<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1997
REGISTRATION NO. 333-
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RENTX INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C> <C>
DELAWARE 7359 84-1336248
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
6000 EAST EVANS AVENUE
SUITE 2-300
DENVER, COLORADO 80222
(303) 512-2001
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ARNOLD A. BERNSTEIN
6000 EAST EVANS AVENUE, SUITE 2-300
DENVER, COLORADO 80222
(303) 512-2001
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<C> <C>
ANDREW L. BLAIR, JR., ESQ. THERESE A. MROZEK, ESQ.
SHERMAN & HOWARD L.L.C. BROBECK, PHLEGER & HARRISON LLP
3000 FIRST INTERSTATE TOWER NORTH 2200 GENG ROAD
633 SEVENTEENTH STREET TWO EMBARCADERO PLACE
DENVER, COLORADO 80202 PALO ALTO, CALIFORNIA 94303
(303) 297-2900 (650) 424-0160
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01 per share................... $38,333,330 $11,616
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 25, 1997
[LOGO OF RENTX]
3,333,333 SHARES
COMMON STOCK
All of the shares of Common Stock offered hereby are being issued and sold by
RentX Industries, Inc. ("RentX" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $8.00 and
$10.00 per share. See "Underwriting" for information relating to the method of
determining the initial public offering price.
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................. $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(2)................... $ $ $
==================================================================================================================
</TABLE>
(1) Before deducting expenses payable by the Company, estimated at $1,800,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 500,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ ,
respectively.
------------------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens &
Company"), San Francisco, California, on or about , 1997.
ROBERTSON, STEPHENS & COMPANY BT ALEX. BROWN
The date of this Prospectus is , 1997
<PAGE> 3
INSIDE FRONT COVER:
RentX logo; photo of a RentX associate assisting customers in front of a
RentX sign; photo of the inside of a RentX store showing merchandise; photo
of a RentX store yard showing equipment available for rent; photo of a
backhoe being used on a job site; photo of a home owner using a rototiller;
and photo of party tents assembled at a site.
FOLD OUT FRONT COVER:
An architectural rendering of a model RentX store.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DISCUSSION OF THESE TRANSACTIONS,
SEE "UNDERWRITING."
2
<PAGE> 4
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR ANY OFFER
TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 4
Risk Factors................................................ 7
Background of the Company................................... 14
Use of Proceeds............................................. 15
Dividend Policy............................................. 15
Capitalization.............................................. 16
Dilution.................................................... 17
Selected Financial Information and Operating Data........... 18
Summary Unaudited Pro Forma Financial Information........... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 38
Management.................................................. 52
Certain Transactions........................................ 60
Principal Stockholders...................................... 63
Description of Capital Stock................................ 64
Shares Available for Future Sale............................ 67
Underwriting................................................ 69
Legal Matters............................................... 71
Experts..................................................... 71
Additional Information...................................... 72
Index to Financial Statements............................... F-1
</TABLE>
---------------------
The Company intends to mail to all of its stockholders annual reports
containing financial statements audited by independent auditors for each fiscal
year and quarterly reports containing unaudited financial data for each of the
first three quarters of each fiscal year.
The Company was incorporated in Delaware in March 1996. The Company's
principal executive offices are located at 6000 East Evans Avenue, Suite 2-300,
Denver, Colorado 80222, and its telephone number is 303-512-2000.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, and the notes thereto, appearing elsewhere
in this Prospectus. As used in this Prospectus, unless the context otherwise
requires, the terms "RentX" or the "Company" include RentX Industries, Inc. and
the businesses of its subsidiaries. Unless otherwise indicated, all information
in this Prospectus (i) assumes an initial public offering price of $9.00 per
share (the midpoint of the estimated range of the initial public offering
price), (ii) assumes no exercise of the Underwriters' over-allotment option and
(iii) assumes the conversion of all of the outstanding shares of the Company's
Series A, Series B and Series C Preferred Stock and Class A Common Stock into an
aggregate of 5,722,018 shares of Common Stock, and the conversion of all
outstanding options to purchase shares of the Company's Class B Common Stock
into options to purchase a total of 248,308 shares of Common Stock, upon
consummation of this offering. References in this Prospectus to fiscal 1996 mean
the Company's fiscal year ended January 31, 1997.
THE COMPANY
RentX is a leading equipment rental company serving the needs of the
homeowner, light commercial and special events segments of the rental market.
RentX was formed in March 1996 to pursue a national consolidation and growth
strategy. Management believes RentX is unique in focusing on these fragmented
segments of the equipment rental market on a national scale. RentX is
implementing a branded national retail concept to offer a broad range of light
construction, industrial, general tool and special events equipment in a
service-oriented, customer-friendly and well-merchandised store. Company-wide
emphasis is placed on helping customers find "project solutions," backed by a
guarantee of complete customer satisfaction. On a pro forma basis, the Company
had revenues of $47.1 million in fiscal 1996 and revenues of $22.9 million for
the six months ended July 31, 1997.
Since May 1996, the Company has pursued an aggressive growth strategy,
acquiring 14 businesses with 57 stores in 10 states (the "Completed
Acquisitions"). The acquired businesses had been in operation for an average of
25 years. The Company currently has a letter of intent to acquire an additional
business with two stores in Tennessee (the "Pending Acquisition") and continues
to evaluate a large number of additional acquisitions. In addition to its
acquisition activity, the Company has built a substantial corporate
infrastructure by assembling an experienced management team, customizing and
commencing installation of a sophisticated management information system,
developing initiatives designed to enhance the performance of acquired stores
and developing refined concepts and prototypes for start-up stores, including
both general equipment rental stores to expand market coverage and special
events hubs. The Company's management includes executives with substantial
experience operating and growing multi-location, marketing-driven consumer and
commercial businesses, as well as executives with extensive experience in the
rental industry.
The Company's goal is to increase repeat business, attract new customers,
and ultimately to expand its target markets, while maximizing economies of scale
that arise from consolidation. RentX's strategy to achieve its goals includes:
providing total project solutions with guaranteed customer satisfaction;
developing a hub and spoke store structure in appropriate markets; implementing
sophisticated retailing techniques and marketing programs; generating
incremental revenue through tie-in merchandise sales; and implementing an
advanced management information system capable of integrating and analyzing
store data. RentX also endeavors to leverage the expertise of local managers by
preserving their autonomy and allows area managers sufficient flexibility to
tailor operations to their particular markets.
Management believes that RentX is well positioned to capitalize on
consolidation and growth opportunities in the homeowner, light commercial, and
special events segments of the equipment rental industry. The Company has
adopted a strategy for expansion through a combination of acquisitions, new
start-up stores in areas where it has an existing platform and increased sales
in existing stores. Acquisitions will include multi-store businesses to serve as
platforms in new markets and smaller "tuck-in" acquisitions in existing markets.
Management believes that the RentX concept can be adapted to a wide variety of
markets, including large, densely developed areas, smaller suburban markets and
rural areas, by tailoring the mix of equipment and merchandise, store size and
concentration of stores to fit the local customer base.
4
<PAGE> 6
THE OFFERING
Common Stock Offered.......................... 3,333,333
Common Stock Outstanding after the Offering... 9,055,351(1)
Use of Proceeds............................... To reduce borrowings under the
Company's bank line of credit,
thereby increasing available
borrowing capacity for
acquisitions and working
capital, and to pay accrued
dividends on preferred stock.
See "Use of Proceeds."(2)
Proposed Nasdaq National Market Symbol........ RNTX
- ---------------
(1) Excludes (i) 248,308 shares subject to outstanding options granted pursuant
to the Company's stock option plans described in "Management -- Stock Option
Plans" (the "Stock Option Plans") or pursuant to individual agreements with
executive officers at a weighted average exercise price of $4.88 per share,
(ii) shares subject to options to be granted pursuant to the Stock
Option Plans on the completion of this offering at an exercise price equal
to the offering price and (iii) shares reserved for issuance
pursuant to the Stock Option Plans. See "Management -- Option Grants and
-- Stock Option Plans."
(2) All of the Company's outstanding preferred stock will be converted into
Common Stock upon completion of this offering and accrued dividends are
payable upon such conversion.
------------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the captions "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this Prospectus constitute
"forward-looking statements" within the meaning of the federal securities laws.
Such forward looking statements involve known and unknown risks, uncertainties,
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, those described under "Risk
Factors" and the following: general economic and business conditions;
competition; success of operating initiatives and implementation of the RentX
model; development and operating costs; advertising and promotional efforts;
brand awareness; the occurrence or timing of acquisitions; availability,
locations and terms of sites for store development; changes in business strategy
or development plans; quality of management; availability, terms and deployment
of capital; business abilities and judgment of personnel; availability of
qualified personnel; labor and employee benefit costs; changes in, or the
failure to comply with, government regulations; construction costs and other
factors referenced in this Prospectus. See "Risk Factors."
5
<PAGE> 7
SUMMARY FINANCIAL INFORMATION AND OPERATING DATA
(In thousands, except selected operating data and per share amounts)
<TABLE>
<CAPTION>
MAY 15, 1996
(COMMENCEMENT PRO FORMA PRO FORMA
OF OPERATIONS) AS ADJUSTED AS ADJUSTED
THROUGH YEAR ENDED SIX MONTHS SIX MONTHS
JANUARY 31, JANUARY 31, ENDED ENDED
1997(1) 1997(2) JULY 31, 1997 JULY 31, 1997(2)
-------------- ----------- ------------- ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Rental revenue.............................. $ 9,221 $40,148 $13,598 $19,318
Rental equipment sales...................... 280 986 537 696
Merchandise and other....................... 1,337 5,921 1,934 2,903
------- ------- ------- --------
Total revenues....................... 10,838 47,055 16,069 22,917
Cost of revenues
Rental equipment expense.................... 1,285 4,895 1,634 2,212
Rental equipment depreciation............... 436 2,775 1,176 1,677
Cost of rental equipment sales.............. 272 907 512 655
Cost of merchandise sales................... 625 3,904 1,204 1,956
Direct operating expense.................... 4,864 19,469 6,763 10,235
------- ------- ------- --------
Total cost of revenues............... 7,482 31,950 11,289 16,735
Store contribution............................ 3,356 15,105 4,780 6,182
Selling, general and administrative expense... 2,351 8,721 3,504 4,601
Depreciation and amortization, excluding
rental equipment depreciation............... 293 944 422 538
------- ------- ------- --------
Operating income.............................. 712 5,440 854 1,043
Other expense, net............................ 4 17 (38) (38)
Interest expense.............................. 784 1,018 1,295 827
------- ------- ------- --------
Income (loss) before income taxes............. (76) 4,405 (403) 254
Income taxes.................................. -- 1,765 -- 102
------- ------- ------- --------
Net income (loss)............................. (76) 2,640 (403) 152
Preferred stock dividends..................... (302) -- (384) --
------- ------- ------- --------
Net income (loss) attributable to common
stockholders................................ $ (378) $ 2,640 $ (787) $ 152
======= ======= ======= ========
Net income (loss) per common share............ $ (.01) $ .29 $ (.07) $ .02
======= ======= ======= ========
Common shares used in computing net
income (loss) per common share.............. 5,812 9,145 5,812 9,145
======= ======= ======= ========
Store contribution margin..................... 31.0% 32.1% 29.7% 27.0%
Operating margin.............................. 6.6% 11.6% 5.3% 4.6%
SELECTED OPERATING DATA:
Opening store count........................... -- -- 24 24
Stores purchased in acquisitions............ 24 59 33 35
New stores opened........................... -- -- 1 1
Stores closed............................... -- -- (1) (1)
------- ------- ------- --------
Ending store count............................ 24 59 57 59
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1997
-------------------------
JANUARY 31, PRO FORMA
1997 ACTUAL AS ADJUSTED(2)
----------- ------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................................ $29,083 $67,990 $71,340
Rental equipment, net....................................... 9,087 27,261 28,641
Total debt.................................................. 17,048 41,121 20,121
Redeemable preferred stock.................................. 10,050 20,295 --
Stockholders' (deficit) equity.............................. (270) (1,057) 45,338
Purchase price of acquisitions.............................. 26,526 27,747 31,747
Capital expenditures........................................ 1,811 9,586 NA
</TABLE>
- ---------------
(1) Includes information concerning the Company after the date of its first
acquisition. For information concerning the Company's predecessor, see
"Selected Financial Information and Operating Data."
(2) The pro forma as adjusted data gives effect to (i) the Completed
Acquisitions and the Pending Acquisition, (ii) the sale by the Company of
3,333,333 shares of Common Stock in the offering at an assumed initial
public offering price of $9.00 per share, (iii) a reduction in interest
expense and bank debt as a result of utilizing a portion of the estimated
net proceeds of the offering to reduce the debt of the Company and (iv) the
conversion of the Company's redeemable preferred stock and the payment of
the related accrued dividends, in each case as though such transaction had
occurred on the first day of the period presented in the case of statement
of operations data or at July 31, 1997 in the case of balance sheet data.
See "Use of Proceeds," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Certain
Transactions" and the Company's historical and pro forma financial
statements and notes thereto. There can be no assurance that the Pending
Acquisition will be consummated.
6
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. This Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed below and elsewhere in this Prospectus.
LIMITED OPERATING HISTORY
RentX completed its first acquisition in May 1996 and had no operations
prior to that date. Accordingly, there is an extremely limited operating history
upon which to base an evaluation of the Company and its business and prospects.
The companies acquired by RentX had been operated independently by local
owner-managers and there can be no assurance that RentX will be able to
successfully integrate these businesses and operate them profitably on a
combined basis. As a result, period-to-period comparisons of the Company's
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance. The Company's management team has been
assembled only recently and there can be no assurance that the management group
will be able to oversee the operation of the combined businesses and effectively
implement the Company's operating and growth strategies.
The Company's operating and growth strategies contemplate the
implementation of the RentX business model at acquired stores, subject to
adjustments for local market conditions, including an expanded inventory of
rental equipment and merchandise at many of the acquired stores. See
"Business -- Store Format and Retail Initiatives." The Company has only recently
begun implementing the RentX model at all acquired stores and there can be no
assurance that it can complete such implementation in a timely manner without
substantial costs, delays or other problems or that the new model will be
successful. The Company incurs additional costs at each acquired store in
connection with this process, which reduces short-term profitability, and there
can be no assurance that the Company will be able to recover such costs or
maintain historical levels of sales and profitability after the process is
completed. The Company's growth strategy also contemplates the establishment of
new stores in markets where businesses are acquired. The first new store was
opened in May 1997 and the Company intends to open five to 10 additional new
stores in the fiscal year ending January 31, 1998. The Company does not yet have
sufficient experience with new stores to have tested the concepts that it
applies in choosing the size, configuration and location of such stores. There
can be no assurance that any new stores will be opened on schedule, if at all,
or operated profitably.
RISKS RELATING TO GROWTH STRATEGY
The principal component of the Company's growth strategy is to continue to
expand through additional acquisitions which complement the Company's business
in new or existing markets. Since its formation in 1996, the Company has pursued
an aggressive growth strategy and has acquired 14 businesses with 57 stores in
10 states. It currently has a letter of intent with respect to the Pending
Acquisition, but there can be no assurance that the Pending Acquisition will be
consummated. The Company also intends to grow by opening new stores in existing
markets. The Company's future growth will be dependent upon a number of factors
including, among others, the Company's ability to (i) identify and negotiate
satisfactory agreements with acceptable acquisition candidates; (ii) identify
and secure sites for new stores; (iii) generate sufficient funds from existing
operations or obtain third-party financing to support expansion; (iv) staff,
train and retain skilled on-site management personnel; (v) successfully
integrate acquired businesses with the Company's existing operations and
systems; and (vi) expand its customer base. Certain of these factors are beyond
the Company's control and may be affected by the economy or actions taken by
competing companies. There can be no assurance that the Company will
successfully expand or that any expansion will result in profitability. The
failure to effectively identify, evaluate, purchase and integrate acquired
businesses would adversely affect the
7
<PAGE> 9
Company's business, financial condition and results of operations, causing
negative effects on the market price of the Common Stock. In addition,
acquisitions involve a number of special risks, such as diversion of
management's attention, difficulties in the integration of acquired operations
and retention of key personnel and unanticipated legal liabilities, some or all
of which could have a material adverse effect on the Company's business,
financial condition and results of operations. The results achieved to date by
the Company may not be indicative of its prospects or ability to operate
successfully in new markets, many of which may have different competitive
conditions and demographic characteristics than the Company's current markets.
The Company's strategy to expand in existing markets by opening new stores
involves a number of special risks, including unexpected delays in opening due
to construction delays or the failure of vendors to deliver equipment, fixtures
or merchandise, inability to obtain necessary zoning or other regulatory
approvals, hiring and training skilled personnel to staff the new stores,
integrating new personnel and facilities into the Company's overall systems and
operations and significant start-up costs which must be incurred before the
viability of the stores is established, some of which are beyond the control of
the Company. There can be no assurance that the Company will be successful in
opening new stores on schedule, if at all, or that such new stores will achieve
revenue and profitability levels comparable to existing stores, if they are
profitable at all, or that the Company will improve its overall market position
and profitability by opening such new stores.
In connection with prospective acquisitions and new stores, the Company
anticipates experiencing growth in the number of its employees and the
geographic area of its operations. The Company believes this growth will
increase the operating complexity of the Company, the demands on its operating
and financial systems and the level of responsibility for both existing and new
management personnel. Implementation of the Company's growth strategy may
therefore impose significant strain on the Company's management and systems. To
manage this expected growth, the Company intends to continue to expand, train
and manage its employee base and update its systems as necessary. There can be
no assurance that the Company will be able to attract and retain qualified
management and employees or maintain adequate operating and financial systems
and controls to support its growth. The inability of the Company to successfully
manage expected growth would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- Growth
Strategy."
