies that the Indemnities may have
against any of the Shareholders or his successors.
8. OTHER POST-CLOSING COVENANTS OF THE SHAREHOLDERS AND
----------------------------------------------------
UNITED
------
8.1 RESTRICTIVE COVENANTS. As to the Corporation, the Shareholders
---------------------
and their Affiliates acknowledge that (i) United, as the purchaser of the
Corporation's Stock, is and will be engaged in the same business as the
Corporation (the "Business"); (ii) the Shareholders and their Affiliates are
intimately familiar with the Business; (iii) the Business is currently conducted
in the State of California and United intends to continue the Business in
California and intends, by acquisition or otherwise, to expand the Business into
other geographic areas of California where it is not presently conducted; (iv)
the Shareholders and their Affiliates have had access to trade secrets of, and
confidential information concerning, the Business; (v) the agreements and
covenants contained in this Section 8.1 are essential to protect the Business
and the goodwill being acquired; and (vi) the Shareholders and their Affiliates
have the means to support themselves and their dependents other than by engaging
in a business substantially similar to the Business and the provisions of this
Section 8 will not impair such ability. Each of the Shareholders covenants and
agrees as set forth in (a), (b) and (c) below with respect to the Corporation:
(a) NON-COMPETE. For a period commencing on the Closing Date
-----------
and terminating five years thereafter (the "Restricted Period"),
neither the Shareholders nor any of their Affiliates shall, anywhere in
the counties of Alameda, Contra Costa, Marin, San Francisco, San
▇▇▇▇▇▇▇, San Mateo, Santa ▇▇▇▇▇ and ▇▇▇▇▇▇, California, or any other
county in California where United or one of its subsidiaries owns or
operates a business similar to the Business (meaning any location where
rental equipment is used by a customer) (the "Restricted Counties"),
directly or indirectly, acting individually or as the owner,
shareholder, partner, or employee of any entity, (i) engage in the
operation of
28
any equipment rental, sales or leasing business; (ii) enter the employ
of, or render any personal services to or for the benefit of, or assist
in or facilitate the solicitation of customers for, or receive
remuneration in the form of salary, commissions or otherwise from, any
business engaged in such activities; or (iii) receive or purchase a
financial interest in, make a loan to, or make a gift in support of,
any such business in any capacity, including, without limitation, as a
sole proprietor, partner, shareholder, officer, director, principal,
agent, trustee or lender; provided, however, that the Shareholders may
own, directly or indirectly, solely as an investment, securities of any
business traded on any national securities exchange or NASDAQ, provided
that none of the Shareholders is a controlling person of, or a member
of a group which controls, such business and further provided that the
Shareholders do not, in the aggregate, directly or indirectly, own 2%
or more of any class of securities of such business.
(b) CONFIDENTIAL INFORMATION. During the Restricted Period and
------------------------
thereafter, the Shareholders and their respective Affiliates shall keep
secret and retain in strictest confidence, and shall not use for the
benefit of themselves or others, all data and information relating to
the Business ("Confidential Information"), including without
limitation, know-how, trade secrets, customer lists, supplier lists,
details of contracts, pricing policies, operational methods, marketing
plans or strategies, bidding information, practices, policies or
procedures, product development techniques or plans, and technical
processes; provided, however, that the term "Confidential Information"
shall not include information that (i) is or becomes generally
available to the public other than as a result of disclosure by the
Shareholders, or (ii) is general knowledge in the equipment rental,
sales or leasing business and not specifically related to the Business.
(c) PROPERTY OF THE BUSINESS. All memoranda, notes, lists,
------------------------
records and other documents or papers (and all copies thereof) relating
to the Business, including such items stored in computer memories, on
microfiche or by any other means, made or compiled by or on behalf of
the Shareholders or the Corporation or made available to them relating
to the Business, but excluding any materials (other than the minute
books of the Corporation) maintained by any attorneys for the
Corporation or the Shareholders prior to the Closing, are and shall be
the property of United and have been delivered or will be delivered or
made available to United at the Closing.
(d) NON-SOLICITATION. Without the consent of United, which may
----------------
be granted or withheld by United in its discretion, the Shareholders
and their Affiliates shall not solicit any employees of the Corporation
to leave the employ of the Corporation and join the Shareholders or any
Affiliate in any business endeavor owned or pursued by the
Shareholders.
