EXHIBIT (10)(k)
STOCK PURCHASE AGREEMENT
AMONG
UNITED RENTALS, INC.
AND
THE SHAREHOLDERS OF ▇▇▇▇▇▇ EQUIPMENT COMPANY
DATED AS OF OCTOBER 24, 1997
TABLE OF CONTENTS
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 24, 1997 (the "Agreement"),
is by and among United Rentals, Inc., a Delaware corporation (the "Purchaser"),
and the shareholders of ▇▇▇▇▇▇ Equipment Company, a North Carolina corporation
(the "Company"), listed on the signature pages hereof (collectively the
"Sellers").
W I T N E S S E T H:
WHEREAS, the Sellers own an aggregate of 16,667 shares of Class A Voting
Common Stock, $1.00 par value (the "Class A Shares") and 150,000 shares of Class
B Nonvoting Common Stock, $1.00 par value (the "Class B Shares" and, together
with the Class A Shares, the "Shares"), of the Company, which Shares constitute
all of the issued and outstanding shares of capital stock of the Company; and
WHEREAS, the Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from the Sellers, the Shares for the purchase price and upon the terms
and conditions hereinafter set forth; and
WHEREAS, certain terms used in this Agreement are defined in Section 9.1
hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. At the Closing (as hereinafter defined),
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upon the terms and subject to the conditions contained herein each Seller shall
sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser
shall purchase from each Seller, the Shares of such Seller set forth opposite
such Seller's name on Annex A hereto.
ARTICLE II
PURCHASE CONSIDERATION
2.1 Amount of Purchase Price. The purchase price for the Shares shall be
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an aggregate amount equal to $25,000,000 (the "Purchase Price"), subject to
adjustment pursuant to the provisions of Sections 2.3, 2.4 and 2.5 hereof.
2.2 Payment of Estimated Purchase Price. The Purchaser shall pay the
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Estimated Purchase Price (as hereinafter defined) to the Sellers, less the
Escrow Amount (as hereinafter defined), by wire transfer of immediately
available funds into a trust account of Kennedy, Covington, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.P. designated by the Sellers' Representative for allocation among the
Sellers in accordance with their pro-rata ownership of the Shares as set forth
on Annex A.
2.3 Determination of Purchase Price
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(a) The Sellers have prepared and delivered to the Purchaser an estimate of
the Purchase Price Adjustment (as hereinafter defined) (the "Estimated Purchase
Price Adjustment"). The "Estimated Purchase Price" paid by the Purchaser at
Closing shall be the Purchase Price increased by the amount of the Estimated
Purchase Price Adjustment if such Estimated Purchase Price Adjustment is a
number greater than zero or decreased by the amount of the Estimated Purchase
Price Adjustment if such Estimated Purchase Price Adjustment is a number less
than zero.
(b) As soon as practicable following the Closing Date, the Purchaser shall
cause the Company to prepare and deliver to the Purchaser and the Sellers a
balance sheet of the Company as at the close of business on the Closing Date
(the "Closing Balance Sheet"). The Closing Balance Sheet shall be compiled by
▇▇▇▇▇▇▇, ▇▇▇▇ & Co., P.A., ("Company's Accountants") and shall be prepared in
accordance with GAAP applied on a basis consistent with that of the preceding
fiscal year (subject to the absence of notes and to normal year-end
adjustments). The Seller, the Purchaser and the Purchaser's accountants
("Purchaser's Accountants") shall have the opportunity to consult with and to
examine the work papers, schedules and other documents prepared or reviewed by
Company's Accountants in connection with the compilation of the Closing Balance
Sheet and of the Purchase Price Certificate referred to in subparagraph (c)
hereof.
(c) The calculation of the Purchase Price Adjustment (as defined below)
shall be made by the Company's Accountants, who shall render a certificate (the
"Purchase Price Certificate") showing such calculation and stating that such
calculation has been made in accordance with the provisions of this Article II
hereof. The Purchase Price Certificate shall be delivered to the Purchaser and
the Sellers as soon as practicable following the Closing Date but in no event
later than 45 days thereafter.
(d) The "Purchase Price Adjustment" shall equal the difference between (A)
the aggregate of the Company's (i) cash and cash equivalents, (ii) accounts
receivable (without regard to the allowance for doubtful accounts), finance
accounts, advances, unearned insurance premiums, refundable non-highway use fuel
taxes and notes receivable (including notes receivable from any Seller or
Affiliate of any Seller) (the "Receivables") and (iii) prepaid expenses and (B)
the total liabilities of the Company, as reflected on the Closing Balance Sheet
or the Estimated Purchase Price Adjustment, as applicable.
(e) The Purchaser and the Sellers' Representative shall have a period of
twenty (20) days after delivery of the Closing Balance Sheet and the Purchase
Price Certificate to present in writing to the Company's Accountants (with a
copy to the Sellers or the Purchaser, as applicable) any objections the
Purchaser or the Sellers' Representative on behalf of the Sellers, may have to
any of the matters set forth therein, which objections shall be set forth in
reasonable detail. If no objections are raised within such 20-day period, the
Closing Balance Sheet and the determination of the Purchase Price Adjustment
shall be deemed accepted and approved by the Purchaser and by the Sellers and
(i) within five business days thereafter, the Purchaser shall pay to the Sellers
by wire transfer of immediately available funds to accounts designated by the
Sellers within five business days thereafter, the amount, if any, by which the
Purchase Price Adjustment shall exceed the amount of the Estimated Purchase
Adjustment ("Positive Purchase Price Adjustment") and allocated among the
Sellers in accordance with their pro-rata ownership of the Shares as set forth
on Annex A or (ii) the Purchaser shall, to the extent of the Escrow Amount,
collect from the Escrow (in which case the Purchaser and the Sellers'
Representative shall give instructions to the Escrow Agent to permit the
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Purchaser to collect from the Escrow) or within five business days after the 20-
day period, be paid by the Sellers by wire transfer of immediately available
funds to an account designated by the Purchaser, the amount, if any, by which
the Estimated Purchase Adjustment shall exceed the Purchase Price Adjustment
("Negative Purchase Price Adjustment").
(f) If the Purchaser or the Sellers' Representative shall raise any
objections within the aforesaid 20-day period, the Company's Accountants and the
Purchaser's Accountants shall attempt to resolve the matter or matters in
dispute and, if resolved, such firms shall send a joint notice to the Purchaser
and the Sellers stating the manner in which the dispute was resolved and a
revised Purchase Price Certificate prepared in accordance with such resolution,
whereupon the revised Purchase Price Certificate shall be final and binding on
the parties hereto and the revised Positive Purchase Price Adjustment or
Negative Purchase Price Adjustment as applicable shall be paid in accordance
with the payment provisions of Section 2.4(e) hereof.
If such dispute cannot be resolved by the Purchaser and the Sellers'
Representative nor by such accounting firms within forty (40) days after the
delivery of the Closing Balance Sheet, then the specific matters in dispute
shall be submitted to another firm of independent public accountants mutually
acceptable to the Purchaser and the Sellers' Representative, which firm shall
make a final and binding determination as to such matter or matters and the
revised Positive Purchase Price Adjustment or Negative Purchase Price Adjustment
as applicable shall be paid in accordance with the payment provisions of Section
2.4(e) hereof.
The parties agree to cooperate with each other and each other's authorized
representatives and with any other accounting firm selected by the Purchaser and
the Sellers' Representative in order that any and all matters in dispute shall
be resolved as soon as practicable.
(g) The fees and expenses hereunder of Company's Accountants and the
Purchaser's Accountants shall be paid by the Sellers and the Purchaser,
respectively, except that the fees and expenses of Company's Accountants in
conducting the compilation as required by Section 2.3(b) hereof, shall be paid
when due by the Purchaser, and those of the other accounting firm selected by
the Purchaser and the Sellers' Representative pursuant to Section 2.4(f) hereof
shall be paid one-half by the Purchaser and one-half by the Sellers.
2.4 Equipment Adjustment. The Rental Asset Listing attached as Schedule
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2.4 sets forth, as of October 21, 1997, the asset description, make, model and
original cost of all rental equipment inventory (the "Equipment") held for rent
to customers as used in the preparation of the Closing Balance Sheet. The
Equipment is Rental Ready (as defined below). Within 30 days following the
Closing Date, the Purchaser shall complete a physical inventory 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 (i) reduced
for each item of Equipment listed on the Rental Asset Listing which is missing
(or non-existing), not Rental Ready, or otherwise not available for rent to
customers by the Company and not replaced with other like Equipment, but only to
the extent the value (as calculated in the next sentence) of all such Equipment
exceeds $50,000 (ii) increased for each item of Equipment listed on the Rental
Asset Listing, which has a unit cost less than $7,500 (unless approved by
Purchaser) and which was purchased by the Company subsequent to October 21,
1997; provided, however , without
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the written consent of the Purchaser, the aggregate of all such Equipment
purchased shall not exceed $75,000; provided further, the Purchase Price shall
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be increased for all such Equipment purchased in the aggregate in excess of
$75,000 if the purchase thereof was consented to by the Purchaser, and (iii)
reduced for each item of Equipment sold by the Company subsequent to October 21,
1997 (collectively, the "Equipment Adjustment"). The reduction in the Purchase
Price in item (i) above shall be calculated by the aggregate fair market value
(as determined by the Purchaser and the Sellers' Representative) of all missing
or unavailable Equipment and at the repair cost for all non-Rental Ready
Equipment. Such repair cost with respect to any item of Equipment shall be
determined based upon the cost of similar repair most recently performed by the
Company to the same or similar item of such Equipment. In the event of a
Purchase Price reduction due to an Equipment Adjustment, the Purchaser shall be
entitled to be paid out of the Escrow Amount, and the Purchaser and the Sellers'
Representative shall give instructions to the Escrow Agent to pay, an amount
equal to such reduction within five business days of completion of the
determination of the Equipment Adjustment. For purposes of this Agreement, an
item of Equipment is "Rental Ready" only if it does not require any repairs in
excess of $750 per item for those items having a net book value in excess of
$25,000, in excess of $500 per item for those items having a net book value in
excess of $10,000 but not in excess of $25,000, in excess of $200 per item for
those items having a net book value in excess of $5,000 but not in excess of
$10,000 and $100 per item for those items having a net book value not in excess
of $5,000 per item. Any disputes as to the physical count, fair market value or
Rental Readiness 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 the dispute resolution provisions of Section 2.3(f)
hereof.