DEPENDENCE ON ADDITIONAL CAPITAL FOR FUTURE GROWTH
Expansion of the Company through acquisitions, new stores and internal
growth will require significant capital expenditures. The Company must continue
to reinvest in high quality, well-maintained equipment and rental facilities in
order to remain competitive. In addition, the Company will be required to make
substantial capital expenditures in implementing the RentX business model,
including increasing inventories at recently acquired stores. The Company has
historically financed acquisitions and capital expenditures primarily through
the issuance of equity securities, secured borrowings and internally generated
cash flow. To implement its growth strategy and meet its capital needs, the
Company will be required to increase amounts available under its credit facility
and/or issue additional equity securities (which could result in dilution to the
purchasers of Common Stock offered hereby). Such additional indebtedness would
likely increase RentX's leverage, may make the Company more vulnerable to
economic downturns and may limit its ability to withstand competitive pressures.
There can be no assurance that additional capital, if and when required, will be
available on terms acceptable to the Company, or at all. Failure by the Company
to obtain sufficient additional capital in the future could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and
"Business -- Growth Strategy."
8
<PAGE> 10
DEPENDENCE ON MANAGEMENT INFORMATION SYSTEM
The Company believes that its management information system is critical to
the success of its operations. RentX is currently implementing a new integrated
management, inventory, accounting and point-of-sale system that has been
installed in 52 of the Company's 57 stores, and will be installed in all stores.
Pending such installation, acquired stores are operated using the systems in
place at the time of the acquisition. The Company's failure to implement the
system in existing and future stores could adversely affect revenues and
profitability. RentX has not operated with the new system for a full fiscal year
and has not had the opportunity to use the system with a large number of stores.
In addition, some of the system's capabilities, such as the ability to capture
and analyze certain information, are not yet fully functional. Implementation of
these capabilities will require substantial time and cost and there can be no
assurance that the Company will be able to utilize these capabilities in the
near-term. The Company's aggressive growth strategy is expected to place
significant additional burdens on the system and will eventually require the
expansion of the hardware for the system. There can be no assurance that the
system will handle the additional transaction volume satisfactorily, that it can
be expanded to keep pace with the Company's expected growth or that the system's
cost will not exceed the Company's current expectations. The failure of the
system to perform in accordance with design specifications could have a material
adverse effect on the Company's business, financial condition and results of
operations. Further, the Company relies on a single outside vendor for the
software and support of its management information system and on an independent
contractor to monitor the operation of the system. If the Company's current
vendor failed to support the software, or if the Company's independent system
monitoring firm failed to promptly identify and report operating problems in the
system, the Company could experience system delays or interruptions, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Management Information System."
COMPETITION; LIMITED BARRIERS TO ENTRY
The overall equipment rental industry is highly fragmented and competitive
with limited barriers to entry. The Company's competitors in various segments of
its business include independent businesses with one to four rental stores in a
single geographic area or regional competitors that operate in more than one
state; large national equipment rental companies; home improvement and hardware
retailers; and equipment vendors and dealers who both sell and rent equipment
directly to customers. Some of the Company's competitors have greater financial
resources and a longer operating history than the Company and a substantial
local customer base, and consequently have greater name recognition than the
Company. There can be no assurance that the Company will not encounter increased
competition from existing competitors or new market entrants that may be
significantly larger and have greater financial and marketing resources than the
Company. Increased competition is likely to result in, among other things,
reduced operating margins, loss of market share and diminished brand value, any
one of which could have a material adverse effect on the Company. One equipment
rental company which operates primarily in the heavy equipment segment has
significantly reduced prices on longer term rentals of certain pieces of heavy
equipment. In addition, existing or future competitors may compete with the
Company for acquisition candidates and sites for new stores, which could have
the effect of increasing the price for acquisitions or reducing the number of
suitable acquisition candidates or new store locations. Currently, the largest
companies in the equipment rental industry, including a number which are
actively pursuing consolidation and growth strategies, are primarily in the
heavy equipment segment of the market, but also compete in some of the Company's
targeted segments. There can be no assurance that some or all of these companies
will not increase their focus on one or more of the market segments in which the
Company is active, which would significantly increase competition for customers,
acquisitions and locations for new stores. In addition, there can be no
assurance that foreign companies that focus on the Company's market segments
will not aggressively enter the U.S. market. See "Business -- Competition."
9
<PAGE> 11
DEPENDENCE ON KEY PERSONNEL
The Company's future performance and development will depend, in large
part, upon the efforts and abilities of certain members of senior management,
particularly Arnold A. Bernstein, Chief Executive Officer, Gary J. Kulesza,
Chief Operating Officer and Thomas D. Nugent, Chief Financial Officer. The loss
of the services of one or more members of senior management could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company is dependent upon the
performance and productivity of its local area managers and field personnel and
upon retaining the key members of operating management of the businesses it
acquires. The Company's ability to attract and retain business is significantly
affected by local relationships and the quality of service rendered by local
managerial personnel. The loss of the Company's key local managers could have an
adverse effect on the Company's business, financial condition and results of
operations, including the Company's ability to establish and maintain customer
relationships and to control store costs. See "Management."
DEPENDENCE ON BACE INDUSTRIES; POSSIBLE CONFLICTS OF INTEREST WITH BACE
INDUSTRIES
The Company's success is dependent on its continued relationship with BACE
Industries, LLC ("BACE"). The Company and BACE are parties to a Consulting
Agreement under which BACE provides consulting services to the Company. When the
Company was first founded, those services included a wide range of management
and administrative support. As the Company has assembled its own management team
and systems, BACE's role now consists primarily of assisting management in
identifying, evaluating and effecting acquisitions of companies. The termination
of this Consulting Agreement or the loss of the services provided by BACE could
have a material adverse effect on the Company's business, financial condition or
results of operations and in particular its ability to successfully implement
its acquisition strategy. BACE does not have and after the offering will not
have a majority stock ownership position in the Company or majority
representation on the Board of Directors. After consummation of this offering,
the members and employees of BACE will beneficially own 20.0% of the outstanding
shares of Common Stock of the Company (19.0% if the Underwriters' over-allotment
option is exercised in full) and Craig J. Zoellner and Richard M. Tyler,
principals of BACE, will continue to serve on the Company's Board of Directors.
As a result, BACE will be able to significantly influence the affairs and
policies of the Company, the election of the Company's board of directors and
the approval or disapproval of any matter submitted to a vote of the
stockholders, including certain fundamental corporate transactions requiring
stockholder approval. The Company may enter into additional or modified
agreements, arrangements and transactions with BACE. While the Company expects
that any such future arrangements and transactions will be determined through
negotiation between the two companies, there can be no assurance that conflicts
of interest will not occur with respect to such future business dealings and
similar corporate matters or that any such conflicts will be resolved in a
manner favorable to the Company or its stockholders. All material contracts and
transactions between the Company and BACE have been approved by a majority of
the Company's directors who are not affiliated with BACE, and the Company
intends to continue that policy in the future. See "Certain
Transactions -- Consulting Agreement and -- Stockholders Agreement."
SEASONALITY AND WEATHER
The Company's business is highly seasonal. In fiscal 1996, the majority of
the Company's total pro forma revenues occurred during the six months from May
through October. The Company expects to have net losses in the first and fourth
fiscal quarters each year for the foreseeable future. The Company's annual
results would be materially adversely affected if the Company's revenues were to
be below seasonal norms during the second and third fiscal quarters of the year.
Demand for certain of the Company's products is significantly influenced by
weather, particularly weekend weather during the peak homeowner seasons.
Meteorologists are currently predicting that a severe weather phenomenon known
as "El Nino" will impact the U.S. in late 1997 and early 1998, which may result
in unusually
10
<PAGE> 12
cool and wet conditions in several of the Company's markets. The Company's
business, financial condition and results of operations could be materially
adversely affected by this or other weather patterns which result in
unseasonably cool temperatures, rain or snow, water shortages or floods. In
addition, RentX's geographic mix makes it more susceptible to seasonality than
companies with a greater concentration of stores in warmer climates.
QUARTERLY FLUCTUATIONS
The revenues and operating results of the Company and the businesses
acquired by the Company vary from quarter to quarter and are expected to
continue to fluctuate in the future. These fluctuations result from a number of
factors, including: general economic conditions and weather conditions in the
Company's markets; the timing of acquisitions and new store openings and related
costs; the product and customer mix of businesses acquired; the costs of
integrating acquired businesses; the timing of expenditures for new equipment
and the disposition of used equipment; the realization of targeted equipment
utilization rates; seasonal rental patterns of the Company's customers; and
price changes in response to competitive factors. The Company anticipates that
these fluctuations will be more significant in the future due to implementation
of its aggressive growth strategy. These factors, among others, may cause the
Company's results of operations in some future quarters to be below the
expectations of securities analysts and investors, which could have a material
adverse effect on the market price of the Common Stock. See "-- Seasonality and
Weather" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
GENERAL ECONOMIC CONDITIONS
The equipment rental industry is impacted by national, regional and local
economic conditions, including slowdowns in construction. The Company's
operating results may be adversely affected by events or conditions in a
particular region, such as a regional economic slowdown, adverse weather and
other factors. In addition, the Company's operating results may be adversely
affected by increases in interest rates that may lead to a decline in economic
activity, while simultaneously resulting in higher interest payments by the
Company under its variable rate credit facilities. Economic slowdowns or adverse
economic or competitive conditions would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Stores and Facilities."
CONTROL BY EXISTING STOCKHOLDERS
After the sale of the shares of Common Stock offered hereby, the Company's
officers and directors and holders of five percent or more of the Company's
securities will in the aggregate own approximately 60.5% of the Company's
outstanding Common Stock (57.3% if the Underwriters' over-allotment option is
exercised in full). Accordingly, such persons, if they choose to act together,
generally will be able to exercise significant control over the business,
policies and affairs of the Company, to elect all of the directors and to
approve any matter requiring the approval of the Company's stockholders.
Similarly, such persons, acting together, would be in a position to prevent a
takeover of the Company by one or more third parties, which could deprive the
Company's stockholders of a control premium that might otherwise be realized by
them in connection with an acquisition of the Company. The holders of 5,722,018
shares of the Company's Common Stock, which will represent approximately 63.2%
of the Common Stock outstanding after the offering, are parties to a
Stockholders Agreement requiring them to vote for their nominees in all
elections of directors for a period of two years following the offering. In
addition, the Company has agreed to indemnify certain of its stockholders
against certain matters. See "Principal Stockholders" and "Certain
Transactions -- Stockholders Agreement."
GOVERNMENT AND ENVIRONMENTAL REGULATION
The Company and its operations are subject to various federal, state, local
and common laws and regulations governing, among other things, worker safety,
air emissions, water discharge and the
11
<PAGE> 13
generation, handling, storage, transportation, treatment and disposal of
hazardous substances and wastes. Under these laws, an owner or operator
(including a lessee) of a facility may be liable for the costs of removal or
remediation of certain hazardous or toxic substances located on or in, or
emanating from, its property, as well as related costs of investigation and
property damage. Liability is often imposed without regard to whether the owner
or operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. There can be no assurance that the Company's locations have
been operated in compliance with environmental laws and regulations or that
future uses or conditions will not result in the imposition of environmental
liability upon the Company or expose the Company to third-party actions such as
tort suits. In addition, the Company dispenses petroleum products and propane
gas from above-ground storage tanks located at certain rental locations. There
can be no assurance that these tank systems have been or will at all times
remain free from leaks or that the use of these tanks has not or will not result
in spills or other releases, which could subject the Company to significant
removal or remediation costs. The Company also uses hazardous materials such as
solvents to clean and maintain its rental equipment. In addition, the Company
generates and disposes of wastes such as used motor oil, radiator fluid and
solvents, and may be liable under various federal, state and local laws for
environmental contamination at treatment, storage, disposal or recycling
facilities to which its waste is or has been shipped. The Company is required to
obtain stormwater discharge permits for most of its stores. In some instances
the Company may also be required to obtain authorization from local waste water
treatment authorities for discharge of industrial wash waters to the sanitary
sewer system. There can be no assurance that the Company's failure to comply
with either present or future laws or regulations, which may become more
stringent, would not subject the Company to significant compliance expenses,
restrictions on expansion or the acquisition of costly equipment. See
"Business -- Government and Environmental Regulation."
LIABILITY AND INSURANCE
The Company's business exposes it to possible claims for personal injury or
death resulting from the use of equipment rented or sold by the Company and from
injuries caused in motor vehicle accidents in which Company delivery and service
personnel are involved. The Company carries comprehensive insurance subject to a
deductible that generally must be renewed on an annual basis. There can be no
assurance that future claims will not exceed the level of the Company's
insurance or that such insurance will continue to be available on economically
reasonable terms, if at all. In addition, certain types of claims, such as
claims for punitive damages or for damages arising from intentional misconduct,
are generally not covered by the Company's insurance. Claims against the
Company, regardless of their merit or eventual outcome, may have a material
adverse effect on the Company's business, financial condition and results of
operation.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws include provisions
that may delay, defer or prevent a change in control of the Company, may
discourage bids for the Common Stock at a premium over the market price of the
Common Stock and may adversely affect the market price of the Common Stock and
the voting and other rights of the holders of the Common Stock. These provisions
include, but are not limited to, a provision under which only the Board of
Directors may call meetings of stockholders and certain advance notice
procedures for nominating candidates for election to the Board of Directors. The
Certificate of Incorporation provides that the Board of Directors may issue up
to 1,000,000 shares of preferred stock and fix the rights, preferences,
privileges and priorities, including voting rights, of such preferred stock,
without any further stockholder approval. The rights of holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The Company has no
present plans to issue shares of preferred stock. In addition, under certain
conditions, Section 203 of the Delaware General Corporation Law would prohibit
the Company from engaging in a "business combination" with an "interested
stockholder" (in general, a stockholder owning 15% or more of the Company's
outstanding voting stock) for a period of three years. See "Description of
Capital Stock."
12
<PAGE> 14
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; NO DIVIDENDS
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
as a result of this offering or, if a trading market does develop, that it will
be sustained or that the shares of Common Stock could be resold at or above the
initial public offering price. After completion of this offering, the market
price of the Common Stock could be subject to significant variation due to
fluctuations in the Company's operating results, changes in earnings estimates
by investment analysts, the degree of success the Company achieves in
implementing its business and growth strategies, changes in business or
regulatory conditions affecting the Company, its customers or its competitors
and other factors. In addition, the Nasdaq National Market historically has
experienced extreme price and volume fluctuations that often have been unrelated
or disproportionate to the operating performance of companies. These
fluctuations, as well as general economic, political and market conditions, may
adversely affect the market price of the Common Stock. The initial public
offering price of the Common Stock offered hereby will be determined through
negotiations between the Company and the representatives of the Underwriters and
may not be indicative of the market price of the Common Stock after this
offering. See "Underwriting." The Company has never paid any cash dividends on
its Common Stock and does not anticipate paying cash dividends in the future.
See "Dividend Policy."
ADDITIONAL SHARES ELIGIBLE FOR FUTURE SALE IN THE PUBLIC MARKET
The sale of a substantial number of shares of Common Stock in the public
market following this offering, or the perception that such sales could occur,
could adversely affect the market price of the Common Stock. Upon completion of
this offering, the Company will have outstanding an aggregate of 9,055,351
shares of Common Stock assuming no exercise of the Underwriters' over-allotment
option and no exercise of outstanding options. The 3,333,333 shares of Common
Stock sold in this offering will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), unless such shares are held by "affiliates" of the Company,
as that term is defined under the Securities Act and the regulations promulgated
thereunder.
The remaining 5,722,018 shares of Common Stock are "Restricted Shares" and
are subject to restrictions under the Securities Act. All of the Restricted
Shares are subject to lock-up agreements under which the holders have agreed not
to sell or otherwise dispose of any of their shares for a period of 180 days
after the date of this Prospectus without the prior written consent of
Robertson, Stephens & Company. Beginning 180 days after the date of this
Prospectus, 4,758,738 Restricted Shares will be eligible for sale in the public
market pursuant to Rule 144 under the Securities Act, subject to the volume and
other limitations of Rule 144. The remaining 963,280 Restricted Shares will
become eligible for sale at various times through June 1998. In addition,
holders of 5,722,018 shares of Common Stock have registration rights with
respect to such shares. The Company intends to file a registration statement on
Form S-8 180 days after the date of this Prospectus to register 550,308 shares
of Common Stock authorized for issuance under the Company's Stock Options Plans
or other agreements with employees, of which options for 248,308 shares are
outstanding. See "Management -- Stock Option Plans and -- Employment
Agreements," "Description of Capital Stock -- Registration Rights" and "Shares
Eligible for Future Sale."
SUBSTANTIAL AND IMMEDIATE DILUTION
The initial public offering price will be substantially higher than the pro
forma net tangible book value per share of Common Stock. Investors purchasing
shares of Common Stock in the offering will be subject to immediate dilution in
pro forma net tangible book value of $7.41 per share. See "Dilution."