(e) NO DISPARAGEMENT. From and after the Closing Date, the
----------------
Shareholders shall not, in any way or to any person or entity or
governmental or regulatory body or agency, denigrate or derogate United
or any of its subsidiaries, or any officer, director or employee, or
any product or service or procedure of any such company whether or not
such denigrating or derogatory statements shall be true and are based
on acts or omissions which are learned by the Shareholders from and
after the date hereof or on
29
acts or omissions which occur from and after the date hereof, or
otherwise. A statement shall be deemed denigrating or derogatory to any
person or entity if it adversely affects the regard or esteem in which
such person or entity is held by investors, lenders or licensing,
rating, or regulatory entities. Without limiting the generality of the
foregoing, the Shareholders shall not, directly or indirectly in any
way in respect of any such company or any such directors or officers,
communicate with, or take any action which is adverse to the position
of any such company with any person, entity or governmental or
regulatory body or agency who or which has dealings or prospective
dealings with any such company or jurisdiction or prospective
jurisdiction over any such company. This paragraph does not apply to
the extent that testimony is required by legal process, provided that
United has received not less than five days' prior written notice of
such proposed testimony.
8.2 RIGHTS AND REMEDIES UPON BREACH. If any of the Shareholders or
-------------------------------
any of their Affiliates breaches, or threatens to commit a breach of, any of the
provisions of Section 8.1 herein (the "Restrictive Covenants"), United shall
have the following rights and remedies, each of which rights and remedies shall
be independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to
United at law or in equity:
(a) SPECIFIC PERFORMANCE. The right and remedy to have the
--------------------
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of
the Restrictive Covenants would cause irreparable injury to United and
that money damages would not provide an adequate remedy to United.
Accordingly, in addition to any other rights or remedies, United shall
be entitled to injunctive relief to enforce the terms of the
Restrictive Covenants and to restrain the Shareholders from any
violation thereof.
(b) ACCOUNTING. The right and remedy to require the
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Shareholders to account for and pay over to United all compensation,
profits, monies, accruals, increments or other benefits derived or
received by the Shareholders as the result of any transactions
constituting a breach of the Restrictive Covenants.
(c) SEVERABILITY OF COVENANTS. Each of the Shareholders
-------------------------
acknowledges and agrees that the Restrictive Covenants are reasonable
and valid in geographical and temporal scope and in all other respects.
If any court determines that any of the Restrictive Covenants, or any
part thereof, is invalid or unenforceable, the remainder of the
Restrictive Covenants shall not thereby be affected and shall be given
full effect, without regard to the invalid portions.
(d) BLUE-PENCILING. If any court determines that any of the
--------------
Restrictive Covenants, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, such court shall
reduce the duration or scope of such provision, as the case may be, to
the extent necessary to render it enforceable and, in its reduced form,
such provision shall then be enforced.
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(e) ENFORCEABILITY IN JURISDICTION. United and the
------------------------------
Shareholders intend to and hereby confer jurisdiction to enforce the
Restrictive Covenants upon the courts of any jurisdiction within the
geographic scope of the Restrictive Covenants. If the courts of any one
or more of such jurisdictions hold the Restrictive Covenants
unenforceable by reason of the breadth of such scope or otherwise, it
is the intention of United and the Shareholders that such determination
not bar or in any way affect United's right to the relief provided
above in the courts of any other jurisdiction within the geographic
scope of the Restrictive Covenants as to breaches of such covenants in
such other respective jurisdictions, such covenants as they relate to
each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
9. GENERAL
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9.1 ASSIGNMENT. This Agreement shall be binding upon and shall
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inure to the benefit of the parties hereto, the successors or assigns of United
and the heirs, legal representatives or assigns of the Shareholders; provided,
however, that any such assignment shall be subject to the terms of this
Agreement and shall not relieve the assignor of its or his responsibilities
under this Agreement.
9.2 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
9.3 NOTICES. All notices, requests, demands and other
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communications hereunder shall be deemed to have been duly given if in writing
and either delivered personally, sent by facsimile transmission or by air
courier service, or mailed by postage prepaid registered or certified U.S. mail,
return receipt requested, to the addresses designated below or such other
addresses as may be designated in writing by notice given hereunder, and shall
be effective upon personal delivery or facsimile transmission thereof or upon
delivery by registered or certified U.S. mail or one business day following
deposit with an air courier service:
If to the Shareholders: ▇▇▇▇▇▇▇ ▇. Journey
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇, Esq.
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to United: United Rentals, Inc.
Four ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
31
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.4 ATTORNEYS' FEES. In the event of any dispute or controversy
---------------
between United on the one hand and the Corporation or the Shareholders on the
other hand relating to the interpretation of this Agreement or to the
transactions contemplated hereby, the prevailing party shall be entitled to
recover from the other party reasonable attorneys' fees and expenses incurred by
the prevailing party. Such award shall include post-judgment attorney's fees and
costs.