2.5 Receivables Adjustment. The Sellers represent and warrant that
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all of the Receivables on the Closing Balance Sheet are good and valid and will
be collectable by the Company not later than 120 days after the Closing Date. To
the extent any Receivables existing on the Closing Date remain outstanding
following such 120 day period, the Purchaser shall be entitled to be paid, and
the Purchaser and the Sellers' Representative shall give instructions to the
Escrow Agent to pay, out of the Escrow Amount an amount equal to the Receivables
remaining unpaid at such time. Upon receipt of such payment in respect of the
unpaid Receivables, the Company shall assign such unpaid Receivables to the
Sellers' Representative for the benefit of the Sellers free and clear of any
Liens and, if the Company receives any payment with respect to any such assigned
Receivables, the Company shall promptly turn over to the Sellers' Representative
for the benefit of the Sellers such payment in the form received, properly
endorsed for transfer, if necessary. The Purchaser shall cause the Company to
take all reasonable action, consistent with past practice to collect the
Receivables and, unless otherwise specified in any remittance, collected
Receivables will be applied against invoices on a "FIFO" basis. The Purchaser
shall cause the Company to permit the Sellers and their representatives full
access, during normal business hours, to the books and records of the Company
relating to the Receivables.
2.6 Escrow
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(a) At the Closing, $2,000,000 (the "Escrow Amount") of the Purchase Price
shall be deposited by the Purchaser with First Union National Bank, a national
banking association (the "Escrow Agent") pursuant to an escrow agreement
mutually agreeable to the parties hereto (the "Escrow Agreement"). All interest
and other income earned on the Escrow Amount shall, subject to Section 2.6(b)
hereof, be disbursed by the Escrow Agent
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together with the Escrow Amount (collectively, the "Escrow") to the Sellers'
Representative for the benefit of the Sellers 120 days after the Closing Date
(the "Escrow Expiration Date"); provided, however, that, in the event that the
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Purchaser has prior to the Escrow Expiration Date delivered notice to the Escrow
Agent and the Sellers that the Purchaser, in good faith, disputes the adjustment
to the Purchase Price, the Equipment Adjustment or the Receivables Adjustment
and setting for the amount of such dispute (the "Disputed Amount"), the Escrow
Agent shall disburse to the Sellers' Representative for the benefit of the
Sellers the sum of (i) the remaining Escrow less (ii) the Disputed Amount. Upon
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resolution by the Purchaser and the Sellers' Representative of the Disputed
Amount, the Escrow Agent shall disburse the Disputed Amount as so resolved.
(b) To the extent there is any of the Escrow Amount remaining following the
adjustment of the Purchase Price pursuant to Section 2.3 hereof, the Equipment
Adjustment pursuant to Section 2.4 hereof and the Receivables Adjustment
pursuant to Section 2.5 hereof, the Sellers shall be entitled to be paid in
accordance with their pro-rata ownership of Shares as set forth on Annex A, and
the Purchaser and Sellers' Representative shall give instructions to the Escrow
Agent to pay out, any such amount within five business days of the determination
of the last of such adjustments.
(c) To the extent that the aggregate amount of the adjustments pursuant to
Sections 2.3, 2.4 and 2.5 exceed the Escrow Amount, the Sellers shall pay the
deficiency in the Escrow Amount to the Purchaser by wire transfer of immediately
available funds not later than five business days after resolution of the
calculation of such deficiency as provided in Section 2.3, 2.4 and 2.5, as
applicable. The obligation to pay to the Purchaser any deficiency in the Escrow
Amount shall be a joint and several obligation of the Sellers.
2.7 Payment of Certain Company Debt. At the Closing, the Purchaser
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shall, on behalf of the Company, pay in full all amounts then owing by the
Company to the Persons specified in Schedule 2.7 and cause the obligations
(including guarantees), if any, of the Sellers with respect thereto to be
terminated, and the Purchaser shall cause the guaranty of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ with American Honda Motor Co., Inc.
and the guaranty of ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ with Stone Financing, Inc. to be
terminated within thirty (30) days of the Closing Date.
ARTICLE III
CLOSING AND TERMINATION
3.1 Closing Date. The closing of the sale and purchase of the Shares
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provided for in Section 1.1 hereof (the "Closing") shall take place simultaneous
with the execution of this Agreement at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, L.L.P. located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ on October 24, 1997. The date on which the Closing was
held is referred to in this Agreement as the "Closing Date".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby jointly and severally represent and warrant to the
Purchaser that:
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4.1 Organization and Good Standing. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the state of
North Carolina, is qualified to do business and is in good standing as a foreign
corporation in the state of South Carolina and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now conducted. The Company is not, and is not required to be,
qualified or authorized to do business as a foreign corporation in any other
jurisdiction, the failure to so qualify or be authorized would result in a
Material Adverse Change.
4.2 Authorization of Agreement. Each Seller has all requisite power,
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authority and legal capacity to execute and deliver, as applicable, this
Agreement, an Employment Agreement substantially in the form of Exhibit A hereto
(the "Employment Agreements"), an Escrow Agreement substantially in the form of
Exhibit B hereto (the "Escrow Agreement"), a Non-Competition Agreement
substantially in the form of Exhibit C hereto (the "Non-Competition
Agreements"), a Consulting Agreement substantially in the form of Exhibit D
hereto (the "Consulting Agreement") and each other agreement, document, or
instrument or certificate contemplated by this Agreement to be executed by such
Seller in connection with the consummation of the transactions contemplated by
this Agreement (together with this Agreement, the Employment Agreements, the
Escrow Agreement, the Non-Competition Agreement and the Consulting Agreement,
the "Seller Documents"), and to consummate the transactions contemplated hereby
and thereby. This Agreement and each of the other Seller Documents have been
duly and validly executed and delivered by each Seller and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each of the other Seller Documents constitutes a
legal, valid and binding obligation of each Seller, enforceable against each
Seller in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
4.3 Capitalization.
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(a) The authorized capital stock of the Company consists of 200,000 Shares,
of which 25,000 shares are Class A Shares and 175,000 shares are Class B Shares.
As of the date hereof, there are 166,667 Shares issued and outstanding, of which
16,667 shares are Class A Shares and 150,000 shares are Class B Shares. All of
the issued and outstanding Shares were duly authorized for issuance and are
validly issued, fully paid and non-assessable. The Shares being acquired by the
Purchaser hereunder constitute all of the outstanding shares of capital stock of
the Company.
(b) There is no existing option, warrant, call, right, commitment or other
agreement of any character to which any Seller or the Company is a party
requiring, and there are no securities of the Company outstanding which upon
conversion or exchange would require, the issuance, sale or transfer of any
additional shares of capital stock or other equity securities of the Company or
other securities convertible into, exchangeable for or evidencing the right to
subscribe for or purchase shares of capital stock or other equity securities of
the Company. Except as set forth on Schedule 4.3 (which agreements would
terminate upon closing), none of the Sellers nor the Company is a party to any
voting trust or other voting agreement with respect to any
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of the Shares or to any agreement relating to the issuance, sale, redemption,
transfer or other disposition of the capital stock of the Company.
4.4 No Subsidiaries. The Company does not, directly or indirectly,
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own any stock or other equity interest in any other Person.
4.5 Corporate Records
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(a) The Sellers have delivered to the Purchaser true, correct and complete
copies of the Articles of Incorporation certified by the Secretary of State of
the State of North Carolina and By-laws of the Company, each certified by the
secretary, assistant secretary or other appropriate officer of the Company.
(b) The stock certificate books and stock transfer ledgers of the Company
previously made available to the Purchaser are true, correct and complete. All
stock transfer taxes levied or payable with respect to all transfers of shares
of the Company prior to the date hereof, if any, have been paid and appropriate
transfer tax stamps affixed, if required.
4.6 Conflicts; Consents of Third Parties.
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(a) Neither the execution, delivery and performance by any Seller of this
Agreement and the other Seller Documents, nor compliance by any Seller with any
of the provisions hereof or thereof will (i) conflict with, or result in the
breach of, any provision of the Articles of Incorporation or By-laws of the
Company, (ii) conflict with, violate, result in the breach or termination of, or
constitute a default under any material note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which the Company or any
Seller is a party or by which any of them or any of their respective properties
or assets is bound, (iii) violate any statute, rule, regulation, order or decree
of any governmental body or authority by which the Company or any Seller is
bound, or (iv) result in the creation of any Lien upon the properties or assets
of the Company, except, in the case of clause (ii), (iii) and (iv), for such
violations, Liens, breaches or defaults as would not, individually or in the
aggregate, result in a Material Adverse Change.
(b) Except as set forth on Schedule 4.6 hereto, no consent, waiver,
approval, Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on the part of any
Seller or the Company in connection with the execution and delivery of this
Agreement or the other Seller Documents, or the compliance by each Seller or the
Company, as the case may be, with any of the provisions hereof or thereof.
4.7 Ownership and Transfer of Shares. Each Seller is the record and
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beneficial owner of the Shares indicated as being owned by such Seller on Annex
A, free and clear of any and all Liens, other than any restrictions imposed by
any federal or state securities Laws. Annex A hereto sets forth, as of the date
hereof, the name, address and social security number of each record or
beneficial owner of Shares and the number and type of Shares so owned. Each
Seller has the power and authority to sell, transfer, assign and deliver such
Shares as provided in this Agreement, and such delivery will convey to the
Purchaser good and marketable title to such Shares, free and clear of any and
all Liens, other than any restrictions imposed by any federal or state
securities Laws.