13
<PAGE> 15
BACKGROUND OF THE COMPANY
RentX was incorporated in March 1996 and completed its first acquisition in
May 1996. To date, RentX has acquired 14 separate businesses operating a total
of 57 stores in 10 different states. See "Business -- Acquisition History." The
following table summarizes those acquisitions:
<TABLE>
<CAPTION>
DATE COMPANY ACQUIRED MARKET AREA NUMBER OF STORES
---- ---------------- ----------- ----------------
<S> <C> <C> <C>
May 1996 Zodiac Rentals Denver, Colorado 9
May 1996 A to Z Rentals Spokane, Washington 4
August 1996 E-Z Way Rentals Five Colorado mountain 5
and January 1997 and resort towns
November 1996 U-Rent Oklahoma City and 4
Southern Oklahoma
December 1996 U-Do-It Rental Centers Northern Idaho 2
and January 1997
February 1997 Hays Rentals Arkansas 5
March 1997 Central Virginia Rentals Central Virginia 6
April 1997 Scotty Rents San Francisco Bay 4
Area, California
May 1997 A-1 Rental Center Southern New Mexico 5
June 1997 Suburban Rent-It Detroit, Michigan 7
July 1997 A-Z Rents It Fort Collins, Colorado 1
July 1997 A-1 Rent All Tyler, Texas 3
July 1997 A-1 Rent All of Marshall Marshall, Texas 1
July 1997 Duncan Rents All Duncan, Oklahoma 1
</TABLE>
The Company has combined two of the acquired stores in New Mexico and has opened
a start-up store in Spokane, Washington.
The Company has signed a letter of intent relating to the Pending
Acquisition, which would add two locations in Tennessee. There can be no
assurance that the Pending Acquisition will be consummated. The Company
continually evaluates information on rental equipment companies active in one or
more of its targeted segments to determine whether they would be attractive
candidates for acquisition. The Company is in discussion with a large number of
potential acquisition candidates, some of which would be material to the
Company. If and when appropriate acquisition opportunities become available, the
Company intends to pursue them actively. No assurance can be given that any
acquisition by the Company will or will not occur, that, if an acquisition does
occur, it will not materially and adversely affect the Company or that any such
acquisition will be successful in enhancing the Company's business. See "Risk
Factors -- Risks Relating to Growth Strategy."
In addition to pursuing acquisitions, the Company has focused on assembling
a management team, identifying sites for new stores and putting in place the
systems necessary to support its growth and operations. The Company's management
includes executives with substantial experience operating and growing
multi-location, marketing driven consumer and commercial businesses, as well as
executives with extensive experience in the rental industry. Many of the former
owners of the businesses acquired by RentX have joined its management team,
either as area managers or as part of senior management with Company-wide
responsibilities, and have also invested in the Company. A number of the
individuals are prominent in the American Rental Association ("ARA"), the rental
industry's active national trade association, and in state trade associations.
See "Management." In March 1997, the Company commenced the national installation
of a sophisticated integrated point of sale, inventory, accounting and
management information system that was selected by the management team after
extensive analysis and customized to meet the Company's needs and management
objectives. See "Business -- Management Information System." Management believes
that its management team and information system will be adequate to support the
Company's continuing growth for the foreseeable future.
14
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,333,333 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $9.00 per share, after deducting estimated underwriting discounts and
commissions and offering expenses, are estimated to be approximately $26.1
million. The Company intends to utilize approximately $25 million of such net
proceeds to reduce borrowings under its bank line of credit. The total amount of
the bank line of credit is $39.3 million and the interest rate is currently 8.5%
per annum. As of July 31, 1997, the total outstanding borrowings were
approximately $35 million. The line of credit matures on May 31, 1999.
Borrowings under the line have been used to fund the Company's acquisitions and
for working capital. For additional information regarding the Company's bank
line of credit, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and Note 5 of
Notes to the Company's financial statements. The increase in available borrowing
capacity resulting from the repayment of outstanding borrowings will provide the
Company with a source of funds for working capital and acquisitions. The Company
has signed a letter of intent with respect to the Pending Acquisition and is
engaged in acquisition discussions with a number of other companies. See "Risk
Factors -- Risks Relating to Growth Strategy," "Background of the Company" and
"Business -- Growth Strategy." The Company will use approximately $1 million of
the net proceeds of this offering to pay accrued dividends to the holders of
Preferred Stock. All outstanding Preferred Stock will convert to Common Stock
upon the consummation of this offering, and accrued dividends will be payable
through the date of conversion. See "Certain Transactions -- Sales of Preferred
Stock."
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock since its
formation and does not currently intend to pay cash dividends in the foreseeable
future. The Company intends to retain any earnings for the operation and
expansion of its business. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, the Company's earnings, financial condition, results of operations,
level of indebtedness, capital requirements, general business conditions and
contractual restrictions on payment of dividends, if any, as well as such other
factors the Board of Directors may deem relevant. The Company is restricted by
the terms of its bank line of credit from paying cash dividends on its Common
Stock, and may in the future enter into loan or other agreements or issue debt
securities or preferred stock that restrict the payment of cash dividends on
Common Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and Note 5 of
Notes to the Company's financial statements.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the total debt and capitalization of the
Company at July 31, 1997 on (i) an historical basis, (ii) a pro forma basis to
reflect the consummation of the Pending Acquisition and (iii) a pro forma as
adjusted basis to reflect the conversion of the Company's Series A, Series B and
Series C Preferred Stock and Class A and Class B Common Stock into a single
class of Common Stock effective upon the consummation of this offering and to
give effect to the sale by the Company of 3,333,333 shares of Common Stock
offered hereby at an assumed initial public offering price of $9.00 per share
and the application of the estimated net proceeds therefrom. There can be no
assurance that the Pending Acquisition will be consummated. This table should be
read in conjunction with "Selected Financial Information and Operating Data" and
the Company's historical and pro forma financial statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
------- ------- -----------
<S> <C> <C> <C>
(In thousands)
Debt:
Bank debt and long term obligations(1).................... $40,798 $44,798 $19,798
Notes payable to related parties.......................... 323 323 323
------- ------- -------
Total debt......................................... 41,121 45,121 20,121
Redeemable preferred stock, cumulative, convertible, $1 par
value:
Series A preferred stock; 17,195 shares authorized; 17,195
shares issued and outstanding actual and pro forma
(entitled in liquidation to $17,195,000); none issued
and outstanding pro forma as adjusted................... 17,095 17,095 --
Series B preferred stock; 200 shares authorized; 200
shares issued and outstanding actual and pro forma
(entitled in liquidation to $200,000); none issued and
outstanding pro forma as adjusted....................... 200 200 --
Series C preferred stock; 3,000 shares authorized; 3,000
shares issued and outstanding actual and pro forma
(entitled in liquidation to $3,000,000); none issued and
outstanding pro forma as adjusted....................... 3,000 3,000 --
------- ------- -------
Total redeemable preferred stock...................... 20,295 20,295 --
Stockholders' (deficit) equity:
Class A common stock, $.01 par value; 5,964,326 shares
authorized; 1,000 shares issued and outstanding actual
and pro forma; none issued and outstanding pro forma as
adjusted................................................ -- -- --
Class B common stock, $.01 par value; 248,308 shares
authorized; none issued and outstanding(2).............. -- -- --
Common stock, $.01 par value; 19,000,000 shares
authorized; 9,055,351 shares issued and outstanding pro
forma as adjusted(2)(3)................................. -- -- 91
Preferred stock, $.01 par value; 1,000,000 shares
authorized; none issued and outstanding(3).............. -- -- --
Paid-in capital........................................... 108 108 46,412
Accumulated deficit....................................... (1,165) (1,165) (1,165)
------- ------- -------
Total stockholders' (deficit) equity............... (1,057) (1,057) 45,338
------- ------- -------
Total capitalization............................. $60,359 $64,359 $65,459
======= ======= =======
</TABLE>
- ---------------
(1) The Company will apply approximately $25 million of the net proceeds from
this offering to repay outstanding borrowings under its bank line of credit
and approximately $1 million of the net proceeds to pay accrued dividends on
the Preferred Stock outstanding prior to this offering. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(2) Issued and outstanding shares exclude (i) 248,308 shares subject to
outstanding options granted pursuant to the Company's Stock Option Plans or
pursuant to individual agreements with executive officers at a weighted
average exercise price of $4.88 per share, (ii) shares subject to
options to be granted pursuant to the Stock Option Plans on the completion
of this offering at an exercise price equal to the offering price and (iii)
shares reserved for issuance pursuant to the Stock Option Plans.
See "Management -- Option Grants and -- Stock Option Plans."
(3) Under the Company's Amended and Restated Certificate of Incorporation, upon
completion of the offering the Series A, Series B and Series C Preferred
Stock and Class A and Class B Common Stock reflected in the table will be
eliminated and the authorized capitalization will consist of 19,000,000
shares of Common Stock and 1,000,000 shares of Preferred Stock.
16
<PAGE> 18
DILUTION
The pro forma net tangible book value (deficit) of the Company as of July
31, 1997 was $(11.7) million, or $(2.05) per share of Common Stock. Pro forma
net tangible book value per share of Common Stock is determined by dividing pro
forma net tangible book value (total pro forma tangible assets less total pro
forma liabilities) by the pro forma number of shares of Common Stock outstanding
at July 31, 1997. Without taking into account any changes in the pro forma net
tangible book value after July 31, 1997, other than to give effect to the sale
by the Company of the 3,333,333 shares of Common Stock offered hereby at an
assumed initial public offering price of $9.00 per share and the application of
the estimated net proceeds therefrom, the pro forma as adjusted net tangible
book value of the Company's Common Stock at July 31, 1997, would have been $14.4
million, or $1.59 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of $3.64 per share to existing
stockholders and an immediate dilution of $7.41 per share to new investors. The
following table illustrates this dilution per share.
<TABLE>
<S> <C> <C>
Assumed initial public offering price................................. $ 9.00
Pro forma net tangible book value (deficit) before the
offering............................................... $ (2.05)
Increase in pro forma net tangible book value (deficit)
attributable to new investors.......................... $ 3.64
--------
Pro forma as adjusted net tangible book value after the offering...... $ 1.59
--------
Dilution to new investors............................................. $ 7.41
</TABLE>
The following table summarizes, on a pro forma basis, as of July 31, 1997,
the differences between existing stockholders and new investors with respect to
the number of shares of Common Stock purchased from the Company, the total
consideration paid by the existing stockholders and new investors and the
average price paid per share by the existing stockholders and new investors
(assuming an initial public offering price $9.00 per share and before deducting
the underwriting discount and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 5,722,018 63.2% $20,395,000 40.5% $ 3.56
New investors.............. 3,333,333 36.8 29,999,997 59.5 $ 9.00
--------- ----- ----------- ----- ------
Total............ 9,055,351 100.0% $50,394,997 100.0%
========= ===== =========== =====
</TABLE>
Options are outstanding under the Company's Stock Option Plans and other
agreements with executive officers to purchase a total of 248,308 shares of
Common Stock at a weighted average exercise price of $4.88 per share, subject to
vesting. To the extent such options are exercised, there will be further
dilution to the new investors in the offering. See "Capitalization" and
"Management -- Stock Option Plans."
17
<PAGE> 19
SELECTED FINANCIAL INFORMATION AND OPERATING DATA
The following selected statement of operations data of the Company for the
period from May 15, 1996 (commencement of operations) through January 31, 1997,
and selected balance sheet data as of January 31, 1997, have been derived from
the audited financial statements of the Company appearing elsewhere in this
Prospectus. The selected statement of operations data of the Company for the
six-month period ended July 31, 1997 and selected balance sheet data as of July
31, 1997 have been derived from the unaudited financial statements of the
Company appearing elsewhere in this Prospectus, which, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's results of operations and
financial position at such date and for such period. The results for the six
months ended July 31, 1997 are not necessarily indicative of the results that
may be expected for future periods or for the year ending January 31, 1998. The
following selected statement of operations data of the Company's predecessor,
Zodiac Rentals ("Zodiac" or the "Predecessor Company"), for the years ended
December 31, 1994 and 1995 and the period from January 1, 1996 through May 14,
1996 and selected balance sheet data of Zodiac as of December 31, 1994 and 1995
have been derived from the audited financial statements of Zodiac appearing
elsewhere in this Prospectus. The selected statement of operations data of
Zodiac for the years ended December 31, 1992 and 1993 and selected balance sheet
data of Zodiac as of December 31, 1992 and 1993 have been derived from the
unaudited financial statements of Zodiac not included herein. The selected pro
forma financial information has been derived from the unaudited pro forma
financial information included elsewhere herein. The selected operating data
presented below has not been audited. The selected historical and pro forma
financial information and operating data presented below should be read in
conjunction with the Company's financial statements and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus.
18
<PAGE> 20
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND
OPERATING DATA)
JANUARY 1
YEARS ENDED DECEMBER 31, THROUGH
--------------------------------- MAY 14,
1992 1993 1994 1995 1996
------ ------ ------ ------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Rental revenues....................... $3,015 $3,709 $4,697 $6,425 $2,160
Rental equipment sales................ 140 64 88 99 193
Merchandise and other................. 616 748 865 1,066 461
------ ------ ------ ------ ------
Total revenues.................... 3,771 4,521 5,650 7,590 2,814
Cost of revenues
Rental equipment expense.............. 322 341 450 509 214
Rental equipment depreciation......... 213 337 546 1,069 463
Cost of rental equipment sales........ 42 52 64 91 149
Cost of merchandise sales............. 412 451 629 462 203
Direct operating expense.............. 1,360 1,677 2,436 3,296 1,408
------ ------ ------ ------ ------
Total cost of revenues............ 2,349 2,858 4,125 5,427 2,437
Store contribution...................... 1,422 1,663 1,525 2,163 377
Selling, general and administrative
expense............................... 1,210 1,601 1,094 1,486 553
Depreciation and amortization, excluding
rental equipment depreciation......... 31 34 31 21 20
------ ------ ------ ------ ------
Operating income........................ 181 28 400 656 (196)
Other expense (income), net.............
Interest expense........................ 43 71 113 216 93
------ ------ ------ ------ ------
Income (loss) before income taxes....... 138 (43) 287 440 (289)
Income taxes(3).........................
Net income (loss).......................
Preferred stock dividends...............
Net income (loss) attributable to common
stockholders..........................
Net income (loss) per common
share(2)..............................
Common shares used in computing net
income (loss) per common
share(2)(4)...........................
Store contribution margin................. 37.7% 36.8% 27.0% 28.5% 13.4%
Operating margin.......................... 4.8% 0.6% 7.1% 8.6% (7.0)%
SELECTED OPERATING DATA:
Opening store count..................... 5 5 5 7 9
Stores purchased in acquisitions...... -- -- 1 2 --
New stores opened..................... -- -- 1 -- --
Stores closed......................... -- -- -- -- --
------ ------ ------ ------ ------
Ending store count...................... 5 5 7 9 9
<CAPTION>
THE COMPANY
----------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND
OPERATING DATA)
PRO FORMA
MAY 15, 1996 PRO FORMA AS ADJUSTED
(COMMENCEMENT AS ADJUSTED 6 MONTHS 6 MONTHS
OF OPERATIONS) YEAR ENDED ENDED ENDED
THROUGH JANUARY 31, JULY 31, JULY 31,
JANUARY 31, 1997 1997(1) 1997 1997(1)
---------------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Rental revenues....................... $ 9,221 $40,148 $13,598 $19,318
Rental equipment sales................ 280 986 537 696
Merchandise and other................. 1,337 5,921 1,934 2,903
------- ------- ------- -------
Total revenues.................... 10,838 47,055 16,069 22,917
Cost of revenues
Rental equipment expense.............. 1,285 4,895 1,634 2,212
Rental equipment depreciation......... 436 2,775 1,175 1,677
Cost of rental equipment sales........ 272 907 512 655
Cost of merchandise sales............. 625 3,904 1,204 1,956
Direct operating expense.............. 4,864 19,469 6,764 10,235
------- ------- ------- -------
Total cost of revenues............ 7,482 31,950 11,289 16,735
Store contribution...................... 3,356 15,105 4,780 6,182
Selling, general and administrative
expense............................... 2,351 8,721 3,504 4,601
Depreciation and amortization, excluding
rental equipment depreciation......... 293 944 422 538
------- ------- ------- -------
Operating income........................ 712 5,440 854 1,043
Other expense (income), net............. 4 17 (38) (38)
Interest expense........................ 784 1,018 1,295 827
------- ------- ------- -------
Income (loss) before income taxes....... (76) 4,405 (403) 254
Income taxes(3)......................... 1,765 102
------- ------- ------- -------
Net income (loss)....................... (76) 2,640 (403) 152
Preferred stock dividends............... (302) -- (384) --
------- ------- ------- -------
Net income (loss) attributable to common
stockholders.......................... (378) 2,640 (787) 152
======= ======= ======= =======
Net income (loss) per common
share(2).............................. $ (.01) $ .29 $ (.07) $ .02
======= ======= ======= =======
Common shares used in computing net
income (loss) per common
share(2)(4)........................... 5,812 9,145 5,812 9,145
======= ======= ======= =======
Store contribution margin................. 31.0% 32.1% 29.7% 27.0%
Operating margin.......................... 6.6% 11.6% 5.3% 4.6%
SELECTED OPERATING DATA:
Opening store count..................... -- -- 24 24
Stores purchased in acquisitions...... 24 59 33 35
New stores opened..................... -- -- 1 1
Stores closed......................... -- -- (1) (1)
------- ------- ------- -------
Ending store count...................... 24 59 57 59
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------- MAY 14, JANUARY 31,
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................ $1,552 $2,044 $3,425 $4,234 $4,262 $29,083
Rental equipment, net................... 840 1,020 1,957 2,367 3,120 9,087
Total debt.............................. 676 1,389 1,915 2,363 3,027 17,048
Redeemable preferred stock.............. -- -- -- -- -- 10,050
Stockholders' equity (deficit).......... 517 524 1,227 1,516 933 (270)
Purchase price of acquisitions.......... NA NA NA NA NA 26,526
Capital expenditures.................... 667 628 1,536 1,545 1,099 1,811
<CAPTION>
PRO FORMA
AS ADJUSTED
JULY 31, JULY 31,
1997 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets............................ $67,990 $71,340
Rental equipment, net................... 27,261 28,641
Total debt.............................. 41,121 20,121
Redeemable preferred stock.............. 20,295 --
Stockholders' equity (deficit).......... (1,057) 45,338
Purchase price of acquisitions.......... 27,747 31,747
Capital expenditures.................... 9,586 NA
</TABLE>
- ---------------
(1) The pro forma as adjusted data gives effect to (i) the Completed
Acquisitions and the Pending Acquisition, (ii) the sale by the Company of
3,333,333 shares of Common Stock in the offering at an assumed initial
public offering price of $9.00 per share, (iii) a reduction in interest
expense and bank debt as a result of utilizing a portion of the estimated
net proceeds of the offering to reduce the debt of the Company and (iv) the
conversion of the Company's redeemable Preferred Stock and the payment of
the related accrued dividends, in each case as though such transaction had
occurred on the first day of the period presented in the case of statement
of operations data or at July 31, 1997 in the case of balance sheet data.