9.5 APPLICABLE LAW. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California without regard
to its conflict of laws provisions.
9.6 PAYMENT OF FEES AND EXPENSES. Whether or not the transactions
----------------------------
herein contemplated shall be consummated, each party hereto will pay its own
fees, expenses and disbursements incurred in connection herewith and all other
costs and expenses incurred in the performance and compliance with all
conditions to be performed hereunder (including, in the case of the
Shareholders, any such fees, expenses and disbursements paid or accrued by, or
charged to, the Corporation).
9.7 INCORPORATION BY REFERENCE. All Schedules and Exhibits
--------------------------
attached hereto are incorporated herein by reference as though fully set forth
at each point referred to in this Agreement.
9.8 CAPTIONS. The captions in this Agreement are for convenience
--------
only and shall not be considered a part hereof or affect the construction or
interpretation of any provisions of this Agreement.
9.9 NUMBER AND GENDER OF WORDS; CORPORATION. Whenever the singular
---------------------------------------
number is used herein, the same shall include the plural where appropriate, and
shall apply to all of such number, and to each of them, jointly and severally,
and words of any gender shall include each other gender where appropriate.
9.10 ENTIRE AGREEMENT. This Agreement (including the Schedules and
----------------
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the entire Agreement and
32
understanding between the Corporation, the Shareholders and United and
supersedes any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement may be modified or amended only by a written
instrument executed by the Corporation, the Shareholders and United acting
through its officers, thereunto duly authorized by its Board of Directors.
9.11 WAIVER. No waiver by any party hereto at any time of any
------
breach of, or compliance with, any condition or provision of this Agreement to
be performed by any other party hereto may be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
9.12 CONSTRUCTION. The language in all parts of this Agreement must
------------
be in all cases construed simply according to its fair meaning and not strictly
for or against any party. Unless expressly set forth otherwise, all references
herein to a "day" are deemed to be a reference to a calendar day. All references
to "business day" mean any day of the year other than a Saturday, Sunday or a
public or bank holiday in Connecticut or California. Unless expressly stated
otherwise, cross-references herein refer to provisions within this Agreement and
are not references to the overall transaction or to any other document.
10. ARBITRATION AND DISPUTE RESOLUTION. THE PARTIES WAIVE THEIR
----------------------------------
RIGHT TO SEEK REMEDIES IN COURT, INCLUDING ANY RIGHT TO A JURY TRIAL, WITH
RESPECT TO ANY DISPUTE CONCERNING DETERMINATION OF THE ADJUSTMENTS TO THE
PURCHASE PRICE UNDER SECTIONS 1.3 AND 1.4 ONLY. The parties agree that in the
event United and the Shareholders' Representative are unable to resolve a
dispute concerning determination of the Adjustments to the Purchase Price, such
dispute shall be resolved exclusively by arbitration to be conducted only in San
Francisco, California in accordance with the rules of the Judicial Arbitration
and Mediation Service ("JAMS") applying the laws of California. The parties
agree that such arbitration shall be conducted by a retired judge who is
experienced in dispute resolution regarding business acquisitions and accounting
matters, that discovery shall not be permitted except as required by the rules
of JAMS, that the arbitration award shall not include factual findings or
conclusions of law, and that no punitive damages shall be awarded. The parties
understand that any party's right to appeal or to seek modification of any
ruling or award of the arbitrator is severely limited. Any award rendered by the
arbitrator shall be final and binding, and judgment may be entered on it in any
court of competent jurisdiction as otherwise provided by law. The preceding
portion of this Section does not apply to any dispute relating to any other
provision of the Agreement, or to any other aspect of the transactions
contemplated herein, and such other disputes may be resolved by the parties by
any means available, including without limitation court action and a jury trial.
The parties expressly do not waive any right to pursue any remedy available with
respect to any dispute other than one concerning determination of the
Adjustments to the Purchase Price under Sections 1.3 and 1.4, and expressly do
not waive the right to trial with respect any other dispute.
33
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
persons thereunto duly authorized as of the date first above written.
THE CORPORATION: MISSION VALLEY RENTALS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. Journey
-------------------------------
▇▇▇▇▇▇▇ ▇. Journey
President
THE SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. Journey
------------------------------------
▇▇▇▇▇▇▇ ▇. Journey
/s/ ▇▇▇▇▇▇ ▇. Journey
------------------------------------
▇▇▇▇▇▇ ▇. Journey
UNITED: UNITED RENTALS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇, Vice Chairman and
Chief Acquisition Officer
34