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4.8 Financial Statements. The Sellers have delivered to the Purchaser
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copies of (i) the audited balance sheets of the Company as at December 31, 1990,
1991, 1992, 1993, 1994, 1995 and 1996 and the related audited statements of
income and of cash flows of the Company for the years then ended and (ii) the
unaudited balance sheet of the Company as at September 30, 1997 and the related
statement of income of the Company for the nine (9) month period then ended
(such audited and unaudited statements, including the related notes and
schedules thereto, are referred to herein as the "Financial Statements"). Each
of the Financial Statements is, and the Closing Balance Sheet when delivered
will be, complete and correct in all material respects, has been (or will be)
prepared in accordance with GAAP (subject to the absence of notes and to normal
year-end adjustments in the case of the unaudited statements) and in conformity
with the practices consistently applied by the Company without modification of
the accounting principles used in the preparation thereof and presents (or will
present) fairly the financial position, results of operations and cash flows of
the Company as at the dates and for the periods indicated as applicable, in
accordance with GAAP consistently applied, subject in the case of the unaudited
Financial Statements and the Closing Balance Sheet to the absence of notes and a
statement of cash flows and to normal year-end adjustments
For the purposes hereof, the audited balance sheet of the Company as at
December 31, 1996 is referred to as the "1996 Balance Sheet", December 31, 1996
is referred to as the "1996 Balance Sheet Date" and the unaudited balance sheet
of the Company as at September 30, 1997 is referred to as the "September Balance
Sheet".
4.9 No Undisclosed Liabilities. Except as set forth on Schedule 4.9,
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the Company has no indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due)
that would have been required to be reflected in, reserved against or otherwise
described on the September Balance Sheet, the 1996 Balance Sheet or in the notes
to the 1996 Balance Sheet in accordance with GAAP which was not fully reflected
in, reserved against or otherwise described in the September Balance Sheet, the
1996 Balance Sheet or the notes to the 1996 Balance Sheet or was not incurred in
the ordinary course of business consistent with past practice since the Balance
Sheet Date.
4.10 Absence of Certain Developments. Except as expressly contemplated
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by this Agreement or as set forth on Schedule 4.10, since the 1996 Balance Sheet
Date:
(i) there has not been any Material Adverse Change nor has there occurred
any event which is reasonably likely to result in a Material Adverse Change;
(ii) there has not been any damage, destruction or loss, whether or not
covered by insurance, with respect to the property and assets of the Company
having a replacement cost of more than $5,000 for any single loss;
(iii) there has not been any declaration, setting aside or payment of any
dividend or other distribution in respect of any shares of capital stock of the
Company or any repurchase, redemption or other acquisition by any Seller or the
Company of any outstanding shares of capital stock or other securities of, or
other ownership interest in, the Company;
(iv) The Company has not awarded or paid any bonuses to employees of the
Company except to the extent accrued on the 1996 Balance Sheet or the September
Balance Sheet or entered into any employment, deferred compensation, severance
or similar agreement (nor amended any such agreement) that is not terminable at
will or
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agreed to increase the compensation payable or to become payable by it to any of
the Company's directors, officers or employees or agreed to increase the
coverage or benefits available under any severance pay, termination pay,
vacation pay, company awards, salary continuation for disability, sick leave,
deferred compensation, bonus or other incentive compensation, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with such
directors, officers, employees, agents or representatives (other than in each
case in this Section 4.10(iv) normal increases in the ordinary course of
business consistent with past practice and that in the aggregate have not
resulted in a material increase in the benefits or compensation expense of the
Company);
(v) there has not been any change by the Company in accounting or Tax
reporting principles, methods or policies;
(vi) the Company has not entered into any transaction or Contract or
conducted its business other than in the ordinary course consistent with past
practice;
(vii) the Company has not failed to promptly pay and discharge current
liabilities except where disputed in good faith by appropriate proceedings;
(viii) the Company has not made any loans, advances or capital
contributions to, or investments in, any Person;
(ix) the Company has not mortgaged, pledged or subjected to any Lien any of
its assets, or acquired any assets or sold, assigned, transferred, conveyed,
leased or otherwise disposed of any assets of the Company, except for assets
acquired or sold, assigned, transferred, conveyed, leased or otherwise disposed
of in the ordinary course of business consistent with past practice;
(x) the Company has not discharged or satisfied any Lien, or paid any
obligation or liability (fixed or contingent), except in the ordinary course of
business consistent with past practice;
(xi) the Company has not canceled or compromised any debt or claim or
amended, canceled, terminated, relinquished, waived or released any Contract or
right except in the ordinary course of business consistent with past practice;
(xii) the Company has not made or committed to make any capital
expenditures or capital additions or betterments outside of the ordinary course
of business consistent with past practices;
(xiii) the Company has not instituted or settled any material Legal
Proceeding; and
(xiv) neither the Sellers nor the Company has agreed to do anything set
forth in this Section 4.10.
4.11 Taxes.
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(a) The Company has properly and timely elected under Section 1362 of the
Code, and under each analogous or similar provision of state or local law in
each jurisdiction where the Company is required to file a Tax Return, to be
treated as an "S"
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corporation for all taxable periods since its inception. There has not been any
voluntary or involuntary termination or revocation of any such election.
(b) Except as set forth on Schedule 4.11(a), (i) all Tax Returns required
to be filed by or on behalf of the Company have been properly prepared and duly
and timely filed with the appropriate taxing authorities in all jurisdictions in
which such Tax Returns are required to be filed (after giving effect to any
valid extensions of time in which to make such filings), and all such Tax
Returns were true, complete and correct in all material respects; and (ii) all
amounts that are due from the Company with respect to the periods covered by
such Tax Returns (including interest and penalties) have been fully and timely
paid, and adequate reserves or accruals for Taxes have been provided in the
Closing Balance Sheet with respect to any period for which Tax Returns have not
yet been filed or for which Taxes are not yet due and owing.
(c) The Company has complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes and
has duly and timely withheld from employee salaries, wages and other
compensation and has paid over to the appropriate taxing authorities all amounts
required to be so withheld and paid over for all periods under all applicable
laws.
(d) All federal and state income Tax Returns of the Company relating to the
last three (3) taxable periods of the Company have been made available to the
Purchaser. All income and franchise Tax Returns filed by or on behalf of the
Company for the taxable years ended on the respective dates set forth on
Schedule 4.11(d) have been or are being audited by the relevant taxing
authority. Except as set forth on Schedule 4.11(d), the Company has not filed
for any extension to file any income or franchise Tax Return.
(e) Except as set forth on Schedule 4.11(e), the Company has received no
written claim by a taxing authority in a jurisdiction where the Company does not
file Tax Returns such that it is or may be subject to taxation by that
jurisdiction.
(f) Except as set forth on Schedule 4.11(f), all deficiencies asserted or
assessments made as a result of any examinations by the Internal Revenue Service
or any other taxing authority of the Tax Returns of or covering or including the
Company have been fully paid, and there are no other audits or, to the Knowledge
of the Sellers, investigations by any taxing authority in progress, nor have the
Sellers or the Company received any written notice or, to the Knowledge of the
Sellers, oral notice from any taxing authority that it intends to conduct such
an audit or investigation. No issue has been raised by a federal, state, local
or foreign taxing authority in any current or prior examination which, by
application of the same or similar principles, could reasonably be expected to
result in a material deficiency for any subsequent taxable period.
(g) Except as set forth on Schedule 4.11(g), neither the Company nor any
other Person (including any of the Sellers) on behalf of the Company has (i)
agreed to or is required to make any adjustments pursuant to Section 481(a) of
the Code or any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Company or has any Knowledge that
the Internal Revenue Service has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company, (ii) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law with respect to
the
10
Company, (iii) extended the time within which to file any Tax Return, which Tax
Return has since not been filed or the assessment or collection of taxes, which
taxes have not since been paid or (iv) granted any power of attorney with
respect to any tax matter currently in force.
(h) No property owned by the Company (i) is property required to be treated
as being owned by another Person pursuant to the provisions of Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986, (ii) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (iii) is "tax-
exempt bond financed property" within the meaning of Section 168(g) of the Code.
(i) No Seller is a foreign person within the meaning of Section 1445 of the
Code.
(j) The Company is not a party to any tax sharing or similar agreement or
arrangement (whether or not written).
(k) There is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by the Purchaser, or its Affiliates by
reason of Section 280G of the Code.
(l) The Company is not subject to any private letter ruling of the IRS or
comparable rulings of other taxing authorities that are addressed expressly to
the Company or the Sellers.
(m) There are no Liens as a result of any unpaid Taxes upon any of the
assets of the Company.
(n) Except as set forth on Schedule 4.11(n), the Company has no elections
in effect for federal income tax purposes under Sections 108, 168, 338, 441,
463, 472, 1017, 1033 or 4977 of the Code.
(o) The Company has never owned any Subsidiaries and has never been a
member of any consolidated, combined or affiliated group of corporations for any
Tax purposes.
4.12 Real Property.
-------------
(a) The Company owns no real property or interests in real property.
Schedule 4.12(a) sets forth a complete list of all real property and interests
in real property leased by the Company (individually, a "Real Property Lease"
and the real properties specified in such leases, being referred to herein
individually as a "Company Property" and collectively as the "Company
Properties") as lessee or lessor. The Company Properties constitute all
interests in real property currently used or currently held for use in
connection with the business of the Company and which are necessary for the
continued operation of the business of the Company as the business is currently
conducted. The Company has a valid and enforceable leasehold interest under
each of the Real Property Leases, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of
11
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity). The Company has not
received any written notice of any material default or event that with notice or
lapse of time, or both, would constitute a material default by the Company under
any of the Real Property Leases. All of the Company Property, buildings,
fixtures and improvements thereon owned or leased by the Company are in good
operating condition and repair for items of comparable age (subject to normal
wear and tear). The Sellers have delivered or otherwise made available to the
Purchaser true, correct and complete copies of the Real Property Leases,
together with all amendments, modifications or supplements, if any, thereto.
(b) The Company has all material certificates of occupancy and Permits of
any Governmental Body necessary to be possessed by it for the current use and
operation of each Company Property, and the Company has fully complied with all
material conditions of the Permits applicable to them. No material default or
violation, or event that with the lapse of time or giving of notice or both
would become material a default or violation, has occurred in the due observance
of any Permit.
(c) There does not exist any actual or, to the best Knowledge of the
Sellers, threatened or contemplated condemnation or eminent domain proceedings
in respect of any Company Property or any part thereof, and none of the Sellers
has received any written notice of the intention of any Governmental Body to
institute any condemnation or eminent domain proceedings in respect of any
Company Property to take or use all or any part thereof.