See "Use of Proceeds," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Certain
Transactions" and the Company's pro forma and historical financial
statements and notes thereto.
(2) Net income per common share and common shares used in computing net income
(loss) per common share are not presented for the Predecessor Company on an
historical basis as such information would not be representative of the
capital structure of the Company after this offering. Historical and pro
forma earnings per share were calculated by assuming the conversion of the
outstanding Preferred Stock of the Company into Common Stock equivalents and
the exercise of all stock options issued within one year of the assumed
effective date, on a treasury stock basis. Pro forma as adjusted earnings
per share also assumes the issuance of 3,333,333 shares of Common Stock in
this offering.
(3) The Predecessor Company was structured as a partnership or S corporation
during the periods presented and accordingly had no income tax expense at
the entity level.
(4) Historical and pro forma earnings per share were calculated by assuming the
conversion of the outstanding Preferred Stock of the Company into Common
Stock equivalents and the exercise of all stock options issued within one
year of the initial filing of the Registration Statement of which this
Prospectus is a part. The calculation utilizes the as-if converted method
for Preferred Stock and the treasury stock method for stock options. Pro
forma as adjusted earnings per share also assumes the issuance of 3,333,333
shares of Common Stock in this offering.
19
<PAGE> 21
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
INTRODUCTION TO SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following summary unaudited pro forma financial information of the
Company presents the unaudited pro forma statements of operations for the six
months ended July 31, 1997 and fiscal 1996. The pro forma statement of
operations for the six months ended July 31, 1997, has been adjusted to give
effect to the Completed Acquisitions that were consummated after January 31,
1997 and the Pending Acquisition as if such acquisitions had occurred on
February 1, 1997. There can be no assurance that the Pending Acquisition will be
consummated. Pro forma adjustments relating to the Completed Acquisitions and
the Pending Acquisition are referred to herein collectively as the "Pro Forma
Acquisition Adjustments." The pro forma statement of operations for fiscal 1996
has been adjusted to give effect to the Completed Acquisitions and the Pending
Acquisition, in each case, as if such transactions had occurred on February 1,
1996. See "Background of the Company" and "Business -- Acquisition History" for
information as to the dates of and companies acquired in the Completed
Acquisitions and to be acquired in the Pending Acquisition.
The pro forma as adjusted statements of operations for fiscal 1996 and the
six months ended July 31, 1997, give additional effect to (i) the sale by the
Company of 3,333,333 shares of Common Stock offered hereby at an assumed initial
public offering price of $9.00 per share, (ii) a reduction in interest expense
as a result of a reduction in indebtedness upon application of a portion of the
net proceeds from the offering and (iii) the conversion of all of the Company's
Series A, Series B and Series C Preferred Stock and Class A Common Stock into a
total of 5,722,018 shares of Common Stock upon the consummation of this offering
and the payment of the related accrued preferred stock dividends, as though they
had occurred at the beginning of the periods covered by such statements of
operations or as of the date of such balance sheet. The pro forma adjustments
relating to the transactions referred to in clauses (i), (ii) and (iii) are
referred to herein collectively as the "Pro Forma Offering Adjustments." See
"Use of Proceeds."
The Pro Forma Acquisition Adjustments and Pro Forma Offering Adjustments
represent the Company's determination of all adjustments necessary to present
fairly the Company's pro forma results of operations and financial position and
are based upon available information and certain assumptions considered
reasonable under the circumstances. The pro forma financial information
presented herein does not purport to present what the Company's financial
position or results of operations would actually have been had such events
leading to the Pro Forma Acquisition Adjustments and Pro Forma Offering
Adjustments in fact occurred on the date or at the beginning of the periods
indicated or to project the Company's financial position or results of
operations for any future date or period.
The unaudited summary pro forma financial information should be read in
conjunction with the historical and pro forma financial statements of the
Company and the notes thereto and management's discussion thereof contained
elsewhere in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's financial
statements and the notes thereto.
20
<PAGE> 22
SUMMARY UNAUDITED PRO FORMA INCOME STATEMENT
<TABLE>
<CAPTION>
Six Months Ended July 31, 1997
-----------------------------------------------------------------
Historical Completed Pending Acquisition
Company Acquisitions(1)(3) Acquisition(2)(3) Adjustments
---------- ------------------ ----------------- -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues
Rental revenue............ $13,598 $4,203 $1,517 $ --
Rental equipment sales.... 537 159 -- --
Merchandise revenues...... 1,934 691 278 --
------- ------ ------ ------
Total revenues...... 16,069 5,053 1,795 --
Cost of revenues
Rental equipment expense.. 1,634 466 112 --
Rental equipment
depreciation............ 1,176 632 174 (305)(4)
Cost of rental equipment
sales................... 512 67 -- 76(5)
Cost of merchandise and
new equipment sales..... 1,204 529 223 --
Direct operating
expense................. 6,763 2,421 1,035 16(6)
------- ------ ------ ------
Total cost of
revenues.......... 11,289 4,115 1,544 (213)
Store contribution.......... 4,780 938 251 213
Selling, general and
administrative expense.... 3,504 1,333 516 (752)(7)
Depreciation and
amortization, excluding
rental equipment
depreciation.............. 422 102 38 (24)(8)
------- ------ ------ ------
Operating income (loss)..... 854 (497) (303) 989
Other (income) expense,
net....................... (38) -- -- --
Interest expense, related
parties................... 6 -- -- --
Interest expense, other..... 1,289 121 15 396(10)
------- ------ ------ ------
Income (loss) before income
taxes..................... (403) (618) (318) 593
Income tax expense.......... -- (95) (117) (106)(11)
------- ------ ------ ------
Net income (loss)........... (403) (523) (201) 699
Preferred stock dividends... (384) -- -- (116)
------- ------ ------ ------
Net income (loss) available
to common stockholders.... $ (787) $ (523) $ (201) $ 583
======= ====== ====== ======
Store contribution margin... 29.7% 18.6% 14.0%
Operating margin............ 5.3% (9.8)% (16.9)%
Net income (loss) per common
share(15)................. $ (.07)
=======
Common shares used in
computing net income
(loss) per common
share(15)................. 5,812
=======
<CAPTION>
Six Months Ended July 31, 1997
-----------------------------------------
Offering Pro Forma
Pro Forma Adjustments(12) As Adjusted
--------- --------------- -----------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues
Rental revenue............ $19,318 $ -- $19,318
Rental equipment sales.... 696 -- 696
Merchandise revenues...... 2,903 -- 2,903
------- ------- -------
Total revenues...... 22,917 -- 22,917
Cost of revenues
Rental equipment expense.. 2,212 -- 2,212
Rental equipment
depreciation............ 1,677 -- 1,677
Cost of rental equipment
sales................... 655 -- 655
Cost of merchandise and
new equipment sales..... 1,956 -- 1,956
Direct operating
expense................. 10,235 -- 10,235
------- ------- -------
Total cost of
revenues.......... 16,735 -- 16,735
Store contribution.......... 6,182 -- 6,182
Selling, general and
administrative expense.... 4,601 -- 4,601
Depreciation and
amortization, excluding
rental equipment
depreciation.............. 538 -- 538
------- ------- -------
Operating income (loss)..... 1,043 -- 1,043
Other (income) expense,
net....................... (38) -- (38)
Interest expense, related
parties................... 6 -- 6
Interest expense, other..... 1,821 (1,000)(13) 821
------- ------- -------
Income (loss) before income
taxes..................... (746) 1,000 254
Income tax expense.......... (318) 420(11) 102
------- ------- -------
Net income (loss)........... (428) 580 152
Preferred stock dividends... (500) 500(14) --
------- ------- -------
Net income (loss) available
to common stockholders.... $ (928) $ 1,080 $ 152
======= ======= =======
Store contribution margin... 27.0% 27.0%
Operating margin............ 4.6% 4.6%
Net income (loss) per common
share(15)................. $ (.07) $ .02
======= =======
Common shares used in
computing net income
(loss) per common
share(15)................. 5,812 3,333 9,145
======= ======= =======
</TABLE>
21
<PAGE> 23
SUMMARY UNAUDITED PRO FORMA INCOME STATEMENT
<TABLE>
<CAPTION>
May 15, 1996
(Commencement Fiscal 1996
of Operations) -----------------------------------------------------
through Completed Pending Acquisition
January 31, 1997 Acquisitions(1)(3) Acquisition(2)(3) Adjustments
---------------- ------------------ ------------------ -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues
Rental revenue........ $ 9,221 $27,380 $3,547 $ --
Rental equipment
sales............... 280 706 -- --
Merchandise and other
revenues............ 1,337 4,066 518 --
------- ------- ------ -------
Total
revenues...... 10,838 32,152 4,065 --
Cost of revenues
Rental equipment
expense............. 1,285 3,367 243 --
Rental equipment
depreciation........ 436 3,412 342 (1,415)(4)
Cost of rental
equipment sales..... 272 429 -- 206(5)
Cost of merchandise
and new equipment
sales............... 625 2,865 414 --
Direct operating
expense............. 4,864 12,329 2,182 94(6)
------- ------- ------ -------
Total cost of
revenues...... 7,482 22,402 3,181 (1,115)
Store contribution...... 3,356 9,750 884 1,115
Selling, general and
administrative
expense............... 2,351 6,568 677 (875)(7)
Depreciation and
amortization,
excluding rental
equipment
depreciation.......... 293 562 76 13(8)
------- ------- ------ -------
Operating income........ 712 2,620 131 1,977
Other (income) expense,
net................... 4 (577) -- 590(9)
Interest expense,
related parties....... 28 -- -- --
Interest expense,
other................. 756 939 20 1,275(10)
------- ------- ------ -------
Income (loss) before
income taxes.......... (76) 2,258 111 112
Income tax expense...... -- 579 41 404(11)
------- ------- ------ -------
Net income (loss)....... (76) 1,679 70 (292)
Preferred stock
dividends............. (302) -- -- (697)
------- ------- ------ -------
Net income (loss)
available to common
stockholders.......... $ (378) $ 1,679 $ 70 $ (989)
======= ======= ====== =======
Store contribution
margin................ 31.0% 30.3% 21.7%
Operating margin........ 6.6% 8.1% 3.2%
Net income (loss) per
common share(15)...... $ (.01)
=======
Common shares used in
computing net income
(loss) per common
share(15)............. 5,812
=======
<CAPTION>
Fiscal 1996
-----------------------------------------
Offering Pro Forma
Pro Forma Adjustments(12) As Adjusted
--------- --------------- -----------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues
Rental revenue........ $40,148 $ -- $40,148
Rental equipment
sales............... 986 -- 986
Merchandise and other
revenues............ 5,921 -- 5,921
------- ------- -------
Total
revenues...... 47,055 -- 47,055
Cost of revenues
Rental equipment
expense............. 4,895 -- 4,895
Rental equipment
depreciation........ 2,775 -- 2,775
Cost of rental
equipment sales..... 907 -- 907
Cost of merchandise
and new equipment
sales............... 3,904 -- 3,904
Direct operating
expense............. 19,469 -- 19,469
------- ------- -------
Total cost of
revenues...... 31,950 -- 31,950
Store contribution...... 15,105 -- 15,105
Selling, general and
administrative
expense............... 8,721 -- 8,721
Depreciation and
amortization,
excluding rental
equipment
depreciation.......... 944 -- 944
------- ------- -------
Operating income........ 5,440 -- 5,440
Other (income) expense,
net................... 17 -- 17
Interest expense,
related parties....... 28 -- 28
Interest expense,
other................. 2,990 (2,000)(13) 990
------- ------- -------
Income (loss) before
income taxes.......... 2,405 2,000 4,405
Income tax expense...... 1,024 741(11) 1,765
------- ------- -------
Net income (loss)....... 1,381 1,259 2,640
Preferred stock
dividends............. (999) 999(14) --
------- ------- -------
Net income (loss)
available to common
stockholders.......... $ 382 $ 2,258 $ 2,640
======= ======= =======
Store contribution
margin................ 32.1% 32.1%
Operating margin........ 11.6% 11.6%
Net income (loss) per
common share(15)...... $ .24 $ .29
======= =======
Common shares used in
computing net income
(loss) per common
share(15)............. 5,812 3,333 9,145
======= ======= =======
</TABLE>
22
<PAGE> 24
NOTES TO SUMMARY UNAUDITED PRO FORMA INCOME STATEMENTS
(1) Since inception in March 1996, the Company has effected the Completed
Acquisitions as follows: (i) Zodiac, acquired on May 15, 1996, with nine
locations in and around Denver, Colorado; (ii) A to Z, acquired on May 29, 1996,
with four locations in Spokane, Washington; (iii) E-Z Way, acquired on August 2,
1996 (four locations) and January 31, 1997 (one location), located in five
Colorado mountain and resort towns; (iv) U-Rent, acquired on November 1, 1996,
with four locations in Oklahoma; (v) U-Do-It, acquired on December 20, 1996 and
January 6, 1997, with two locations in Idaho; (vi) Hays, acquired on February
14, 1997, with five locations in Arkansas; (vii) CVR, acquired on March 14,
1997, with six locations in Virginia; (viii) A-1, acquired on May 22, 1997, with
five locations in New Mexico; (ix) Suburban, acquired on June 26, 1997, with
seven locations in and around Detroit, Michigan; (x) Duncan, acquired on July
31, 1997, with one location in Oklahoma; and (xi) and four other insignificant
acquisitions with nine locations in Colorado, California and Texas.
(2) The Company has entered into a letter of intent with respect to the
Pending Acquisition, which would add two locations in Tennessee. The audited
financial statements of the business to be acquired in the Pending Acquisition
are included elsewhere herein.
(3) RentX has a fiscal year ending January 31. Certain of the businesses
acquired by RentX had fiscal years which ended more than 93 days from RentX's
fiscal year end. For pro forma purposes, the historical financial statements of
these acquired businesses have been adjusted to year ends within 93 days of Rent
X's fiscal year end. In addition, the income statement information for Suburban
for the period from January 1 through March 31, 1997, and for the Pending
Acquisition and one of the insignificant acquisitions for the period from
December 1, 1996 through April 30, 1997 are included in both the pro forma
income statements for the year ended January 31, 1997 and the six months ended
July 31, 1997.
(4) For each acquisition, the acquired business' historical asset carrying
values and depreciation expense were eliminated and the acquired assets were
revalued at their estimated fair market value for purchase accounting.
Depreciation expense was then recalculated by applying the Company's policies
for depreciation expense.
(5) Although the cost of goods sold for used rental equipment sales by the
acquired businesses was approximately 60% on a combined historical basis, for
purposes of the pro forma presentation, the cost of used rental equipment sales
was recalculated, as necessary, to equal 90% of revenues from the sale of used
rental equipment, the Company's estimate of the cost of used rental equipment
sold for the year.
(6) For each acquisition as necessary, facility rentals were adjusted to
rental rates currently being paid by the Company.
(7) For each acquisition, salary and benefits payable to former owners of
the acquired businesses or members of their families were reduced or eliminated,
as necessary, to reflect employment arrangements entered into at the time of the
acquisition. Additionally the costs for the Company's infrastructure were added.
(8) For each acquisition, the historical cost for other depreciable assets
and intangible assets was eliminated and replaced by the purchase accounting
valuations applied by the Company. Depreciation and amortization were then
recalculated using the Company's depreciation and amortization policies.
(9) For each acquisition, nonrecurring gains and losses were eliminated.
(10) For each acquisition, historical debt balances and interest expense
were eliminated and replaced with debt balances as if the debt incurred or to be
incurred by the Company to finance the acquisition were in place on the first
day of the period. Historically, the Company has financed its acquisitions with
a combination of bank borrowings and proceeds from the sale of preferred stock.
(11) For each acquisition, historical income tax expense was eliminated and
replaced by income tax expense using the Company's effective tax rate.