(d) None of the Sellers nor the Company has received any written notice
from any insurance company that has issued a policy with respect to any Company
Property requiring performance of any structural or other repairs or alterations
to such Company Property.
(e) The Company does not own or hold, and is not obligated under or a party
to, any option, right of first refusal or other contractual right to purchase,
acquire, sell, assign or dispose of any real estate or interest therein.
4.13 Tangible Personal Property.
--------------------------
(a) Schedule 2.4 sets forth a list, as of October 21, 1997, of all
Equipment owned or leased pursuant to a capital lease by the Company for lease
or rent to its customers. Schedule 4.13(a) also sets forth a list, as of
October 22 or September 30, 1997, as indicated on the list attached thereto, of
all material tangible personal property (other than the Equipment) owned or
leased by the Company ("Other Assets").
(b) Except as set forth in Schedule 4.13(b), the Company has good and
marketable title to all of the Equipment and Other Assets (except as sold or
disposed of subsequent to the date indicated in Section 4.13(a) hereof in the
ordinary course of business consistent with past practice), free and clear of
any and all Liens other than the Permitted Exceptions. All such Other Assets
are in good condition and repair for items of comparable age (ordinary wear and
tear excepted).
4.14 Intangible Property. Other than generally available, "off-the-
-------------------
shelf" items containing intellectual property, Schedule 4.14(a) contains a
complete and correct list of each patent, trademark, trade name, service ▇▇▇▇
and copyright owned or used by
12
Company as well as all registrations thereof and pending applications therefor,
and each license or other agreement relating thereto. Except as set forth on
Schedule 4.14, each of the foregoing is owned by the Company free and clear of
all Liens and, to the Knowledge of Sellers, is not the subject of any ownership
challenge. To the Knowledge of the Sellers, neither the Sellers nor the Company
has received any written notice or otherwise knows or has reason to believe that
any of the foregoing is invalid or conflicts with the asserted rights of others.
4.15 Material Contracts.
------------------
Schedule 4.15 sets forth all of the following Contracts to which the Company
is a party or by which it is bound (collectively, the "Material Contracts"):
(i) Contracts with any Seller or any current officer or director of the Company;
(ii) Contracts with any labor union or association representing any employee of
the Company; (iii) Contracts for the sale of any of the assets of the Company
other than in the ordinary course of business or for the grant to any person of
any preferential rights to purchase any of its assets; (iv) Contracts containing
covenants of the Company not to compete in any line of business or with any
person in any geographical area or covenants of any other person not to compete
with the Company in any line of business or in any geographical area; (v)
Contracts relating to the acquisition by the Company of any operating business
or the capital stock of any other person; (vi) Contracts relating to the
borrowing of money; (vii) written Contracts under which the Company acts as a
distributor, dealer or franchisor; or (viii) any other Contracts, including oral
distributor, dealer or franchisor Contracts, which require the expenditure of
more than $20,000 in the aggregate per Contract or $20,000 annually per
Contract. There have been made available to the Purchaser or its representatives
true and complete copies of all of the Material Contracts. Except as set forth
on Schedule 4.15(a), all of the Material Contracts and other agreements are in
full force and effect and are the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Except as set forth
on Schedule 4.15(b), the Company is not in default in any material respect under
any Material Contracts, nor, to the Knowledge of any Seller, is any other party
to any Material Contract in default thereunder in any material respect. Except
as set forth on Schedule 4.6, no Material Contract requires notice to, or
consent or approval of, any third party to the transactions contemplated by this
Agreement.
4.16 Employee Benefits.
-----------------
(a) Schedule 4.16(a) sets forth a complete and correct list of (i) all
"employee benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and any other pension plans
or employee benefit arrangements, programs or payroll practices (including,
without limitation, severance pay, vacation pay, company awards, salary
continuation for disability, sick leave, retirement, deferred compensation,
bonus or other incentive compensation, stock purchase arrangements or policies,
hospitalization, medical insurance, life insurance and scholarship programs) as
to which the Company has any obligation or liability (contingent or otherwise)
("Employee Benefit Plans") and (ii) all "employee pension benefit plans", as
defined in Section 3(2) of ERISA, maintained by the Company or any trade or
business (whether or not incorporated) which are under control, or which are
treated as a single employer, with Company under Section 414(b), (c), (m) or (o)
of the Code ("ERISA Affiliate") or to which the Company or any ERISA Affiliate
contributed or is obligated to contribute thereunder ("Pension Plans").
13
(b) No Pension Plan is subject to Title IV of ERISA.
(c) Each of the Employee Benefit Plans and Pension Plans intended to
qualify under Section 401 of the Code ("Qualified Plans") so qualify and the
trusts maintained thereto are exempt from federal income taxation under Section
501 of the Code, and, except as disclosed on Schedule 4.16(c), nothing has
occurred with respect to the operation of any such plan which could cause the
loss of such qualification or exemption or the imposition of any material
liability, penalty or tax under ERISA or the Code.
(d) All contributions and premiums required by law or by the terms of any
Employee Benefit Plan or Pension Plan or any agreement relating thereto have
been timely made (without regard to any waivers granted with respect thereto) to
any funds or trusts established thereunder or in connection therewith, and no
accumulated funding deficiencies exist in any of such plans subject to Section
412 of the Code.
(e) There are no pending Legal Proceedings which have been asserted or
instituted against any of the Employee Benefit Plans or Pension Plans, the
assets of any such plans or the Company, or the plan administrator or any
fiduciary of the Employee Benefit Plans or Pension Plans with respect to the
operation of such plans (other than routine, uncontested benefit claims), and
there are no facts or circumstances which could form the basis for any such
Legal Proceeding.
(f) Each of the Employee Benefit Plans and Pension Plans has been
maintained, in all material respects, in accordance with its terms and all
provisions of applicable Law. All amendments and actions required to bring each
of the Employee Benefit Plans and Pension Plans into conformity in all material
respects with all of the applicable provisions of ERISA and other applicable
Laws have been made or taken except to the extent that such amendments or
actions are not required by law to be made or taken until a date after the
Closing Date.
(g) Neither the Company nor any ERISA Affiliate has terminated any Employee
Benefit Plan or Pension Plan subject to Title IV of ERISA, or incurred any
outstanding liability under Section 4062 of ERISA to the Pension Benefit
Guaranty Corporation or to a trustee appointed under Section 4042 of ERISA.
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee of Company; (ii) increase any benefits
otherwise payable under any Employee Benefit Plan or Pension Plan; or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
(i) No stock or other security issued by Company forms or has formed a
material part of the assets of any Employee Benefit Plan or Pension Plan.
14
4.17 Labor; Personnel.
----------------
(a) Schedule 4.17(a) sets forth a complete list, as of the Closing Date, of
all officers, directors and employees (by type or classification) of the Company
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.
(b) The Company is not party to any labor or collective bargaining
agreement and there are no labor or collective bargaining agreements which
pertain to employees of the Company. No employees of the Company are
represented by any labor organization. No labor organization or group of
employees of the Company has made a pending written demand to the Company for
recognition, and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the best Knowledge of the
Sellers, threatened to be brought or filed, with the National Labor Relations
Board or other labor relations tribunal. To the Knowledge of the Sellers, there
is no organizing activity involving the Company pending or threatened by any
labor organization or group of employees of the Company.
(c) There are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other material labor disputes
pending or, to the best Knowledge of any Seller, threatened against or involving
the Company. There are no unfair labor practice charges, grievances or
complaints pending or, to the best Knowledge of any Seller, threatened by or on
behalf of any employee or group of employees of the Company.
4.18 Litigation. Except as set forth in Schedule 4.18, there is
----------
no suit, action, proceeding, investigation, claim or order of which the Company
has had notice pending before any court, or before any governmental department,
commission, board, agency, or instrumentality or, to the Knowledge of the
Sellers, threatened against the Company (or to the Knowledge of the Sellers or
the Company, pending or threatened, against any of the officers, directors or
key employees of the Company with respect to their business activities on behalf
of the Company), or to which the Sellers or the Company is otherwise a party,
which would reasonably be expected to result in a judgment in excess of $100,000
to the Company. Except as set forth in Schedule 4.18, the Company is not subject
to any judgment, order or decree of any court or governmental agency that is not
of general application, and the Company is not engaged in any legal action to
recover monies due it or for damages sustained by it.
4.19 Compliance with Laws; Permits.
-----------------------------
(a) The Company is in compliance in all material respects with all Laws
applicable to the Company or to the conduct of the business or operations of the
Company or the use of its properties (including any leased properties) and
assets as now used. Except as set forth on Schedule 4.19(a), the Company has
received no notice from any party asserting that the Company has violated any
Laws.
(b) Schedule 4.19(b) sets forth a full and complete list of all Permits
owned by or issued to the Company and which are material to the operation of the
business of the Company or now conducted. Such Permits constitute all Permits
necessary in the
15
operation of the business of the Company as currently conducted. All of such
Permits are valid and in full force and effect and there are no proceedings
pending, or to the Knowledge of the Sellers, threatened which may result in the
revocation, cancellation, suspension or material adverse modification of any
such Permit.