(12) Assumes the sale of 3,333,333 shares of Common Stock in the offering at
an assumed initial public offering price of $9.00 per share, the application of
the estimated net proceeds thereof as described herein and conversion of all
outstanding Series A, Series B and Series C Preferred Stock and Class A Common
Stock into Common Stock upon consummation of the offering.
(13) Represents a reduction in interest expense as a result of utilizing a
portion of the estimated net proceeds of the offering to reduce the debt of the
Company.
(14) Represents the conversion of the outstanding Preferred Stock to Common
Stock and the resulting elimination of Preferred Stock dividends.
(15) Historical and pro forma earnings per share were calculated by assuming
the conversion of the outstanding Preferred Stock of the Company into Common
Stock equivalents and the exercise of all stock options issued within one year
of the initial filing of the Registration Statement of which this Prospectus is
a part. The calculation utilizes the as-if converted method for Preferred Stock
and the treasury stock method for stock options. Pro forma as adjusted earnings
per share also assumes the issuance of 3,333,333 shares of common stock in this
offering.
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the historical financial condition and
results of operations of the Company. The financial information, discussion and
analysis which follow are based upon and should be read in conjunction with the
financial statements and notes thereto included elsewhere herein. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and elsewhere in this Prospectus.
OVERVIEW
The Company was formed in March 1996 and had no operations until May 1996
when it acquired Zodiac. Because Zodiac was the first and largest acquisition,
the Company considers Zodiac to be its predecessor. Including Zodiac, the
Company has acquired 14 businesses operating 57 locations in 10 states, with the
first acquisition occurring on May 15, 1996. The Company's acquisition strategy
has focused on rental businesses primarily serving the homeowner, light
commercial and special events markets. The Company has adopted a strategy for
expansion through a combination of acquisitions, start-up stores in areas where
it has an existing platform and increased sales in existing stores. As of July
31, 1997, the Company has opened one start-up store and several others are in
the planning phase. The Company began implementation of its merchandising,
advertising, computerization and inventory improvement programs in the first
half of 1997, and most of the impact of those programs has not yet been
realized. As a consequence, the Company's growth in revenues since inception has
been primarily derived from acquisitions.
Since May 15, 1996, the Company has acquired the following businesses: (i)
Zodiac, acquired on May 15, 1996 with nine locations in and around Denver,
Colorado; (ii) A to Z Rentals and Sales, Inc., acquired on May 29, 1996, with
four locations in Spokane, Washington ("A to Z"); (iii) E-Z Way Rentals,
acquired on August 2, 1996 (four locations) and January 31, 1997 (one location),
with locations in five Colorado mountain and resort towns ("E-Z Way"); (iv)
Redwine Enterprises, Inc., fka U-Rent, Inc., acquired on November 1, 1996, with
four locations in Oklahoma ("U-Rent"); (v) U-Do-It Rental Centers, Inc.,
acquired on December 20, 1996 and January 6, 1997, with two locations in Idaho
("U-Do-It"); (vi) Hays Rental and Sales, acquired on February 14, 1997, with
five locations in Arkansas; ("Hays") (vii) CVR, Inc., fka Central Virginia
Rentals Company, acquired on March 14, 1997, with six locations in Virginia
("CVR"); (viii) Newmanco, Inc., dba A-1 Rental Centers, acquired on May 22,
1997, with five locations in New Mexico ("A-1"); (ix) Titus Rental Service
Companies, Inc., dba Suburban Rent-It Company and Able Party Rental, acquired on
June 26, 1997, with seven locations in and around Detroit, Michigan
("Suburban"); (x) Mer-Cal Enterprises, Inc. dba Duncan Rent-Alls, acquired on
July 31, 1997, with one location in Oklahoma ("Duncan"); and (xi) four other
businesses with nine locations in Colorado, California and Texas.
The Company had revenues of $10.8 million and operating income of $0.7
million for the period from May 15, 1996 through January 31, 1997. Giving pro
forma effect to the Completed Acquisitions and the Pending Acquisition, the
Company had pro forma revenues of $47.1 million and pro forma operating income
of $5.4 million in fiscal 1996.
The Company has historically financed its acquisitions and capital
expenditures through the issuance of preferred stock, bank borrowings, equipment
financing and internally generated cash flow. Such financings have increased the
Company's interest expense and resulted in the accrual of dividends on preferred
stock. All acquisitions have been accounted for under the purchase method of
accounting and accordingly have increased the Company's goodwill and other
intangible assets (including covenants not to compete). In addition, the various
steps taken to integrate acquisitions (procurement and setup of merchandise,
conversion of signage, installation of computer systems, modernization and
expansion of rental inventories and implementation of employee benefit plans at
all
24
<PAGE> 26
locations) have depressed store contribution and operating margins in the short
term. Although no assurance can be given, the Company believes these actions
will contribute to growth in revenues, store contribution and operating margins
in the future.
The Company is continually involved in the investigation and evaluation of
potential acquisitions and start-up locations. In evaluating acquisition
candidates, the Company considers, among other factors, the target's competitive
market position, business mix, strategic value and growth position, the
continuing management team and the demographic characteristics of the target's
market. At any time, the Company may have one or more offers outstanding and may
have executed letters of intent or binding acquisition agreements. The Company
has entered into a letter of intent with respect to the Pending Acquisition that
will add two locations in Tennessee. The Company is currently discussing a
number of possible additional acquisitions. There can be no assurance, however,
that the Pending Acquisition or any other acquisition will be consummated.
In acquisitions, the Company typically acquires the operating assets of the
business, including equipment inventories, merchandise, leasehold improvements
and accounts receivable, customer lists and goodwill. The Company has not
acquired any real property and does not typically assume any of the seller's
liabilities. The sellers agree to indemnify the Company against adverse
consequences the Company may suffer as a result of circumstances in existence at
or prior to closing.
In connection with start-up stores, the Company expenses certain
pre-opening costs relating to marketing, training, set up of fixtures,
merchandise and the in-store computer system. As a result, the profitability of
a new store is expected to be lower in the initial period of its operations. The
Company expects these stores to approximately break even at the operating level
in the first year of operation. The Company anticipates that new store openings
will reduce the Company's overall store contribution and operating margins until
such stores achieve normalized profitability.
The Company frequently makes additional investments in the rental inventory
of acquired stores to broaden and deepen available product offerings. In the six
months ended July 31, 1997, the Company invested $7.9 million in the rental
inventories of previously acquired businesses. The Company further invested
approximately $1.7 million in operating equipment, fixtures for its merchandise
program, signage and new computer systems. Depreciation relating to these
capital expenditures depresses margins in the short term. Although no assurances
can be given, the Company believes that its substantial investment in
merchandising and information systems, combined with its "hub and spoke"
strategy, will allow it to achieve stronger and steadier revenue growth and
better asset utilization over time. The hub and spoke strategy is designed to
increase asset utilization by allowing stores with smaller inventories or "stock
outs" to access inventory at a larger central store for rental. The hub store
will carry more inventory and some of the larger items of equipment.
As the Company was formed during fiscal 1996 to pursue an industry
consolidation, the Company does not have comparable data for prior fiscal year
periods. The following discussion and analysis does not compare the Company's
results of operations to the results of operations of the Company's predecessor,
Zodiac, because of the dramatic change in the business resulting from pursuing
the Company's industry consolidation strategy. Historical Zodiac results are
analyzed and discussed in a separate section of this analysis.
RESULTS OF OPERATIONS
PRO FORMA SIX MONTHS ENDED JULY 31, 1997
Revenues are composed of rental revenue, derived from the rental of the
Company's equipment; rental equipment sales, reflecting revenues received by the
Company from the sale of used rental equipment; and sales of tie-in merchandise
and other items which the Company sells in conjunction with the rental of its
equipment. For the six months ended July 31, 1997, the Company had pro forma
revenues of $22.9 million. On a pro forma basis, the Company acquired nine
businesses with 33 locations during the period including the Pending
Acquisition. In addition, the Company opened one new store and consolidated one
store into an existing store during the period.
25
<PAGE> 27
Cost of revenues includes Rental equipment expense, which is the cost of
repairing and maintaining the rental equipment inventory, as well as the rental
cost to the Company of obtaining equipment, on a short-term basis that the
Company does not own for use by its customers; Rental equipment depreciation,
which reflects the depreciation expense in the period associated with equipment
rented by the Company, calculated on a straight line basis by estimating the
useful life of equipment net of the estimated salvage value; Cost of rental
equipment sales, which reflects the net book value and related disposition costs
of used rental equipment sold by the Company; Cost of merchandise, which
reflects the cost of ancillary merchandise sold by the Company to complement its
equipment offerings; and Direct operating expense, which is composed of such
expenses as facility rents, utilities, property taxes, store labor, employee
training and benefits, store supplies and uniforms, the cost of equipment added
to the rental inventory that is expensed, rather than capitalized, credit card
fees, insurance, computer expenses and other store level charges. For the six
months ended July 31, 1997, the Company's pro forma cost of revenues was $16.7
million. As a percent of sales, pro forma cost of revenues for the period were
73.0%, generating a pro forma store contribution for the period of $6.2 million
or 27.0%.
Selling, general and administrative expense ("SG&A") includes the cost of
advertising and marketing, expenses associated with an area's management
structure and home office overhead. For the six months ended July 31, 1997, the
Company had pro forma SG&A of $4.6 million. As a percent of revenues, pro forma
SG&A for the period was 20.1%.
Depreciation and amortization, excluding rental equipment depreciation
includes depreciation expense associated with computers and other home office
equipment (including leasehold improvements), as well as amortization of
intangible assets, which arise principally from the excess of the purchase price
paid for acquired companies over the estimated fair market value of their
assets. For the six months ended July 31, 1997, the Company had pro forma
depreciation and amortization expense, excluding rental equipment depreciation
of $0.5 million. As a percent of sales, pro forma depreciation and amortization
expense, excluding rental equipment depreciation expense for the period was
2.3%.
Other (income) expense, net includes interest income and other
non-operating items. For the six months ended July 31, 1997, the Company had pro
forma other income, net of $38,000.
Interest expense reflects the debt the Company incurs to fund its
acquisitions, the purchase of rental and other equipment and working capital
during seasonally slow months. For the six months ended July 31, 1997, the
Company had pro forma as adjusted, interest expense of $0.8 million.
Income tax expense. For the six months ended July 31, 1997, the Company had
pro forma as adjusted income tax expense of $0.1 million. The Company's
effective tax rate for the period was 40.2%.
RENTX SIX MONTHS ENDED JULY 31, 1997 AND 1996
Revenues for the Company increased to $16.1 million for the six months
ended July 31, 1997 from $3.0 million for the six months ended July 31, 1996 due
largely to the increase in stores resulting from acquisitions. As of July 31,
1996, the Company had 13 locations which were acquired in May 1996. As of July
31, 1997, the Company had 57 locations. Store contribution margin for the six
months ended July 31, 1996 of 41.1% (versus 29.7% for the six months ended July
31, 1997) benefitted from excluding the low seasonal performance of the acquired
businesses during the first quarter, due to the timing of the respective
acquisitions. Additionally the store contribution margin in 1997 was impacted by
lower margins from subsequent acquisitions, in particular, Suburban and CVR,
which derived a larger share of their revenues from special events, and poor
weather conditions in the comparable markets in 1997. SG&A for the two periods
represents the continued development of a corporate infrastructure necessary to
execute the Company's strategy.
26
<PAGE> 28
PRO FORMA FISCAL 1996
Revenues. In fiscal 1996, the Company had pro forma revenues of $47.1
million. The Company acquired five businesses with 24 locations during the
period.
Cost of Revenues. In fiscal 1996, the Company had pro forma cost of
revenues of $32.0 million. As a percent of sales, pro forma cost of revenues for
the period were 67.9%, generating a pro forma store contribution for the period
of $15.1 million or 32.1%. Pro forma figures for the period generally do not
include the full year impact of increased depreciation deductions from new
rental equipment investment, expanded employee benefit programs and store-level
costs of converting acquired stores to the RentX model.
Selling, general and administrative expense. In fiscal 1996, the Company
had pro forma SG&A of $8.7 million. As a percent of revenues, pro forma SG&A for
the period was 18.5%.
Depreciation and amortization, excluding rental equipment depreciation. In
fiscal 1996, the Company had pro forma depreciation and amortization expense,
excluding rental equipment depreciation of $0.9 million. As a percent of sales,
pro forma depreciation and amortization expense, excluding rental equipment
depreciation expense for the period was 2.0%. As of the end of the period, the
Company had not yet begun installation of its management information system.
Therefore, no depreciation expense relating to that system would have been
incurred. As a result, most expenses in this category relate to amortization of
goodwill arising from acquisitions.
Other (income) expense, net. In fiscal 1996, the Company had pro forma
other expense, net of $17,000.
Interest expense. In fiscal 1996, the Company had pro forma, as adjusted,
interest expense of $1.0 million.
Income tax expense. In fiscal 1996, the Company had pro forma, as adjusted,
income tax expense of $1.8 million. The Company's effective tax rate for the
period was 40.1%.
RENTX INDUSTRIES MAY 15, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH JANUARY 31,
1997
Revenues. In fiscal 1996, the Company had revenues of $10.8 million. The
Company acquired five businesses with 24 locations during the period.
Cost of Revenues. In fiscal 1996, the Company had cost of revenues of $7.5
million. As a percent of sales, cost of revenues for the period was 69.0%,
generating a store contribution for the period of 31.0%. Relative to full annual
periods, the Company benefitted from commencing operations after the first
quarter, which generally has low sales and low operating margins given the
generally fixed nature of operating expenses.
Selling, general and administrative expense. In fiscal 1996, the Company
had SG&A of $2.4 million. As a percent of revenues, SG&A for the period was
21.7%. These costs arise from the initial development of the area management and
corporate infrastructures necessary to implement the Company's strategy.
Depreciation and amortization, excluding rental equipment depreciation. In
fiscal 1996, the Company had depreciation and amortization expense, excluding
rental equipment depreciation of $0.3 million. As a percent of sales, pro forma
depreciation and amortization expense, excluding rental equipment depreciation
expense for the period was 2.7%.
Other (income) expense, net. In fiscal 1996, the Company had other expense,
net of $4,000.
Interest expense. In fiscal 1996, the Company had interest expense of $0.8
million.
Income tax expense. In fiscal 1996, the Company did not incur income tax
expense as it had a loss of $76,000 before income taxes.
27
<PAGE> 29
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of cash have been the funding of acquisitions
and capital expenditures. The Company has financed its acquisitions in part with
borrowings under its credit facility and in part by the sale of preferred stock
to several private equity funds, various members of management and certain
previous owners of the acquired businesses. The Company's capital expenditures
have been financed by cash flow from operations and equipment financing. The
Company's cash flow from operations can be expected to follow the same seasonal
pattern as its revenues -- lower in the first and fourth quarters and higher in
the second and third quarters. Accordingly, the Company expects that debt
utilization for working capital needs will be most intensive during the first
quarter as the Company historically has generated lower cash flow from
operations and purchases a significant portion of its new rental equipment in
advance of the peak rental season.
The Company's credit facility provides for a revolving line of credit of up
to $5.6 million and for term loans of up to $39.3 million. However, in no event
may the combination of term loans and the revolving facility exceed $39.3
million. The credit facility permits the Company to obtain outside equipment
financing of up to $10.0 million. The credit facility matures May 31, 1999. The
credit facility has certain covenants relating to total debt outstanding,
minimum ratios of equity funding for acquisitions and other limitations
regarding lease terms, payment of dividends and certain other restrictions.
Virtually all of the assets of the Company secure the loan.
As of April 30, 1997, the Company was not in compliance with a covenant
under the credit facility relating to the total amount of debt (including
equipment financing) that the Company could carry relative to cash flow. The
lenders waived compliance with this covenant for the quarter ended April 30,
1997. In August 1997, the credit agreement was amended to change the covenant
for each of the quarters July 31, 1997 through April 30, 1998. At the same time,
the lenders increased the total credit facility to $39.3 million. As of July 31,
1997 the Company was in compliance with all the covenants of the Credit
Facility.
As of July 31, 1997, the Company had utilized approximately $35 million
under its credit facility. The increase in borrowings over those outstanding on
January 31, 1997 relate primarily to the funding of 1997 acquisitions. The
Company is currently working with its lenders to increase the size of the credit
facility to fund future acquisitions.
As allowed under the credit facility, the Company had arranged for
equipment financing of up to $6.2 million. At July 31, 1997, the Company had
utilized approximately $5.9 million of the equipment financing and at September
9, 1997, the Company had drawn all of the available equipment financing.
For the fiscal year ending January 31, 1998, the Company has budgeted
approximately $12 million for the purchase of rental equipment, delivery
vehicles, store fixtures, leasehold improvements and computer systems for the
businesses acquired through July 31, 1997. As of July 31, 1997, the Company had
spent approximately $10 million of the budgeted amount.
Expansion of the Company through acquisitions, new stores and internal
growth will require significant capital expenditures. The Company must continue
to reinvest in high quality, well-maintained equipment and rental facilities in
order to remain competitive. In addition, the Company will be required to make
substantial capital expenditures in implementing the RentX business model,
including increasing inventories at recently acquired stores. To implement its
growth strategy and meet its capital needs, the Company will be required to
increase amounts available under its credit facility and/or issue additional
equity securities (which could result in dilution to the purchasers of Common
Stock offered hereby). Such additional indebtedness would likely increase
RentX's leverage, may make the Company more vulnerable to economic downturns and
may limit its ability to withstand competitive pressures. There can be no
assurance that additional capital, if and when required, will be available on
terms acceptable to the Company, or at all. Failure by the Company to obtain
sufficient additional capital in the future could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- Growth Strategy."
28
<PAGE> 30
SEASONALITY
The Company's business is highly seasonal. Given the Company's targeted
segments and geographical mix of stores, revenues and operating income are
expected to be low in the first and fourth quarters and to be relatively
stronger during the second and third quarters. This seasonality should become
less pronounced as the Company continues to expand its special events business,
which typically has a stronger fourth quarter than the general rental business,
and becomes increasingly diversified geographically. The cost structure of the
business is relatively fixed in nature, which negatively impacts store
contribution margins during the seasons with low revenues. During the first
quarter of each year, the Company expects to invest heavily in new equipment and
repairing older equipment in advance of the peak rental season. The resulting
depreciation deductions and repair expenses also contribute to lower store
contribution margins in the first half of the year.
INFLATION AND GENERAL ECONOMIC CONDITIONS
Inflation has not significantly impacted operating results in the Company's
brief history, nor is it expected to significantly impact future results.
However, there can be no assurance that the Company would be able to modify its
prices to offset any inflationary cost increases that may occur in the future.
The equipment rental industry is impacted by national, regional and local
economic conditions, including slowdowns in construction. The Company's
operating results may be adversely affected by events or conditions in a
particular region, such as a regional economic slowdown, adverse weather and
other factors. In addition, the Company's operating results may be adversely
affected by increases in interest rates that may lead to a decline in economic
activity, while simultaneously resulting in higher interest payments by the
Company under its variable rate credit facilities. Economic slowdowns or adverse
economic or competitive conditions would have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Stores and Facilities."
ACQUIRED BUSINESSES
SUMMARY FINANCIAL RESULTS
The Company has acquired 14 separate businesses. The results achieved by
these separate businesses are not necessarily indicative of the results that
they would have achieved had they been operated as a single business. The
companies acquired by RentX were formed using a variety of legal structures and
had varying accounting policies, especially in regard to depreciation and
expensing purchases of rental equipment. They further employed substantial
numbers of people who were owners or relatives of the owners, and those persons
often received wages that were significantly above market (as a part of each
acquisition the Company negotiates pay rates with owners and their family
members staying with the business that more closely reflect market rates). The
acquired companies also had vastly different policies with respect to employee
benefits. In some cases, the various companies served different market segments.
For example, some derived a significant percentage of their revenues from
special events, while others had no special events and focused on general
rentals. Finally, some companies were structured as C corporations for federal
income tax purposes while others were structured as S corporations or
partnerships, and therefore had no income tax expense at the entity level. Most
of the companies were managed with the objective of minimizing taxable income
rather than maximizing reported income. As a result of these and other factors,
margins, net income and growth rates of the companies acquired vary
significantly, and company-to-company or period-to-period comparisons of
financial results are not necessarily meaningful.
29
<PAGE> 31
The following table summarizes the audited financial results for the
Completed Acquisitions and the Pending Acquisition. For 1996, the information
given reflects the financial results of the Completed Acquisitions effected
during that year up to the respective dates of acquisition by RentX and the
information given for RentX reflects the results of their operation on a
combined basis after those dates. The audited results have not been modified to
render the periods presented consistent or to eliminate operations not acquired
by the Company as would be required for consolidation or for a pro forma
presentation. See "Summary Pro Forma Financial Information." All figures relate
to the calendar year unless otherwise indicated in the notes to the table. All
percentages presented are in relation to revenues.
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
RentX(1).......................................... $ -- $ -- $10,838,364
Zodiac(2)......................................... 5,650,306 7,590,554 2,814,332
A to Z(3)......................................... 4,411,111 4,171,595 1,351,437
E-Z Way(4)........................................ 2,582,337 2,792,549 1,506,468
U-Rent(5)......................................... NA NA 1,800,945
U-Do-It........................................... 1,030,483 1,114,078 1,228,376
Hays(6)........................................... 2,582,944 2,910,927 3,386,777
CVR(7)............................................ 3,930,894 4,699,458 5,656,814
A-1(8)............................................ 2,327,044 2,980,027 3,365,810
Suburban(9)....................................... 3,304,215 3,311,585 3,885,251
Duncan............................................ 631,649 730,663 921,261
Insignificant acquisitions(10).................... 6,119,249 6,397,106 7,163,016
Pending Acquisition............................... 3,503,197 3,784,104 4,090,059
STORE CONTRIBUTION % % %
----- ----- -----
RentX(1).......................................... $ -- $ -- $ 3,356,089 31.0
Zodiac Rentals(2)................................. 1,525,236 27.0 2,163,340 28.5 377,924 13.4
A to Z(3)......................................... 1,899,266 43.1 1,963,230 47.1 597,255 44.2
E-Z Way(4)........................................ 1,462,027 56.6 1,425,575 51.0 770,596 51.2
U-Rent(5)......................................... NA NA 1,076,844 59.8
U-Do-It........................................... 533,816 51.8 672,140 60.3 717,407 58.4
Hays(6)........................................... 944,410 36.6 1,125,262 38.7 1,313,718 38.8
CVR(7)............................................ 635,876 16.2 768,971 16.4 1,189,356 21.0
A-1(8)............................................ 560,406 24.1 806,659 27.1 881,576 26.2
Suburban(9)....................................... 610,390 18.5 804,696 24.3 1,118,217 28.8
Duncan............................................ 175,936 27.9 179,723 24.6 273,229 29.7
Insignificant acquisitions(10).................... 1,320,504 21.6 1,359,804 21.3 1,396,472 19.5
Pending Acquisition............................... 816,498 23.3 860,243 22.7 894,680 21.9
OPERATING INCOME
RentX(1).......................................... $ -- $ -- $ 711,702 6.6
Zodiac(2)......................................... 400,714 7.1 656,234 8.6 (196,284) (7.0)
A to Z(3)......................................... 1,164,405 26.4 827,751 19.8 320,499 23.7
E-Z Way(4)........................................ 510,808 19.8 546,784 19.6 201,493 13.4
U-Rent(5)......................................... NA NA 308,477 17.1
U-Do-It........................................... 60,855 5.9 163,296 14.7 (4,075) (0.3)
Hays(6)........................................... 164,319 6.4 163,657 5.6 227,683 6.7
CVR(7)............................................ 296,255 7.5 351,932 7.5 602,117 10.6
A-1(8)............................................ 163,707 7.0 314,078 10.5 328,090 9.7
Suburban(9)....................................... 9,625 0.3 144,093 4.4 339,185 8.7
Duncan............................................ 39,472 6.2 4,622 0.6 105,096 11.4
Insignificant acquisitions(10).................... 273,176 4.5 240,917 3.8 265,368 3.7
Pending Acquisition............................... 202,610 5.8 132,382 3.5 127,359 3.1
</TABLE>
- ---------------
(1) All 1996 figures for RentX relate to the period from commencement of
operations through January 31, 1997.
(2) All 1996 figures for Zodiac relate to the period from January 1, 1996
through May 14, 1996.
(3) All 1996 figures for A to Z relate to the period from January 1, 1996
through May 28, 1996.
(4) All 1996 figures for E-Z Way relate to the period from January 1, 1996
through July 31, 1996. As the fifth location was not acquired by the
Company until January 31, 1997, the results of that location are not
included in the E-Z Way figures or the Company's figures for August 1, 1996
through January 31, 1997.
(5) All 1996 figures for U-Rent relate to the period from January 1, 1996
through October 31, 1996.
(6) All figures for Hays relate to the period from November 1 through October
31.
(7) All figures for CVR include a seventh location which was not purchased by
the Company.
(8) All figures for A-1 relate to the period from October 1 through September
30.
(9) All figures for Suburban relate to the period from April 1 through March
31.
(10) Figures for one of the insignificant acquisitions are not available for
1994 and 1995.
30
<PAGE> 32
DISCUSSION AND ANALYSIS OF ACQUIRED COMPANIES
ZODIAC RENTALS
Results of Operations
On May 15, 1996, the Company acquired Zodiac, a nine-store chain located in
the Denver, Colorado metropolitan area primarily targeting the homeowner and
light commercial segments of the general rental market. Founded in 1974, Zodiac
was a well-established business with a strong reputation for customer service.
The two prior owners of Zodiac became members of the Company's senior operating
team and subsequently invested in Company stock. Both prior owners are
nationally recognized within the rental industry; one of the prior owners was,
at the time of the acquisition, the president of the ARA. The acquisition of
Zodiac gave the Company immediate industry visibility and further positioned it
for rapid future growth through acquisitions given the extensive contacts of the
prior owners.
Zodiac's results of operations for 1996 consisted of the period from
January 1, 1996 through May 14, 1996. Accordingly, comparisons of 1996 results
to 1995 results are not meaningful. Zodiac's revenues were $2,814,332 in 1996.
Store contribution was $377,924, or 13.4% of revenues, and Zodiac had an
operating loss of $196,284. As the period from January 1 through May 14, 1996
only represents a partial year and includes the seasonally poor revenue months
of January through March, store contribution and operating margin for the short
period prior to acquisition by the Company in 1996 declined from the full year
operating margins realized in 1995.
Zodiac's revenues increased to $7,590,554 in 1995 from $5,650,306 in 1994,
an increase of $1,940,248 or 34.3%. Growth was enhanced by the addition of two
new stores in early 1995 which contributed $740,000 of revenue in 1995 and the
full-year impact of a store acquired in the third quarter of 1994 which
contributed $785,000 in 1995. Store contribution increased to $2,163,340, or
28.5% of revenues, in 1995 from $1,525,236, or 27.0% of revenues, in 1994, an
increase of $638,104 or 41.8%. This increase was attributable to efficiencies at
the store level from a larger revenue base and to increased merchandise margins.
Operating income increased to $656,234, or 8.6% of revenues, in 1995 from
$400,714, or 7.1% of revenues, in 1994, an increase of $255,520 or 63.8%.
Operating income grew more rapidly than revenues and store contribution as SG&A
was spread over a larger revenue base.
Liquidity and Capital Resources
During the period from January 1, 1996 through May 14, 1996, Zodiac
borrowed $1,050,000 to meet its working capital needs and to finance the
purchase of $1,099,225 of new rental equipment. During the fiscal years ended
December 31, 1994 and 1995, Zodiac purchased $1,536,088 and $1,545,049,
respectively, in new rental equipment. These purchases were financed with bank
borrowings and cash flow from operations.
A TO Z RENTALS AND SALES, INC.
Results of Operations
On May 29, 1996, the Company acquired A to Z, a four-store chain in the
Spokane, Washington area primarily targeting the homeowner, light commercial and
special events segments of the market. A to Z was owned by a former president of
the ARA. The prior owners are no longer involved with the business.
A to Z's results of operations for 1996 consisted of the period from
January 1, 1996 through May 28, 1996. Accordingly, comparisons of 1996 results
to 1995 results are not meaningful. A to Z's revenues were $1,351,437 in 1996
and its store contribution was $597,255, or 44.2% of revenues. Operating income
was $320,499, or 23.7% of revenues, in 1996. Even though the period from January
1 through May 28, 1996 only represents a partial year and includes the
seasonally poor revenue months of January through April, operating margins
improved for the short period prior to acquisition by the Company due to a
significant decline in prior owner compensation.
31
<PAGE> 33
A to Z's revenues decreased to $4,171,595 in 1995 from $4,411,111 in 1994,
a decrease of $239,516 or 5.7%. The Company believes this decrease was
principally due to reduced involvement of the majority owner, several years of
insufficient investment in inventory and a lack of an outside sales effort.
Store contribution increased to $1,963,230, or 47.1% of revenues, in 1995 from
$1,899,266, or 43.1% of revenues, in 1994, an increase of $63,964 or 3.4%.
Operating income decreased to $827,751, or 19.8% of revenues, in 1995 from
$1,164,405, or 26.4% of revenues, in 1994, a decrease of $336,654 or 28.9%. This
decrease was principally the result of the relatively fixed nature of operating
costs in the rental equipment business with declining sales and an increase in
compensation paid to the prior owners.
Liquidity and Capital Resources
During 1994, 1995 and the short period for 1996, A to Z did not invest
significantly in new rental equipment, purchasing only $324,279 in new
equipment. The prior owners also received material distributions from the
business (cash distributions totalled $585,298 in 1994, $1,379,957 in 1995 and
$1,694,439 in the short period for 1996).
E-Z WAY RENTALS
Results of Operations
On August 2, 1996 (four locations) and January 31, 1997 (one location), the
Company acquired the five rental stores owned and operated by E-Z Way. The five
E-Z Way stores are located in mountain and resort communities in Colorado and
primarily targeted the light commercial market with, in some cases, a limited
focus on special events. At closing, the prior owner and his wife retired from
the business. The prior owner subsequently entered into a consulting and
advisory agreement with the Company to aid it in the acquisition and development
of new stores in the Colorado mountains.
E-Z Way's results of operations for 1996 consisted of the seven month
period ended July 31, 1996. Accordingly, comparisons of 1996 results to 1995
results are not meaningful. E-Z Way's revenues were $1,506,468 in 1996 and store
contribution was $770,596, or 51.2% of revenues. Operating income was $201,493,
or 13.4% of revenues, in 1996. As the period from January 1 through July 31,
1996 only represents a partial year and includes the seasonally poor revenue
months of January through April, store contribution and operating margin for the
short period prior to acquisition by the Company in 1996 declined from the full
year operating margins realized in 1995.
E-Z Way's revenues increased to $2,792,549 in 1995 from $2,582,337 in 1994,
an increase of $210,212 or 8.1%. The Company believes that revenue growth was
enhanced by strong construction and development activity in the areas served by
E-Z Way's stores. Store contribution decreased to $1,425,575, or 51.0% of
revenues, in 1995 from $1,462,027, or 56.6% of revenues, in 1994, a decrease of
$36,452 or 2.5%. This decrease was attributable in part to the increased volume
of "split rentals" made by E-Z Way. In split rental arrangements, the Company
obtains equipment on consignment from the owner (typically an equipment dealer)
and pays the owner a percentage of any rentals received. The equipment can be
returned to the owner at any time. These transactions generate significantly
lower margins than typical rental transactions but do not require capital
investment in the equipment. Split rentals are typically limited to larger items
of equipment useful to contractor customers. Operating income increased to
$546,784, or 19.6% of revenues, in 1995 from $510,808, or 19.8%, in 1994, an
increase of $35,976 or 7.0% due largely to the increase in revenues.
Liquidity and Capital Resources
During the seven months ended July 31, 1996, E-Z Way used its cash flow
from operations to reduce debt and made cash distributions of $101,788 to the
owners. During 1994 and 1995, E-Z Way utilized cash flow from operations to
invest $287,210 and $316,370, respectively, in new rental
32
<PAGE> 34
equipment per year and to reduce debt. In 1995, E-Z Way increased its cash
distributions to owners from $84,338 to $300,000.
U-RENT, INC.
Results of Operations
On November 1, 1996, the Company acquired U-Rent, a company operating four
rental stores in Oklahoma, primarily targeting the homeowner, farming and light
commercial markets. The prior owner remained with the Company after the
acquisition as the Oklahoma area manager and subsequently invested in Company
stock.
Audits could not be performed on U-Rent's financial statements prior to
1996. As a result, audited comparative results from operations are not
available. In 1996, U-Rent had revenues of $1,800,945, store contribution of
$1,076,844 or 59.8% of revenues and operating income of $308,477 or 17.1% of
revenues.
Liquidity and Capital Resources
During the ten months ended October 31, 1996, U-Rent invested $913,737 in
new rental equipment which was financed by cash flow from operations and
increased bank borrowings.
U-DO-IT RENTAL CENTERS, INC.
Results of Operations
On December 20, 1996 and January 6, 1997, the Company acquired two rental
stores operated by U-Do-It in Idaho. U-Do-It primarily served the homeowner and
light commercial market segments. As a part of the acquisition, the Company
acquired the assets of an affiliated partnership which leased certain items of
rental equipment to U-Do-It. While the prior owner retired from the business
after acquisition by the Company, his two sons remained as managers of the
stores.
U-Do-It's revenues increased to $1,228,376 in 1996 from $1,114,078 in 1995,
an increase of $114,298 or 10.3%. Revenue growth was enhanced by the strong
economy of the resort areas serviced by U-Do-It. Store contribution increased to
$717,407, or 58.4% of revenues, in 1996 from $672,140, or 60.3% of revenues in
1995. Contribution margin declined as a result of the increased reliance on
split rentals of equipment. U-Do-It had an operating loss of $4,075 in 1996 as
compared to operating income of $163,296, or 14.7% of revenues, in 1995, a
decrease of $167,371. Operating income declined in part due to the decline in
store contribution and the establishment of pension and retirement programs for
the prior owner. During 1996, the new retirement programs increased expenses by
approximately $57,000.
U-Do-It's revenues increased to $1,114,078 in 1995 from $1,030,483 in 1994,
an increase of $83,595 or 8.1%. Store contribution increased to $672,140, or
60.3% of revenues, in 1995 from $533,816, or 51.8% of revenues, in 1994, an
increase of $138,324 or 25.9%. Store contribution grew more rapidly than
revenues over the same period due to declines in store operating expenses.
Operating income increased to $163,296, or 14.7% of revenues, in 1995 from
$60,855, or 5.9% of revenues, in 1994. This increase primarily was the result of
the expansion in store contribution coupled with slow growth in SG&A.