4.20 Environmental Matters. Except as set forth on Schedule 4.20 hereto:
---------------------
(a) the operations of the Company are in compliance with all applicable
Environmental Laws and all permits issued pursuant to Environmental Laws;
(b) the Company has obtained all material permits required under all
applicable Environmental Laws necessary to operate its business;
(c) the Company is not the subject of any outstanding written order or
Contract with any governmental authority or person respecting (i) Environmental
Laws, (ii) Remedial Action or (iii) any Release or threatened Release of a
Hazardous Material;
(d) the Company has not received any written communication or, to the
Knowledge of the Sellers, any other communication alleging either or both that
the Company may be in violation of (i) any Environmental Law or (ii) any permit
issued pursuant to any Environmental Law, or that the Company may have any
liability under any Environmental Law;
(e) the Company does not have any material contingent liability in
connection with any Release of any Hazardous Materials into the indoor or
outdoor environment (whether on-site or off-site);
(f) to the Sellers' Knowledge, there are no investigations by any
Governmental Body of the business, operations, or currently owned, operated or
leased property of the Company pending or threatened which could lead to the
imposition of any material liability pursuant to Environmental Law;
(g) to the Sellers' Knowledge there is not located at any of the properties
of the Company any (i) underground storage tanks ("UST"), (ii) asbestos-
containing material necessitating immediate abatement or (iii) equipment
containing polychlorinated biphenyls necessitating immediate removal or
remediation;
(h) the Sellers have provided to the Purchaser all material environmentally
related audits, studies, reports, analyses, and results of investigations that
have been performed and provided to the Company with respect to the currently or
previously owned, leased or operated properties of the Company during the time
that the Company owned, leased or operated such property and that are in the
Company's possession and reduced to writing;
(i) As to each UST, Schedule 4.20(i) sets forth to the extent available to
the Company (1) the location of the UST currently or formerly owned by the
Company, and whether the Company currently owns or leases the property on which
the UST is located (and if the Company does not currently own or lease such
property, the dates on which it did and the current owner or lessee of such
property); (2) the approximate date of installation and specific use or uses of
the UST; (3) a copy of each notice to or from a governmental body or agency
relating to the UST; (4) other material records with regard to the UST,
including, without limitation, repair records, financial assurance compliance
16
records and records of ownership; and (5) to the extent not otherwise set forth
pursuant to the above, a summary description of instances, past or present, in
which, to the Seller's Knowledge, the UST failed to meet applicable standards
and regulations in any material respect for tightness or otherwise and the
extent of such failure, and any other material operational or environmental
problems with regard to the UST, including, without limitation, spills,
including spills in connection with delivery of materials to the UST, releases
from the UST and soil contamination.
4.21 Insurance. Schedule 4.21 sets forth (i) a complete and accurate
---------
list of all policies of insurance of any kind or nature covering the Company or
any of its employees (as employees), properties or assets, including, without
limitation, policies of life, disability, fire, theft, workers compensation,
employee fidelity and other casualty and liability insurance; and (ii) as to
each such policy, the name of the insurer, the type of risks insured, the
deductible and limits of coverage and the annual premium therefor. All such
policies are in full force and effect, and, to the Sellers' Knowledge, the
Company is not in default of any provision thereof.
4.22 Related Party Transactions. Except as set forth on Schedule 4.22,
--------------------------
neither the Sellers nor any of their respective Affiliates has borrowed any
moneys from the Company which has not been repaid or has outstanding any
indebtedness or other similar obligations to the Company. Except as set forth in
Schedule 4.22, none of the Sellers, any Affiliate of the Company or the Sellers
or any officer or employee of the Company (i) to the Knowledge of the Sellers,
owns any direct or indirect interest of any kind in (other than any interest of
less than 5% in any in any Person subject to the reporting requirements of the
Exchange Act of 1934, as amended), or controls or is a director, officer,
employee 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) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Company, (B) engaged in a business related to the business of the Company, or
(C) a participant in any transaction to which the Company is a party or (ii) is
a party to any Contract with the Company.
4.23 Banks. Schedule 4.23 contains a complete and correct list of the
-----
names and locations of all banks in which the Company has accounts or safe
deposit boxes and the names of all persons authorized to draw thereon or to have
access thereto. Except as set forth on Schedule 4.23(a), no person holds a power
of attorney to act on behalf of the Company.
4.24 Product Quality, Warranty Claims, Product Liability. All products
---------------------------------------------------
and services sold, rented, leased, provided or delivered by the Company to
customers on or prior to the Closing Date conform or will conform in all
material respects to applicable contractual commitments, express and implied
warranties, product and service specifications and quality standards made or
established by the Company and, to the knowledge of the Sellers, those of the
manufacturer thereof, as applicable. To the Knowledge of the Sellers, the
Company has no liability for replacement or repair of any such product or other
damages in connection therewith other than warranty repairs in the ordinary
course of business consistent with past practices. Except as set forth on
Schedule 4.24, no product or service sold, leased, rented, provided or delivered
by the Company 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 4.24, the
Company has no 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
17
delivered by the Company on or prior to the Closing Date. There has been no
product liability claim asserted in writing against the Company since January 1,
1991, whether covered by insurance or not and whether litigation has resulted or
not.
4.25 No Misrepresentation. No representation or warranty of any Seller
--------------------
contained in this Agreement or in any schedule hereto or in any certificate or
other instrument furnished by any Seller to the Purchaser pursuant to the terms
hereof, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
4.26 Brokers; Finders. No Person has acted, directly or indirectly, as
----------------
a broker or finder for the Sellers or the Company in connection with the
transactions contemplated by this Agreement for which such Person is entitled to
any fee or commission or like payment in respect thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Sellers that:
5.1 Organization and Good Standing. The Purchaser is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
5.2 Authorization of Agreement. The Purchaser has full corporate power
--------------------------
and authority to execute and deliver this Agreement, the Employment Agreements,
the Escrow Agreement, the Non-Competition Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement to be
executed by the Purchaser in connection with the consummation of the
transactions contemplated hereby and thereby (together with this Agreement, the
Employment Agreements, the Escrow Agreement and Non-Competition Agreement, the
"Purchaser Documents"), and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Purchaser of this
Agreement and each other Purchaser Document have been duly authorized by all
necessary corporate action on behalf of the Purchaser. This Agreement and each
other Purchaser Document have been duly executed and delivered by the Purchaser
and (assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement and each other Purchaser Document constitutes
a legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
5.3 Conflicts; Consents of Third Parties.
------------------------------------
(a) Neither the execution, delivery and performance by the Purchaser of
this Agreement and the other Purchaser Documents nor the compliance by the
Purchaser with any of the provisions hereof or thereof will (i) conflict with,
or result in the breach of, any provision of the certificate of incorporation or
by-laws of the Purchaser, (ii) conflict with, violate, result in the breach of,
or constitute a default under any note, bond, mortgage, indenture, license,
agreement or other obligation to which the Purchaser is a party or by
18
which the Purchaser or its properties or assets are bound or (iii) violate any
statute, rule, regulation, order or decree of any governmental body or authority
by which the Purchaser is bound, except, in the case of clauses (ii) and (iii),
for such violations, breaches or defaults as would not, individually or in the
aggregate, have a material adverse effect on the business, properties, results
of operations, prospects, conditions (financial or otherwise) of the Purchaser,
taken as a whole.
(b) No consent, waiver, approval, Order, Permit or authorization of, or
declaration or filing with, or notification to, any Person or Governmental Body
is required on the part of the Purchaser in connection with the execution and
delivery of this Agreement or the other Purchaser Documents or the compliance by
Purchaser with any of the provisions hereof or thereof.
5.4 Litigation. There are no Legal Proceedings pending or, to
----------
the best Knowledge of the Purchaser, threatened that are reasonably likely to
prohibit or restrain the ability of the Purchaser to enter into this Agreement
or consummate the transactions contemplated hereby.
5.5 Investment Intention. The Purchaser is acquiring the Shares for
--------------------
its own account, for investment purposes only and not with a view to the
distribution (as such term is used in Section 2(11) of the Securities Act of
1933, as amended (the "Securities Act"), thereof. Purchaser understands that the
Shares have not been registered under the Securities Act and cannot be sold
unless subsequently registered under the Securities Act or an exemption from
such registration is available.
5.6 Brokers; Finders. No Person has acted, directly or indirectly,
----------------
as a broker or finder for the Purchaser in connection with the transactions
contemplated by this Agreement for which such Person is entitled to any fee or
commission or like payment in respect thereof.
5.7 HRS Filing. The Purchaser is not required to file a Notification
----------
and Report Form under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended, with respect to the transactions contemplated by this Agreement.
ARTICLE VI
DOCUMENTS DELIVERED
6.1 Deliveries by the Sellers. At the Closing, the Sellers shall deliver,
-------------------------
or cause to be delivered, to the Purchaser the following:
(a) stock certificates representing the Shares, duly endorsed in blank or
accompanied by stock transfer powers and with all requisite stock transfer tax
stamps attached;
(b) the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P., counsel to
the Seller;
(c) executed copies of the Leases;
(d) a Non-Competition Agreement, duly executed by each Seller;
19
(e) Employment Agreements, between the Company and each of ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(f) a Consulting Agreement, between the Company and Angus ▇▇▇▇▇▇ ▇▇▇▇▇▇;
(g) written resignations of each of the officers and directors of the
Company;
(i) certificates of good standing with respect to the Company issued by the
Secretary of State of the State of North Carolina and for each state in which
the Company is qualified to do business as a foreign corporation;
(j) a copy of a Power of Attorney appointing the Seller's Representatives;
(k) UCC termination statements, releases or other similar documentation
evidencing satisfaction of the indebtedness required to be paid pursuant to
Section 2.7 hereof;
(l) an executed copy of the Escrow Agreement; and
(m) such other documents as the Purchaser reasonably requested.
6.2 Deliveries by the Purchaser. At the Closing, the Purchaser shall
---------------------------
deliver, or cause to be delivered, to the Sellers (or the Escrow Agent with
respect to Section 6.2(b) hereof or the Persons listed on Schedule 2.7 with
respect to Section 6.2(c) hereof) the following:
(a) the Purchase Price referred to in Section 2.2(a) hereof;
(b) the Escrow Amount referred to in Section 2.6 hereof together with an
executed copy of the Escrow Agreement;
(c) the amounts due in accordance with Section 2.7 hereof;
(d) executed copies of the Leases;
(e) a Non-Competition Agreement with each letter, duly executed by each the
Purchaser;
(f) Employment Agreements, between the Company and each of ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(g) a Consulting Agreement, between the Company and Angus ▇▇▇▇▇▇ ▇▇▇▇▇▇;
(h) the opinion of Weil, Gotshal & ▇▇▇▇▇▇ LLP, counsel to the Purchaser;
and
(i) such other documents as the Sellers reasonably requested.