Liquidity and Capital Resources
Over the periods ended December 31, 1994, 1995 and 1996, U-Do-It utilized
its cash flow from operations to invest modestly in new rental equipment and to
reduce debt. During 1996, U-Do-It completed the sale of its first location to
the Company and utilized the proceeds to reduce long-term debt. U-Do-It
subsequently sold the remainder of its assets and retired the remainder of its
debt on January 6, 1997 when it sold its second location to the Company.
33
<PAGE> 35
HAYS RENTAL AND SALES
Results of Operations
On February 14, 1997, the Company acquired five rental stores operated by
Hays. The Company further acquired certain items of equipment owned by a related
entity. The five Hays rental stores specialized in the homeowner, light
commercial and portable toilet businesses. The prior owner, a former regional
director of the ARA, remained with the Company after the acquisition as the
Arkansas area manager and subsequently invested in Company stock. Hays was one
of a few companies acquired by the Company that have historically been dealers
in new items of equipment.
Hays' revenue increased to $812,575 for the three months ended January 31,
1997 from $758,670 for the three months ended January 31, 1996, an increase of
$53,905 or 7.1%. Operating income increased $70,969 due to the increased
revenues and lower SG&A.
Hays' revenues increased to $3,386,777 in 1996 from $2,910,927 in 1995, an
increase of $475,850 or 16.3%. Growth was enhanced by the continued positive
impact of an incentive compensation program implemented in 1995 and growth in
the local economy. Store contribution increased to $1,313,718, or 38.8% of
revenues, in 1996 from $1,125,262, or 38.7% of revenues, in 1995, an increase of
$188,456 or 16.7%. Operating income increased to $227,683, or 6.7% of revenues,
in 1996 from $163,657, or 5.6% of revenues, in 1995, an increase of $64,026 or
39.1%. This increase was attributable to sales growth and SG&A growing slower
than sales.
Hays' revenues increased to $2,910,927 in 1995 from $2,582,944 in 1994, an
increase of $327,983 or 12.7%. Revenue growth was enhanced by the implementation
of an effective incentive compensation program and an expanding local economy in
southern Arkansas. Store contribution increased to $1,125,262, or 38.7% of
revenues, in 1995 from $944,410, or 36.6% of revenues, in 1994, an increase of
$180,852 or 19.2%. Store contribution outpaced revenue growth partly as a result
of reduced rental equipment expense and improved merchandise margins. Operating
income decreased to $163,657, or 5.6% of revenues, in 1995 from $164,319, or
6.4% of revenues in 1994. Operating income was essentially flat due to increased
SG&A from the centralization of certain administrative activities, the
implementation of a new computer system and increased depreciation from
non-rental equipment.
Liquidity and Capital Resources
In each of the three years ended October 31, 1996, 1995 and 1994, Hays did
not make significant investments in its rental equipment inventory. Over the
three-year period, Hays utilized cash flow from operations to reduce debt.
CENTRAL VIRGINIA RENTAL COMPANY
Results of Operations
On March 14, 1997, the Company acquired six of the seven rental stores
owned by CVR. The six stores acquired by the Company targeted the homeowner,
light commercial and special events segments of the market. The Company also
secured an eighteen month option to purchase the seventh location, located in
Waynesboro, Virginia. All three prior owners of CVR remained with the Company in
some capacity: one is a consultant and advisor to the Company in identifying
acquisitions and start-up locations in the area; the second remained as the
Company's area manager; and the third remained as the Company's assistant area
manager and local special events manager. Two of the three prior owners
subsequently invested in Company stock.
CVR's revenues increased to $5,656,814 in 1996 from $4,699,458 in 1995, an
increase of $957,356 or 20.4%. This increase in revenues was primarily
attributable to the addition of a seventh location (which was not acquired by
the Company). This location provided approximately $650,000 in new revenues.
Store contribution increased to $1,189,356, or 21.0% of revenues, in 1996 from
$768,971, or 16.4% of revenues, in 1995, an increase of $420,385 or 54.7%. The
increase in contribution margin was primarily attributable to better cost
management at the store level and increased revenues. Operating income
34
<PAGE> 36
increased to $602,117, or 10.6% of revenues, in 1996 from $351,932, or 7.5% of
revenues, in 1995, an increase of $250,185 or 71.1%. The additional revenues
from the seventh location contributed to gains in operating income as SG&A did
not grow as quickly as revenues.
CVR's revenues increased to $4,699,458 in 1995 from $3,930,894 in 1994, an
increase of $768,564 or 19.6%. Revenue growth was enhanced by the addition of a
new location. Store contribution increased to $768,971, or 16.4% of revenues, in
1995 from $635,876, or 16.2% of revenues, in 1994, an increase of $133,095 or
20.9%. Since CVR derives a large share (approximately 25%) of its revenues from
its special events business, which is more labor intensive but requires less
capital investment than the general tool business, CVR's store contribution
margins generally are lower than other rental companies focusing on general tool
rentals. Operating income increased to $351,932, or 7.5% of revenues, in 1995
from $296,255, or 7.5% of revenues, in 1994, an increase of $55,677 or 18.8%.
Liquidity and Capital Resources
During 1994, 1995 and 1996, CVR invested $1,619,157 in new rental
equipment. These investments were financed by cash flows from operations.
A-1 RENTAL CENTERS
Results of Operations
On May 22, 1997, the Company acquired A-1, a five-store chain in New
Mexico. The Company further acquired certain items of rental equipment from an
entity owned by the prior owner which were leased to A-1. A-1 targeted the
homeowner, light commercial and special events segments, and also sold and
serviced small items of power equipment (chain saws, lawn mowers, etc.) in one
location. The Company has recently consolidated the repair service and equipment
sales unit into one of the other locations. The prior owner of A-1, who was the
president of the ARA for 1995, remained with the Company as its Western Regional
Director of Operations, and subsequently invested in Company stock. One of the
prior owner's sons served as A-1's general manager prior to acquisition by the
Company and has remained as the Company's area manager. Another son also joined
the Company as an assistant area manager.
Revenues decreased to $1,421,150 for the six months ended March 31, 1997
from $1,498,477 for the six months ended March 31, 1996, a decrease of $77,327
or 5.2%, primarily due to increased local competition. The revenue decrease
combined with increased operating costs resulted in a $211,304 decrease in
operating income.
A-1's revenues increased to $3,365,810 in 1996 from $2,980,027 in 1995, an
increase of $385,783 or 12.9%. Store contribution increased to $881,576, or
26.2% of revenues, in 1996 from $806,659, or 27.1% of revenues, in 1995, an
increase of $74,917 or 9.3%. Contribution margin decreased in part due to an
increase in depreciation. Operating income increased to $328,090, or 9.7% of
revenues, in 1996 from $314,078, or 10.5% of revenues, in 1995, an increase of
$14,012 or 4.5%.
A-1's revenues increased to $2,980,027 in 1995 from $2,327,044 in 1994, an
increase of $652,983 or 28.1%. Revenue growth was enhanced by the opening of one
location in late 1994 which added $275,000 in new revenues in 1995 and by
economic growth in the area. Store contribution increased to $806,659, or 27.1%
of revenues, in 1995 from $560,406, or 24.1% of revenues in 1994, an increase of
$246,253 or 43.9%. Operating income increased to $314,078, or 10.5% of revenues,
in 1995 from $163,707, or 7.0% of revenues, in 1994, as SG&A was spread over a
larger sales base.
Liquidity and Capital Resources
In each of the three years in the period ended September 30, 1996, A-1
continued to invest in new rental equipment. Over the period, A-1 invested
$1,061,860 in new rental equipment which was financed primarily by cash flow
from operations.
35
<PAGE> 37
TITUS RENTAL SERVICE COMPANIES, INC. DBA SUBURBAN RENTS-IT COMPANY AND ABLE
PARTY RENTAL
Results of Operations
On June 26, 1997, the Company acquired Suburban, which operated seven
rental stores in the western suburbs of Detroit, Michigan focusing on the
homeowner, light commercial and special events markets. The prior majority
owner, who had not been active in the business for several years, retired after
the sale. Each of his two sons, who were minority owners in the business, have
remained with the Company as area and assistant area managers. By the end of the
year, the Company plans to consolidate the operations of one of the special
events stores into a nearby location.
Suburban's revenues increased to $3,885,251 in 1996 from $3,311,585 in
1995, an increase of $573,666 or 17.3%. Revenue growth was enhanced by the
stabilization of the operation following the closure of two facilities in 1994
(discussed below), modernization and expansion of the rental inventories and a
strong local economy. Store contribution increased to $1,118,217, or 28.8% of
revenues, in 1996 from $804,696, or 24.3% of revenues, in 1995, an increase of
$313,521 or 39.0%. This increase primarily was attributable to the increase in
revenues. Operating income increased to $339,185, or 8.7% of revenues, in 1996
from $144,093, or 4.4% of revenues, in 1995. Operating income increased despite
increased salaries paid to prior owners.
Suburban's revenues were relatively flat, increasing to $3,311,585 in 1995
from $3,304,215 in 1994. The lack of growth in revenue was primarily
attributable to the facility closures in late 1994. Store contribution increased
to $804,696, or 24.3% of revenues, in 1995 from $610,390, or 18.5% of revenues,
in 1994, an increase of $194,306 or 31.8%. This improvement in store
contribution primarily was due to improvements in the margin earned on the sale
of used rental equipment that, in 1994, had been sold at a loss. Store
contribution growth was further enhanced by the reduction in rent expense
previously payable for the two stores closed in the prior year. Operating income
increased to $144,093, or 4.4% of revenues, in 1995 from $9,625, or 0.3% of
revenues. Due to the increase in revenues and store contribution, operating
income improved as the 1994 results were burdened by losses relating to the
termination of the leases on the two abandoned facilities and the liquidation of
certain other operating assets.
Liquidity and Capital Resources
In the three years ended March 31, 1997, Suburban purchased $1,659,325 in
new rental equipment and these investments were financed primarily by operating
cash flows and proceeds from the sale of used rental equipment.
MER-CAL ENTERPRISES, INC. DBA DUNCAN RENT-ALLS
Results of Operations
On July 31, 1997, the Company purchased Duncan. Duncan operated a single
store located in south central Oklahoma, targeting the homeowner, light
commercial and portable toilet markets.
Revenues decreased to $427,429 for the six months ended June 30, 1997 from
$447,337 for the six months ended June 30, 1996, a decrease of $19,908 or 4.4%.
Revenues decreased due to a $28,000 decrease in merchandise sales, which was
caused by discontinuance of the moving truck rental line of business, and the
nonrecurrence of substantial revenues generated in the 1996 period from
rebuilding projects necessitated by a tornado. Operating income increased
$31,000 due largely to improved operating expense control.
Duncan's revenues increased to $921,261 in 1996 from $730,663 in 1995, an
increase of $190,598 or 26.1%. Revenue growth was enhanced by the continued
resurgence of the local economy and the effects of the infrastructure and
equipment investments levels in 1995 that continued in 1996. Store contribution
increased to $273,229, or 29.7% of revenues, in 1996 from $179,723, or 24.6% of
revenues, in 1995, an increase of $93,506 or 52.0%. Operating income increased
to $105,096, or 11.4% of revenues,
36
<PAGE> 38
in 1996 from $4,622, or 0.6% of revenues, in 1995. Store contribution and
operating income both benefited from volume efficiencies and cost controls.
Duncan's revenues increased to $730,663 in 1995 from $631,649 in 1994, an
increase of $99,014 or 15.7%. Revenue growth was enhanced by a strong local
economy, increases in merchandise sales and expansion of the rental equipment
inventory. Store contribution increased to $179,723, or 24.6% of revenues, in
1995 from $175,936, or 27.9% of revenues, in 1994. Store contribution increased
less than revenues as a result of higher labor costs and repair and maintenance
expense. Operating income decreased to $4,622, or 0.6% of revenues, in 1995 from
$39,472, or 6.2% of revenues, in 1995, a decrease of $34,850 or 88.3%. This
decrease was the result of higher SG&A associated with revenue growth and
infrastructure investment.
Liquidity and Capital Resources
During the three years ended December 31, 1996, Duncan invested $595,925 in
new rental equipment for the business. These purchases were financed by
operating cash flows and increased debt.
OTHER ACQUISITIONS
During 1997, the Company acquired four other businesses with a total of
nine locations in Colorado, California and Texas. In 1996, the aggregate
revenues for these businesses were $7,163,016, and these stores generated
$1,396,472 in store contribution and $265,368 of operating income.
PENDING ACQUISITION
REDI RENTALS, INC.
Results of Operations
On July 16, 1997, the Company entered into a letter of intent to acquire
Redi Rentals, Inc. ("Redi"), a two-store rental company in Knoxville, Tennessee.
Redi focuses on the homeowner, light commercial and special events segments. The
current owners do not anticipate remaining with the Company beyond a three-month
transition period after the acquisition.
Redi's revenues increased to $4,090,059 in 1996 from $3,784,104 in 1995, an
increase of $305,955 or 8.1%. Revenue growth was primarily attributable to
growth in the special events business and additional investments in the rental
inventory. Rental revenue growth of 6.8% over 1995 was offset by lower
merchandise and equipment sales. Store contribution increased to $894,680, or
21.9% of revenues, in 1996 from $860,243, or 22.7% of revenues, in 1995, an
increase of $34,437 or 4.0%. Store contribution growth was lower than revenue
growth as a result of higher rental equipment expense and direct expenses.
Operating income decreased to $127,359, or 3.1% of revenues, in 1996 from
$132,382, or 3.5% of revenues, in 1995, a decrease of $5,023 or 3.8%. Operating
income decreased due to increased SG&A related to increased compensation for the
owners.
Redi's revenues increased to $3,784,104 in 1995 from $3,503,197 in 1994, an
increase of $280,907 or 8.0%. Store contribution increased to $860,243, or 22.7%
of revenues, in 1995 from $816,498, or 23.3% of revenues, in 1994, an increase
of $43,745 or 5.4%. Operating income decreased to $132,382, or 3.5% of revenues,
in 1995 from $202,610, or 5.8% of revenues, in 1994, a decrease of $70,228 or
34.7%.
Liquidity and Capital Resources
During the three years ended May 31, 1997, Redi invested $1,101,488 in new
rental equipment which was financed primarily by cash flow from operations.
37
<PAGE> 39
BUSINESS
The discussion in this section of the Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that would cause or
contribute to such differences include, but are not limited to those discussed
in "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," as well as those discussed elsewhere in
this section and in this Prospectus.
GENERAL
RentX is a leading equipment rental company serving the needs of the
homeowner, light commercial and special events segments of the rental market.
RentX was formed in March 1996 to pursue a national consolidation and growth
strategy. Management believes RentX is unique in focusing on these fragmented
segments of the equipment rental market on a national scale. RentX is
implementing a branded national retail concept to offer a broad range of light
construction, industrial, general tool and special events equipment in a
service-oriented, customer-friendly and well-merchandised store. Company-wide
emphasis is placed on helping customers find "project solutions," backed by a
guarantee of complete customer satisfaction. On a pro forma basis, the Company
had revenues of $47.1 million in fiscal 1996 and revenues of $22.9 million for
the six months ended July 31, 1997.
Since May 1996, the Company has pursued an aggressive growth strategy,
acquiring 14 businesses with 57 stores in 10 states. The acquired businesses had
been in operation for an average of 25 years. The Company has signed a letter of
intent relating to the Pending Acquisition, which will add two stores in
Tennessee, and continues to evaluate a large number of additional acquisitions.
In addition to its acquisition activity, the Company has built a substantial
corporate infrastructure by assembling an experienced management team,
customizing and commencing installation of a sophisticated management
information system, developing initiatives designed to enhance the performance
of acquired stores and developing refined concepts and prototypes for start-up
stores, including both general equipment rental stores to expand market coverage
and special events hubs.
Management believes that RentX is well positioned to capitalize on
consolidation and growth opportunities in the homeowner, light commercial, and
special events segments of the equipment rental industry. The Company has
adopted a strategy for expansion through a combination of acquisitions, start-up
stores in areas where it has an existing platform and increased sales in
existing stores. Acquisitions will include multi-store businesses to serve as
platforms in new markets and smaller "tuck-in" acquisitions in existing markets.
Management believes that the RentX concept can be adapted to a wide variety of
markets, including large, densely developed areas, smaller suburban markets and
rural areas, by tailoring the mix of equipment and merchandise, store size and
concentration of stores to fit the local customer base.
INDUSTRY OVERVIEW
Overall equipment rental industry revenues, exclusive of special events
rentals and equipment sales, grew from approximately $600 million in 1982 to
approximately $13 billion in 1993 (the most recent year for which data is
available), a compound annual growth rate of 32%, according to a study conducted
for the Associated Equipment Distributors. The author of the study further
estimates that such revenues increased to $16 billion in 1996. The rental
industry can be divided into four segments: (i) heavy equipment, typically
rented by larger contractors and industrial users ("heavy equipment"); (ii)
light construction and industrial equipment ("light commercial"); (iii) general
tools and equipment ("homeowner"); and (iv) event and party equipment ("special
events"). Most equipment rental companies derive their revenues from three
sources: renting equipment, selling used rental equipment and selling tie-in
merchandise. While some equipment rental companies also sell new equipment, most
such sales are in the heavy equipment segment. RentX focuses on the homeowner,
light commercial and special events segments. Although the Company is not aware
of any industry data that tracks these
38
<PAGE> 40
segments specifically, the ARA estimates that they represented over $6 billion
in annual revenues in 1996.