20
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
---------------
(a) Subject to Section 7.2 hereof, the Sellers hereby agree to jointly and
severally indemnify and hold the Purchaser, the Company, and their respective
directors, officers, employees, Affiliates, agents, successors and assigns
(collectively, the "Purchaser Indemnified Parties") harmless from and against:
(i) any and all losses, liabilities, obligations, damages, costs and
expenses (collectively, "Losses") based upon, attributable to or resulting
from the failure of any representation or warranty of the Sellers set forth
in Article IV hereof, or any representation or warranty contained in any
certificate delivered by or on behalf of the Sellers pursuant to this
Agreement, to be true and correct in all respects as of the date made;
(ii) any and all Losses based upon, attributable to or resulting from the
breach of any covenant or other agreement on the part of the Sellers under
this Agreement;
(iii) any and all Losses (including any loss of use of Company Property or
any of the tangible personal property of the Company), arising from the
use, operation or existence of any UST on any property owned or leased by
the Company on or prior to the Closing Date;
(iv) any and all Losses in respect of any and all Taxes of the Company for
all periods (or portions thereof) ending on or prior to the Closing Date
for which no accrual has been made on the September Balance Sheet; and
(v) any and all notices, actions, suits, proceedings, claims, demands,
assessments, judgments, costs, penalties and expenses, including attorneys'
and other professionals' fees and disbursements (collectively, "Expenses")
incident to any and all Losses with respect to which indemnification is
provided hereunder.
(b) Purchaser hereby agrees to indemnify and hold the Sellers and their
respective Affiliates, agents, successors and assigns (collectively, the "Seller
Indemnified Parties") harmless from and against:
(i) any and all Losses based upon, attributable to or resulting from the
failure of any representation or warranty of the Purchaser set forth in
Article V hereof, or any representation or warranty contained in any
certificate delivered by or on behalf of the Purchaser pursuant to this
Agreement, to be true and correct as of the date made;
(ii) any and all Losses based upon, attributable to or resulting from the
breach of any covenant or other agreement on the part of the Purchaser
under this Agreement; and
(iii) any and all Losses based upon, attributable to or resulting form the
failure of the Purchaser to abide by its notice to Sellers' Representative
pursuant to Section 8.1(b)(i) relating to whether it will make the
Election.
21
(iv) any and all Expenses incident to the foregoing.
7.2 Limitations on Indemnification. Notwithstanding anything in this
------------------------------
Agreement to the contrary:
(a) An indemnifying party shall not have any liability under Section
7.1(a)(i), (ii) and (iii) or Section 7.1(b)(i) and (ii) hereof unless the
aggregate amount of Losses and Expenses to the indemnified parties finally
determined to arise thereunder based upon, attributable to or resulting from the
failure of any representation or warranty to be true and correct, other than the
representations and warranties set forth in Sections 4.2, 4.3, 4.7, 4.11, 4.26,
5.2 and 5.6 hereof, exceeds $250,000 (the "Basket") and, in such event, the
indemnifying party shall be required to pay the entire amount of such Losses and
Expenses in excess of $250,000 (the "Deductible"). The maximum amount of Losses
and Expenses, in the aggregate together with all other Losses and Expenses,
which either the Sellers, in the aggregate, or the Purchaser shall be liable
hereunder shall not exceed fifty percent (50%) of the Purchase Price, as
adjusted pursuant hereto.
(b) Except with respect to the Employment Agreements, the Non-Competition
Agreements and the Consulting Agreement, neither the Purchaser nor the Sellers
shall have any liability or responsibility in any manner whatsoever to the other
whether for indemnification or otherwise with respect to any matter arising out
of or in connection with this Agreement or any instrument or document delivered
in connection herewith and Article VII hereof provides the exclusive remedy and
cause of action of the Seller Indemnified Parties and the Purchase Indemnified
Parties against the Purchaser and the Sellers, respectively, with respect to any
matter arising out of or in connection with this Agreement or any instrument or
document delivered in connection herewith.
(c) With respect to the incurrence of any Losses and Expenses indemnifiable
hereunder and dealing with any Claim indemnifiable hereunder under Section 7.4
hereof, the Purchaser and each of the Sellers as Indemnified Parties agree to
act as would a reasonable and prudent person to whom no indemnity were
available. The Purchaser shall, and shall cause the Company to, allow the
Sellers and their representatives access at all reasonable times during normal
business hours to the records and files, correspondence, audits and properties
reasonably pertaining or relating to any Claim as the Sellers or their
representatives may request.
(d) Neither the Purchaser nor the Sellers shall have any liability for any
Losses or Expenses otherwise indemnifiable hereunder with respect to which a
Notice of Claim is not delivered to the indemnifying party no later than, with
respect to any Claim relating to Section 4.2, 4.3, 4.7, 4.11, 4.26, 5.2 or 5.6
hereof, thirty (30) days after the date on which the applicable statute of
limitations would have run, with respect to any Claim relating to Section 4.20
or 7.1(a)(iii) hereof, thirty (30) days after the three (3) year anniversary of
the Closing Date, and, with respect to any other representation, warranty,
covenant or agreement, thirty (30) days after the eighteen (18) month
anniversary of the Closing Date.
(e) The amount of any Losses and Expenses indemnifiable hereunder shall be
reduced by the amount of (i) any tax benefits actually realized (taking into
account Purchaser's loss of any tax benefit as a result of the Election) by the
Purchaser Indemnified Parties or the Seller Indemnified parties, as applicable,
(ii) insurance proceeds net of premium increases reasonably anticipated to
result therefrom and (iii)
22
proceeds or amount from third parties (regardless of when received but only if
actually received), in each case of clauses (i), (ii) and (iii) in connection
with or as a result of such Losses and Expenses.
(f) The Sellers shall no liability with respect to any breach of any
representation or warranty in this Agreement or in any instrument or document
delivered pursuant to this Agreement to the extent (but only to the extent) that
the adjustments to the Purchase Price set forth in Article II hereof cover the
same subject matter.
(g) The Sellers shall have no liability with respect to any breach of
Section 4.2 hereof relating to the Employment Agreements, the Non-Competition
Agreements or the Consulting Agreement, provided that this Section 7.2(g) shall
not limit, modify or otherwise affect in any manner the rights and remedies of
the parties to the Employment Agreements, the Non-Competition Agreements and the
Consulting Agreement as provided therein.
7.3 Survival of Representations and Warranties
------------------------------------------
. The parties hereto hereby agree that the representations, warranties,
covenants and agreements, including Section 7.1 hereof, contained in this
Agreement or in any certificate, document or instrument delivered in connection
herewith, shall survive the execution and delivery of this Agreement, and the
Closing hereunder, regardless of any investigation made by the parties hereto,
for a period of eighteen (18) months from the Closing Date; provided, however,
-----------------
that the representations and warranties contained in Sections 4.2, 4.3, 4.7,
4.11, 4.26, 5.2 and 5.6 hereof shall survive for periods coterminous with any
applicable statutes of limitation; provided, further, that the representations
-------- -------
and warranties contained in Section 4.20 hereof and the indemnification provided
in Section 7.1(a)(iii) hereof shall survive for a period of three (3) years from
the Closing Date; and provided, further, that any representation or warranty on
-------- -------
which a claim for indemnification has been made in good faith within the
applicable time limit set forth in Section 7.4 hereof shall survive, with
respect to such claim only, until resolution of such claim pursuant to Section
7.4 hereof.
7.4 Indemnification Procedures.
--------------------------
(a) In the event that any Legal Proceedings shall be instituted or that any
claim or demand in respect of which payment may be sought under Section 7.1
hereof (regardless of the Basket or the Deductible referred to above)
(collectively, a "Claim") shall be instituted or asserted by any Person, the
indemnified party shall reasonably and promptly cause written notice of the
assertion of such Claim (a "Notice of Claim") to be delivered to the
indemnifying party no later than, with respect to any Claim relating to Section
4.2, 4.3, 4.7, 4.11, 4.26, 5.2 or 5.6,hereof the date on which the applicable
statute of limitations would have run or, with respect to Section 4.20 hereof
and the indemnification pursuant to Section 7.1(a)(iii) hereof, the three (3)
year anniversary of the Closing Date, and, with respect to any other
representation, warranty, covenant or agreement, the eighteen (18) month
anniversary of the Closing Date, which Notice of Claim shall set forth in
reasonable detail the basis upon which indemnification is sought and the
specific nature of the Claim and shall include or be accompanied by any
available documents supporting the Claim. The indemnified party shall continue
to provide prompt notice to the indemnifying party of any material developments
with respect to such Claim of which it has Knowledge. The indemnifying party
shall have the right, at its sole option and expense, to be represented by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or
23
otherwise deal with any Claim which relates to any Losses indemnified against
hereunder; provided however, that the Purchaser shall have the right to control
-------- -------
the defense to the extent of any claim seeking equitable relief or Remedial
Action. If the indemnifying party elects to defend against, negotiate, settle or
otherwise deal with any Claim which relates to any Losses indemnified against
hereunder, it shall within ten (10) business days (or sooner, if the nature of
the Claim so requires) notify the indemnified party of its intent to do so. If
the indemnifying party elects not to defend against, negotiate, settle or
otherwise deal with any Claim which relates to any Losses indemnified against
hereunder, fails to notify the indemnified party of its election as herein
provided or contests its obligation to indemnify the indemnified party for such
Losses under this Agreement, the indemnified party may defend against,
negotiate, settle or otherwise deal with such Claim. If the indemnified party
defends any Claim, then the indemnifying party shall reimburse the indemnified
party for the Expenses of defending such Claim upon submission of periodic
bills. If the indemnifying party shall assume the defense of any Claim, the
indemnified party may participate, at his or its own expense, in the defense of
such Claim; provided, however, that such indemnified party shall be entitled to
-------- -------
participate in any such defense with separate counsel at the expense of the
indemnifying party if, (i) so requested by the indemnifying party to participate
or (ii) in the reasonable opinion of counsel to each of the indemnified party
and the indemnifying party, a conflict or potential conflict exists between the
indemnified party and the indemnifying party that would make such separate
representation advisable; and provided, further, that the indemnifying
-------- -------
party shall not be required to pay for more than one such counsel for all
indemnified parties in connection with any Claim. The parties hereto agree to
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such Claim.
(b) After any final judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent jurisdiction and the
expiration of the time in which to appeal therefrom, or a settlement shall have
been consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding agreement with respect to a Claim hereunder, the
indemnified party shall forward to the indemnifying party notice of any sums due
and owing by the indemnifying party pursuant to this Agreement with respect to
such matter and the indemnifying party shall be required to pay all of the sums
so due and owing to the indemnified party by wire transfer of immediately
available funds within 10 business days after the date of such notice.
(c) Except as provided in Section 7.5 hereof, the failure of the
indemnified party to give reasonably prompt notice of any Claim and continuing
notice of any material developments with respect to such Claim shall not
release, waive or otherwise affect the indemnifying party's obligations with
respect thereto except to the extent that the indemnifying party can demonstrate
actual loss and prejudice as a result of such failure.
7.5 Right of Set Off. The Purchaser may, but shall not be obligated to,
----------------
set off against any and all payments due Sellers out of the Escrow Amount, any
amount to which any Purchaser Indemnified Party is entitled hereunder. Such
right of set off shall be separate and apart from any and all other rights and
remedies that such persons may have against the Sellers or their successors.
Notwithstanding the foregoing, no Notice of Claim of which the Claim is disputed
by the Sellers or the Sellers' Representative and the Purchaser shall affect or
otherwise restrict the disbursement provisions set forth in Section 2.6 hereof.
24
ARTICLE VIII
TAX MATTERS
8.1 Tax Matters.
-----------
(a) The Sellers and the Purchaser agree to treat any indemnity payment made
pursuant to Article VII as an adjustment to the Purchase Price for federal,
state, local and foreign income tax purposes.
(b) (i) At the election of the Purchaser, the Sellers and the Purchaser
shall file an election under Section 338(h)(10) of the Code and under any
comparable provisions of state, local, or foreign law with respect to the
purchase of the Shares (the "Election"). No later than February 15, 1998, the
Purchaser shall notify the Sellers' Representative whether the Purchaser will
make the Election. If the Election is made, the Election Tax Cost (as
determined hereunder) shall be paid as additional Purchase Price by the
Purchaser to the Sellers' Representative for the benefit of the Sellers and the
Sellers and the Purchaser shall report, in connection with the determination of
Taxes, the transactions contemplated by this Agreement in a manner consistent
with the Election, the computation of the Election Tax Cost, the Modified
Aggregate Deemed Sales Price (as defined below) and the Deemed Sales Price
Allocation (as defined below). The Sellers and the Purchaser shall take no
action which is inconsistent with the Election or its validity under the Code
and the applicable Treasury Regulations.
(ii) On the Closing Date, the Sellers shall execute and deliver to Ernst &
Young five copies of Internal Revenue Service Form 8023-A provided by the
Purchaser and any similar forms under applicable state, local or foreign law
(the "Election Forms") which shall be released to the Purchaser upon the
Purchaser's payment of the Election Tax Cost to the Sellers' Representative for
the benefit of the Sellers.
(iii) As soon as practicable after the Closing Date, the Purchaser shall
deliver to the Sellers a written notice of its intention to file the Election,
together with the Purchaser's calculation of (A) the Modified Aggregate Deemed
Sales Price, (B) the allocation thereof among the assets of the Company in
accordance with the principles of Treasury Regulation (S)1.338(h)(10)-
1(f)(1)(ii) (the "Deemed Sales Price Allocation") and (C) the Election Tax Cost.
The term "Modified Aggregate Deemed Sales Price" shall mean an amount resulting
from the Election, determined pursuant to Treasury Regulation (S)1.338(h)(10)-
1(f) without regard to items described in Treasury Regulation (S)1.338(h)(10)-
1(f)(4) (provided that the Sellers may take such items into account in filing
Tax Returns). The term "Election Tax Cost" shall mean, with respect to each
Seller, (A) the excess, if any, of (x) the net ordinary income and capital gain
recognized by such Seller as a consequence of the Election multiplied by such
Seller's net effective federal and state income tax rate applicable to ordinary
income and capital gain, as the case may be, in effect on the Closing Date, over
(y) the net long-term capital gain that would have been recognized by such
Seller on the sale of his Shares if the Election had not been made multiplied by
such Seller's net effective federal and state income tax rate applicable to
long-term capital gain on the sale of stock, divided by (B) the excess of 100
percent over the applicable percentage described in clause (x).
(iv) The Purchaser shall be responsible for the preparation and filing of
all forms and documents required in connection with the Election. The Purchaser
shall provide the Sellers with copies of (A) any necessary corrections,
amendments, or
25
supplements to Form 8023-A, (B) all attachments required to be filed therewith
pursuant to applicable Treasury Regulations, and (C) any comparable forms and
attachments with respect to any applicable state, foreign, or local elections
included as part of the Election. The Sellers shall execute and deliver to the
Purchaser within five (5) days of receipt by the Sellers such documents or forms
as are required properly to complete the Election.
(v) The Sellers and the Purchaser shall cooperate fully with each other and
make available to each other such Tax data and other information as may be
reasonably required by the Sellers or the Purchaser in order for the Purchaser
to (A) timely file the Election and any other required statements or schedules
(or any amendments or supplements thereto), (B) compute the Modified Aggregate
Deemed Sale Price and the Deemed Sale Price Allocation and (C) compute the
Election Tax Cost.
ARTICLE IX
MISCELLANEOUS
9.1 Certain Definitions. For purposes of this Agreement, the
-------------------
following terms shall have the meanings specified in this Section 10.1:
"Agreement" shall have the meaning ascribed to such term in the recitals
---------
hereof.
"Affiliate" means, with respect to any Person, any other Person
---------
controlling, controlled by or under common control with such Person.
"1996 Balance Sheet" shall have the meaning ascribed to such term in
------------------
Section 4.8 hereof.
"1996 Balance Sheet Date" shall have the meaning ascribed to such term in
-----------------------
Section 4.8 hereof.
"Basket" shall have the meaning ascribed to such term in Section 7.2(a)
------
hereof.
"Business Day" means any day of the year on which national banking
------------
institutions in New York and Charlotte, North Carolina are open to the public
for conducting business and are not required or authorized to close.
"Claim" shall have the meaning ascribed to such term in Section 7.3(a)
-----
hereof.
"Class A Shares" shall have the meaning ascribed to such term in the
--------------
recitals hereto.
"Class B Shares" shall have the meaning ascribed to such term in the
--------------
recitals hereto.
"Closing" shall have the meaning ascribed to such term in Section 3.1
-------
hereof.
"Closing Balance Sheet" shall have the meaning ascribed to such term in
---------------------
Section 2.3(b) hereof.
"Closing Date" shall have the meaning ascribed to such term in Section 3.1
------------
26
hereof.
"Closing Statement" shall have the meaning ascribed to such term in Section
-----------------
2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Company" shall have the meaning ascribed to such term in the recitals
-------
hereof.
"Company's Accountants" shall have the meaning ascribed to such term in
---------------------
Section 2.3(b) hereof.
"Company Property" shall have the meaning ascribed to such term in Section
----------------
4.12(a) hereof.
"Contract" means any contract, agreement, indenture, note, bond, loan,
--------
lease or other legally binding arrangement or agreement.
"Deductible" shall have the meaning ascribed to such term in Section 7.2(a)
----------
hereof.
"Demand Sale Price Allocation" shall have the meaning ascribed to such term
----------------------------
in Section 8.1(b) hereof.
"Election" shall have the meaning ascribed to such term in Section 8.1(b)
--------
hereof.
"Election Forms" shall have the meaning ascribed to such term in Section
--------------
8.1(b) hereof.
"Election Tax Cost" shall have the meaning ascribed to such term in Section
-----------------
8.1(b) hereof.
"Employee Benefit Plan" shall have the meaning ascribed to such term in
---------------------
Section 4.16(a) hereof.
"Environmental Law" means any federal, state or local statute, regulation,
-----------------
or ordinance, in any way relating to the protection of the environment
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. (S)9601 et seq.), the Hazardous
-- ----
Materials Transportation Act (49 U.S.C. App. (S)1801 et seq.), the Resource
-- ----
Conservation and Recovery Act (42 U.S.C. (S)6901 et seq.), the Clean Water Act
-- ----
(33 U.S.C. (S)1251 et seq.), the Clean Air Act (42 U.S.C. (S)7401 et seq.) the
-- ---- -- ----
Toxic Substances Control Act (15 U.S.C. (S)2601 et seq.), and the Federal
-- ----
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (S)136 et seq.), and the
-- ----
regulations promulgated pursuant thereto.
"Equipment" shall have the meaning ascribed to such term in Section 2.4
---------
hereof.
"Equipment Adjustment" shall have the meaning ascribed to such term in
--------------------
Section 2.5 hereof.
27
"ERISA" shall have the meaning ascribed to such term in Section 4.16(a)
-----
hereof.
"ERISA Affiliate" shall have the meaning ascribed to such term in Section
---------------
4.16(a) hereof.
"Escrow Agreement" shall have the meaning ascribed to such term in Section
----------------
2.6(a) hereof.
"Escrow Amount" shall have the meaning ascribed to such term in Section
-------------
2.6(a) hereof.
"Estimated Purchase Price" shall have the meaning ascribed to such term in
------------------------
Section 2.3(a) hereof.
"Estimated Purchase Price Adjustment" shall have the meaning ascribed to
-----------------------------------
such term in Section 2.3(a) hereof.
"Expenses" shall have the meaning ascribed to such term in Section 7.1(a)
--------
hereof.
"Financial Statements" shall have the meaning ascribed to such term in
--------------------
Section 4.8 hereof.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the United States
accounting profession, that are applicable to the circumstances as of the date
of determination.
"Governmental Body" means any government or governmental or regulatory
-----------------
body thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private).
"Hazardous Material" means any substance, material or waste which is
------------------
regulated by the United States, or any state or local governmental authority
including, without limitation, petroleum and its by-products, asbestos, and any
material or substance which is defined as a "hazardous waste," "hazardous
substance," "hazardous material," "restricted hazardous waste," "industrial
waste," "solid waste," "contaminant," "pollutant," "toxic waste" or "toxic
substance" under any provision of Environmental Law.
"Knowledge" means the actual Knowledge of a person after due inquiry of the
---------
person at the Company with the primary responsibility for such matter.
"Law" means any federal, state, local or foreign law (including common
---
law), statute, code, ordinance, rule, regulation or other requirement of any
governmental authority.
28
"Leases" shall mean the real property leases between the Company and
------
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, LLC to be entered into on the Closing Date relating to each of
the Company Properties.
"Legal Proceeding" means any judicial, administrative or arbitral actions,
----------------
suits, proceedings (public or private), claims or governmental proceedings.
"Lien" means any lien, pledge, mortgage, deed of trust, security interest,
----
lease, charge, option, right of first refusal, easement, servitude, transfer
restriction under any shareholder or similar agreement, encumbrance or any other
restriction whatsoever.
"Losses" shall have the meaning ascribed to such term in Section 7.1(a)
------
hereof.
"Material Adverse Change" means any material adverse change in the
-----------------------
business, properties, results of operations and condition (financial or
otherwise) of the Company, taken as a whole, excluding any change caused in
whole or in part by any of the following: (i) general economic conditions, (ii)
general industry or regulatory conditions and (iii) matters previously disclosed
by the Seller in this Agreement, including the Schedules hereto.
"Material Contracts" shall have the meaning ascribed to such terms in
------------------
Section 4.15 hereof.
"Modified Aggregate Demand Sales Price" shall have the meaning ascribed to
-------------------------------------
such term in Section 8.1(b) hereof.
"Negative Purchase Price Adjustment" shall have the meaning ascribed to
----------------------------------
such term in Section 2.3(e) hereof.
"Non-Competition Agreements" shall have the meaning ascribed to such term
--------------------------
in Section 4.2 hereof.
"Notice of Claim" shall have the meaning ascribed to such term in Section
---------------
7.4(a) hereof.
"Order" means any order, injunction, judgment, decree, ruling, writ,
-----
assessment or arbitration award by any Governmental Body.
"Other Assets" shall have the meaning ascribed to such term in Section
------------
4.13(a) hereof.
"PBGC" shall have the meaning ascribed to such term in Section 4.16(e)
----
hereof.
"Pension Plans" shall have the meaning ascribed to such term in Section
-------------
4.16(a) hereof.
"Permits" means any approvals, authorizations, consents, licenses, permits
-------
or certificates of any type from any Governmental Body.
29
"Permitted Exceptions" means (i) all defects, exceptions, restrictions,
--------------------
easements, rights of way, encumbrances and Liens of record or disclosed in
policies of title insurance which have been made available to Purchaser; (ii)
statutory liens for current taxes, assessments or other governmental charges not
yet delinquent or the amount or validity of which is being contested in good
faith by appropriate proceedings, provided a reserve is established therefor in
accordance with GAAP; (iii) mechanics', carriers', workers', repairers' and
similar Liens arising or incurred in the ordinary course of business that are
not material to the business, operations and financial condition of the property
so encumbered or the Company, taken as a whole; (iv) zoning, entitlement and
other land use and environmental regulations by any Governmental Body, provided
that such regulations have not been violated in any material respect; and (v)
such other imperfections in title, charges, easements, restrictions and
encumbrances which do not materially detract from the value of or materially
interfere with the present use of any Company Property subject thereto or
affected thereby.
"Person" means any individual, corporation, partnership, firm, joint
------
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
"Positive Purchase Price Adjustment" shall have the meaning ascribed to
----------------------------------
such term in Section 2.3(e) hereof.
"Purchase Price" shall have the meaning ascribed to such term in Section
--------------
2.1 hereof.
"Purchaser" shall have the meaning ascribed to such term in the recitals
---------
hereof.
"Purchaser's Accountants" shall have the meaning ascribed to such term in
-----------------------
Section 2.3(b) hereof.
"Purchase Price Adjustment" shall have the meaning ascribed to such term in
-------------------------
Section 2.3(d) hereof.
"Purchase Price Certificate" shall have the meaning ascribed to such term
--------------------------
in Section 2.3(c) hereof.
"Purchaser Documents" shall have the meaning ascribed to such term in
-------------------
Section 5.2 hereof.
"Purchaser Indemnified Parties" shall have the meaning ascribed to such
-----------------------------
term in Section 7.1(a) hereof.
"Qualified Plans" shall have the meaning ascribed to such term in Section
---------------
4.16(c) hereof.
"Real Property Lease" shall have the meaning ascribed to such term in
-------------------
Section 4.12(a) hereof.
"Receivables" shall have the meaning ascribed to such term in Section
-----------
2.3(d) hereof.
30
"Release" means any release, spill, emission, leaking, pumping, injection,
-------
deposit, disposal, discharge, dispersal, or leaching into the indoor or outdoor
environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or in
---------------
any other way address any Hazardous Material as required by applicable
Environmental Law; or (y) perform pre-remedial studies and investigations or
post-remedial monitoring and care with respect to matters under clause (x)
above.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Sellers" shall have the meaning ascribed to such term in the recitals
-------
hereto.
"Sellers Documents" shall have the meaning ascribed to such term in Section
-----------------
4.2 hereof.
"Seller Indemnified Parties" shall have the meaning ascribed to such term
--------------------------
in Section 7.1(b) hereof.
"Sellers' Representative" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or such other
-----------------------
individual as provided in the Irrevocable and Durable Power of Attorney, made
and entered into as of October 24, 1997 by and among ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the
shareholders of the Company signatories thereto.
"September Balance Sheet" shall have the meaning ascribed to such term in
-----------------------
Section 4.8 hereof.
"Share Limitation" shall have the meaning ascribed to such term in Section
----------------
2.3(a) hereof.
"Shares" shall have the meaning ascribed to such term in the recitals
------
hereof.
"Subsidiary" means any Person of which a majority of the outstanding
----------
voting securities or other voting equity interests are owned, directly or
indirectly, by the Company.
"Taxes" means (i) all federal, state, local or foreign governmental taxes,
-----
charges, fees, imposts, levies or other assessments, including, without
limitation, all net income, gross receipts, capital, sales, use, ad valorem,
value added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs duties,
fees, assessments and charges of any kind whatsoever and (ii) all interest,
penalties, fines, additions to tax or additional amounts imposed by any taxing
authority in connection with any item described in clause (i).
"Tax Return" means all returns, declarations, reports, estimates,
----------
information returns and statements required to be filed in respect of any Taxes.
"UST" shall have the meaning ascribed to such term in Section 4.20(g)
---
hereof.
31
9.2 Payment of Sales, Use or Similar Taxes. All required sales, use,
--------------------------------------
transfer, intangible, recordation, documentary stamp or similar Taxes or
charges, of any nature whatsoever, applicable to, or resulting from, the
transactions contemplated by this Agreement shall be borne by the Sellers. All
recordation charges for recording any Memorandum of Lease with respect to the
Leases shall be borne by the Company.
9.3 Expenses. Except as otherwise provided in this Agreement or
--------
the Escrow Agreement, the Sellers and the Purchaser shall each bear its own
expenses incurred in connection with the negotiation and execution of this
Agreement and each other agreement, document and instrument contemplated by this
Agreement and the consummation of the transactions contemplated hereby and
thereby, it being understood that in no event shall the Company bear any of such
costs and expenses.
9.4 Specific Performance. The Sellers acknowledge and agree that the
--------------------
this Agreement would
cause irreparable damage to the Purchaser and that the Purchaser will not have
an adequate remedy at law. Therefore, the obligations of the Sellers under this
Agreement, including, without limitation, the Sellers' obligation to sell the
Shares to the Purchaser, shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which any party may have under this Agreement or
otherwise.
9.5 Further Assurances. The Sellers and the Purchaser each agrees to
------------------
execute and deliver such other documents or agreements and to take such other
action as may be reasonably necessary or desirable for the implementation of
this Agreement and the consummation of the transactions contemplated hereby.
9.6 Entire Agreement; Amendments and Waivers. This Agreement (including
----------------------------------------
the schedules and exhibits hereto) represents the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and can be amended, supplemented or changed, and any provision hereof can be
waived, only by written instrument making specific reference to this Agreement
signed by the party against whom enforcement of any such amendment, supplement,
modification or waiver is sought. No action taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. No failure on the
part of any party to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or remedy by such party preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
9.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of North Carolina applicable
to contracts made and to be performed wholly within the State of North Carolina
and without regard to the conflict of laws principles thereof.
32
9.8 Table of Contents and Headings The table of contents and section
------------------------------
headings of this Agreement are for reference purposes only and are to be given
no effect in the construction or interpretation of this Agreement.
9.9 Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be deemed given when delivered
personally or mailed by certified mail, return receipt requested, to the parties
(and shall also be transmitted by facsimile to the Persons receiving copies
thereof) at the following addresses (or to such other address as a party may
have specified by notice given to the other party pursuant to this provision):
If to any Seller:
at their respective addresses set forth on Annex A
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 28202-4006
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser, to:
United Rentals, Inc.
Four ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.10 Severability. If any provision of this Agreement
------------
is invalid or unenforceable, the balance of this Agreement shall remain in
effect.
9.11 Binding Effect; Assignment . This Agreement shall be binding
--------------------------
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by
33
either the Sellers or the Purchaser (by operation of law or otherwise)
without the prior written consent of the other parties hereto and any attempted
assignment without the required consents shall be void; provided, however, that
-------- -------
the Purchaser may assign this Agreement and any or all rights or obligations
hereunder (including, without limitation, the Purchaser's rights to purchase the
Shares and the Purchaser's rights to seek indemnification hereunder) to any
Affiliate of the Purchaser so long as Purchaser remains jointly and severally
liable for the assigned obligations with the assignee thereof. Upon any such
permitted assignment, the references in this Agreement to the Purchaser shall
also apply to any such assignee unless the context otherwise requires.
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
UNITED RENTALS, INC.
By:
------------------------------------
Name:
Title:
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Angus ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
35
ANNEX A
Number of Shares Owned Pro Rata KCL&H
---------------------- Shares Checks
-------- -------
Seller Voting Non-Voting
------ ------ ----------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 16,667 10% $ 1,243,324.20
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SS No.: ###-##-####
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 10,000 6% 745,994.52
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SS No.: ###-##-####
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ 30,000 18% 2,237,983.56
▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SS No.: ###-##-####
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 30,000 18% 2,237,983.56
▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SS No.: ###-##-####
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 30,000 18% 2,237,983.56
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SS No.: ###-##-####
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 30,000 18% 2,237,983.56
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SS No.: ###-##-####
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 10,000 6% 745,994.52
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SS No.: ###-##-####
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 10,000 6% 745,994.52
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SS No.: ###-##-####
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, $ 500,000.00
as Sellers' Representative
36
TOTAL $12,933.242.00
37