The equipment rental industry, including the homeowner, light commercial
and special events segments, is highly fragmented with over 14,000 stores and
primarily consists of independent operators typically serving a local or
regional market through one to four locations. As a result of consolidation,
expansion and industry growth, 1996 rental revenues of the top 100 equipment
rental companies increased over 1995 rental revenues by approximately 23%, to
$3.1 billion, according to estimates by the Rental Equipment Register. In spite
of this growth, the 100 largest companies still represent only a small
percentage of the total estimated equipment rental revenues. Management believes
that the ten largest equipment rental companies derive their rental revenues
primarily from the heavy equipment segment.
Homeowner Segment. Management believes that a number of current trends in
the homeowner segment will favorably impact the growth in equipment rental
revenues. According to the most recent data available from the ARA, the
percentage of homeowners who have rented equipment at some time has been
increasing gradually, but still represented only 41% of all homeowners in 1993
(the most recent year for which data is available). In the Company's experience,
the typical homeowner customer currently rents a piece of equipment only once
per year. The Company believes that there is a significant opportunity to
increase the percentage of homeowners who rent and the frequency with which they
rent by, among other things, introducing sophisticated retailing and marketing
techniques in this segment of the rental industry.
The typical equipment rental homeowner customer is a 35 to 54 year old male
according to statistics compiled by the ARA. The Bureau of the Census projects
that this segment of the population will increase from 37.3 million people in
1996 to 40.2 million in the year 2000, reflecting a compound annual growth rate
more than twice that of the overall population. The Company believes that its
customer-friendly initiatives will also increase the Company's appeal to female
customers. Additionally, according to the Bureau of the Census, the 35 to 54
year old segment of the population has a higher rate of home ownership as
compared to the total population. Management believes that these demographic
factors, coupled with the higher maintenance and remodeling required with the
general aging of houses in the U.S. from an average 23 years old in 1985 to 28
years old in 1995, will favorably impact demand in the homeowner segment of the
equipment rental industry.
Light Commercial. Management believes that there is a substantial
opportunity for growth in the light commercial segment because contractors
currently rent only a small percentage of their equipment requirements.
According to The CIT Group Construction Industry Forecast, contractors intend to
rent approximately 6% of their total equipment needs in 1997. The Company
believes that the equipment rental industry benefits from the trend among
businesses of all types to outsource various aspects of their operations in
order to reduce capital investment and focus on core competencies. The benefits
of renting can be especially important to small contractors in the light
commercial segment, who often have limited capital and cannot purchase all of
the equipment necessary for every job. The light commercial segment also
encompasses customers outside the construction industry, including industrial
companies which need equipment for maintenance or construction projects;
government agencies and authorities, such as school systems, public golf courses
and park systems; private organizations that own and operate large facilities,
such as golf or tennis clubs; and a wide array of businesses that have ongoing
maintenance and project needs. Management believes that these non-construction
customers represent a substantial growth opportunity in the light commercial
segment due to their budgetary constraints, significant but infrequent usage of
various types of essential equipment and, in many cases, limited previous
exposure to equipment rental.
Special Events. The special events segment represents the second largest
category of equipment rented by homeowners, according to a 1993 study by the ARA
(the most recent available data). This segment tends to be less capital
intensive because of the relatively low cost of the equipment, with the
potential for high utilization rates. Special events rentals are
counter-seasonal to some extent, with
39
<PAGE> 41
strong activity during the winter holidays when other rentals tend to be
slowest. The customer base for this segment includes homeowners and a variety of
organizations which present conferences or host social functions. Management
believes that none of the ten largest U.S. rental companies derive meaningful
revenues from the special events segment. Based on the Company's analysis of
acquisition candidates, management also believes that the special events segment
currently has the highest growth rate of the three segments targeted by the
Company.
Attractiveness of Target Equipment Rental Segments. RentX believes its
segments are attractive relative to the heavy equipment segment of the equipment
rental industry for a number of reasons. Customers in the homeowner, light
commercial and special events segments are primarily focused on equipment
availability and convenience, and are therefore less price sensitive than heavy
equipment customers. Additionally, the short-term nature and lower cost of the
rental, both in absolute terms and in relation to purchasing the equipment for
an infrequent project, lessens customer price sensitivity. The Company believes
its segments are also attractive because of reduced exposure to down business
cycles due to the nature and balance of the Company's customer mix. In down
cycles, homeowners tend to pursue refurbishment and maintenance projects and
light contractors tend to turn to remodeling projects rather than new
construction. Special events such as weddings and graduations are not dependent
on business cycles. Management further believes that the smaller equipment
required in these segments will allow the Company to establish new locations
quickly with lower capital requirements. In addition, the Company believes that
it has the opportunity to realize higher aggregate revenues in relation to the
cost of the equipment because short-term rental rates are generally higher than
long-term rates. Like the homeowner segment, the light commercial segment
benefits from the trend towards increased outsourcing by contractors and other
commercial customers.
Competitiveness of RentX. The Company believes that it maintains
significant competitive advantages over small local or regional independent
operators and other competitors less focused on the homeowner, light commercial
and special events segments. Relative to smaller "mom and pop" businesses, RentX
benefits from several competitive advantages including: (i) volume equipment
purchasing and disposition, including disposition through non-traditional
channels; (ii) a customized management information system geared to processing a
high volume of short-term transactions and maximizing equipment utilization;
(iii) the ability to cluster stores which provides equipment breadth and depth
and marketing synergies to maximize local market penetration; and (iv)
professional management and retailing initiatives. Relative to equipment rental
companies primarily focused on the heavy equipment segment, RentX believes it is
better able to serve its customers due to its convenient locations, retail
orientation, employee training programs and customized management information
system. In addition, the Company has and is expanding marketing programs
designed to reach its targeted market segments, which heavy equipment rental
companies generally do not employ. RentX believes that it also has significant
advantages over home improvement and hardware retailers which rent equipment due
to the Company's maintenance capabilities, equipment breadth and depth, rental
oriented customer service and systems and convenient locations.
BUSINESS STRATEGY
The Company's business strategy is to focus on the homeowner, light
commercial and special events segments of the equipment rental industry. The
Company's goal is to develop a branded national system of equipment rental
stores and to become the largest equipment rental company in its target
segments. Each of the following elements of the Company's strategy is designed
to maximize repeat business, attract new customers and ultimately expand the
size of the Company's market, while enabling the Company to operate in a
cost-effective manner.
Deliver Project Solutions. Guaranteed. The Company believes that it
differentiates itself from many of its competitors by providing total project
solutions with guaranteed customer satisfaction. The Company's compensation and
training programs and systems are designed to emphasize and support this
approach. RentX associates are trained to help the customer evaluate project
needs, offer or
40
<PAGE> 42
identify sources of appropriate equipment and/or merchandise, and, if
appropriate, train the customer in the use of the equipment and/or merchandise.
Regular maintenance is a critical element in ensuring customer satisfaction and
high asset utilization. Company procedures require associates to clean, inspect
and test all equipment after each rental. To provide customers with a quick and
convenient rental experience, the Company offers pick-up and delivery service
and has developed a customer-friendly store environment, customized
point-of-sale computer system and standardized operating procedures. RentX
responds to customer problems promptly and effectively, doing whatever is
necessary to satisfy the customer, including, where appropriate, sending an
associate to the customer's project site to replace equipment or render
assistance. RentX believes that its focus on total project solutions with
guaranteed customer satisfaction will both differentiate it from its competition
and expand the Company's target market over time.
Capitalize on Economies of Consolidation While Preserving Local
Autonomy. Although the Company's goal is to maximize the economies of scale that
arise from consolidation, its local managers are encouraged to act autonomously
in order to preserve the entrepreneurial spirit that characterizes its acquired
businesses. While the Company has designed and implemented consistent operating
procedures to improve the performance of its acquisitions, it continues to allow
store level management sufficient flexibility to tailor operations to the local
market. For example, although most major equipment purchases are made pursuant
to national accounts with manufacturers or distributors, the specific equipment
to be purchased at each location is selected based on the recommendations of the
local managers. Similarly, rental rates at each store are determined locally. As
part of its effort to assist local management, RentX makes available to all
stores the best practices and products from its acquired businesses. The Company
believes that by supporting, rather than constraining, local management,
operations in each area can be structured to maximize market penetration and
increase existing store revenues.
Derive Benefits from Hub and Spoke Structure. In appropriate markets, RentX
develops a local area based on a hub and spoke structure where conveniently
located, smaller spoke stores are supported by a larger hub store. The hub and
spoke structure is designed to minimize capital investment, increase utilization
rates and provide breadth and depth of equipment by utilizing the Company's
sophisticated management information system to transfer equipment inventory as
necessary. In addition, the Company's more experienced mechanics and specialized
maintenance equipment can be concentrated at the hub for more efficient
utilization, while minimizing spare parts inventory. The hub and spoke structure
can also be used to enhance specific segments of the Company's business. For
example, in appropriate markets small displays of special events equipment in
general rental stores are used to develop sales and contacts for a special
events hub serving an entire region. Because most rental transactions require
both a pick-up and return trip, the convenience and proximity to the customer
provided by the hub and spoke structure is a key competitive advantage.
Introduce Sophisticated Retailing Techniques to the Rental Industry. RentX
is implementing sophisticated retailing techniques in all its stores and expects
this approach to be a significant differentiating factor in an industry which
has not traditionally focused on creating a customer-friendly environment.
Although stores may have different physical layouts and mixes of equipment, they
are all designed to have a clean, uniform look prominently featuring RentX
signage, improved labeling, visual presentations to showcase rental equipment
and an enhanced selection of tie-in merchandise for sale. The Company is
instituting training programs, reinforced by an incentive compensation system,
to provide a knowledgeable and professional staff and to make available a career
path for successful associates. All of these techniques are designed to create a
familiar, less intimidating retail experience for customers and to establish a
national standard of professionalism for all RentX stores.
Generate Incremental Revenue Through Tie-In Merchandise Sales. The Company
seeks to increase revenues at its acquired stores by introducing or expanding
the variety of merchandise sold which is related to projects for which equipment
is rented. While RentX will not approach the breadth or depth of product offered
by hardware stores, product categories such as power tool accessories, safety/
protection products, small hand tools (hammers, saws, pliers, etc.), long handle
tools (rakes, shovels,
41
<PAGE> 43
etc.), gloves, propane and related accessories, floor care products and others
are being introduced system-wide to generate incremental revenues. The Company's
point-of-sale system will prompt associates to suggest tie-in merchandise. Due
to the convenience of one-stop shopping, RentX typically does not discount the
prices of such tie-in merchandise.
Employ Sophisticated MIS. The Company has made substantial investments to
select and customize a management information system designed to improve asset
utilization, customer service and financial performance and to support a high
volume of short-term rental contracts. RentX's aggressive expansion strategy led
it to select a system designed to rapidly integrate a large number of acquired
and new stores. The system will link all stores to each other and to the home
office and provide real time transaction processing, extensive asset management
tools and daily financial management reporting.
Leverage Acquired Management. RentX leverages the management of acquired
businesses both to help manage the Company and to help develop the acquisition
pipeline. In managing its ongoing operations, RentX seeks to retain the managers
of the companies it acquires in order to maintain continuity, benefit from their
knowledge of local market conditions, disseminate new best practices and
products and achieve its growth objectives. In many cases, existing management
has joined the RentX team by continuing in store management capacities or by
becoming area managers or consultants. In managing its acquisition program, the
Company finds that the former owners and managers of acquired companies provide
an extensive industry network through which to identify, approach and open
negotiations with potential acquisition targets. To date, acquired company
managers have included two past national presidents of the ARA (including the
1996 president and current chairman and the 1996 chairman, both of whom are now
executives of RentX) and three past executives of regional rental associations.
GROWTH STRATEGY
RentX's growth strategy is to continue to enter new geographic markets
through platform acquisitions and expand its presence in existing markets
through a combination of tuck-in acquisitions and new fill-in stores. An
important aspect of the Company's growth strategy is to cluster stores in
targeted markets, thereby increasing customer awareness, leveraging the RentX
brand and creating operating, capital expenditure, distribution and advertising
efficiencies. The Company is able to pursue this clustering strategy due to its
flexible store format and ability to operate in different types of locations.
The Company believes that, by clustering RentX stores, it discourages potential
competition and can generate higher revenues. The Company seeks to generate
revenue growth and enhanced profitability across its stores through the
implementation of a number of RentX developed initiatives, including the
following:
Acquire Equipment Rental Businesses. The cornerstone of RentX's growth
strategy is the acquisition of existing equipment rental businesses. The Company
seeks to acquire companies in new markets that will provide platforms from which
to pursue growth within the markets through tuck-in acquisitions of other
businesses with complementary operations and locations. Typically, a platform
acquisition includes several stores, but in some instances a single large
facility may be acquired. Tuck-in acquisitions in existing markets usually
consist of one or two stores.
In evaluating a platform acquisition candidate, the Company looks for a
business that operates in at least one of its targeted segments, with a history
of profitability, a quality reputation in the local market, a leading local
market position and a capable operating management team which can continue with
RentX post-acquisition. Acquisition candidates are often family owned businesses
facing capital constraints limiting growth and succession and/or estate planning
issues. When evaluating these acquisition candidates, RentX examines historical
and projected revenue, but uses its own cost structure, including overhead,
staffing and expenses related to new equipment purchases, in determining the
purchase price. The final valuation depends on the growth prospects of both the
local market and individual stores, in addition to the intangibles associated
with the existing business. Tuck-in
42
<PAGE> 44
acquisitions are selected primarily on the basis of location. RentX and BACE
conduct extensive due diligence prior to each acquisition, and the Company
routinely engages an outside consultant to perform environmental due diligence.
Seller indemnification is a standard feature of acquisition agreements.
Open Start-Up Stores in Existing Markets. The Company intends to supplement
its acquisitions by filling in markets with new stores at locations convenient
for its customers. In general, new stores will be located to fill voids in
under-served communities, rather than in close proximity to existing RentX or
competing stores. New stores will also be established in response to population
shifts and growth in a given market as neighborhoods develop and expand.
Start-up stores in the special events segment will typically be combined
showroom and warehouse facilities that handle the majority of the special events
business in a local area.
RentX has devoted extensive management resources to the development of a
prototype general rental store for start-up locations, which can typically be
opened with a relatively low investment. The prototype is flexible so that RentX
can either have a new store constructed by its landlord on a "build-to-suit"
basis or remodel an existing building to meet its specifications. The first
start-up store, which is a special events showroom and warehouse, opened in May
1997, and the Company expects to open five to 10 start-up stores in the fiscal
year ending January 31, 1998. It is the Company's policy to lease, rather than
purchase, its locations.
Pursue Internal Growth. RentX plans to achieve internal growth in revenues
and profitability through the application of its operating strategy and the
benefits of consolidation. RentX's operating strategy is designed to expand
revenues by, among other things, broadening its product offerings through the
best practices and products program, improving asset utilization, delivering a
high level of customer service, increasing brand recognition and awareness of
rental possibilities, increasing average revenues per visit through tie-in
rentals and merchandise sales and instituting direct sales efforts to the light
commercial segment. The Company believes that this strategy will encourage
repeat visits by existing customers and generate initial visits by new
customers.
Management believes that consolidation will benefit margins as well. For
example, economies of scale have improved capital equipment and merchandise
purchasing terms and availability. Besides realizing economies of scale in
purchasing new equipment, organizing consolidated sales of used rental equipment
will help RentX access alternative distribution channels that can provide higher
resale prices which would not be available to smaller operators. The Company
also has plans to improve asset management through the use of integrated
information systems and rental equipment transfers among locations, and to
leverage selling, general and administrative expenses over a large number of
stores.
Role of BACE. As a major equity owner and the founder of RentX, BACE has
played an active role in supporting the development of the Company. BACE was
formed in 1988 as a private equity partnership with a focus on building
companies in industries which present opportunities for consolidation. BACE
worked with management to develop the growth strategy which RentX is following,
and has dedicated significant resources to recruiting a management team and
assisting RentX in identifying, analyzing, negotiating and documenting
acquisitions. BACE has developed a systematic and efficient approach to RentX's
acquisition process and has dedicated a team of professionals to the acquisition
needs of the Company. This allows the management of RentX to focus on selecting
new acquisitions, integrating the stores acquired with the existing business,
implementing the business plan and directing the ongoing operations. BACE has
entered into a consulting agreement pursuant to which the acquisition expertise
of the BACE team is made available to the Company. See "Certain
Transactions -- Consulting Agreement."
ACQUISITION INTEGRATION
Upon completion of an acquisition, the Company integrates the operations of
the acquired business. Integration includes installing RentX's sophisticated
management information system, coordinating asset management, installing RentX
signage, ensuring a clean, attractive outer and inner store
43
<PAGE> 45
appearance, implementing training, marketing and merchandising programs,
emphasizing a culture of customer service and consolidating used equipment
disposition. Although purchasing decisions are made based on recommendations
from the local managers, the stores in each area receive the pricing economies
of RentX's volume purchasing power, including national account status with most
major vendors. Where market conditions dictate, an acquired company may use both
its historical name and the RentX name during a transition period in order to
minimize customer disruption. Since May 1996, RentX has acquired 14 businesses
with a total of 57 stores in 10 states. All of these stores are scheduled to be
fully integrated to the RentX format in the fourth quarter of the fiscal year
ending January 31, 1998.
Management believes that it is important to retain the services of the
operating management of the platform companies it acquires in order to maintain
continuity, benefit from their knowledge of local market conditions and
accelerate growth. In many cases, an existing manager will join the RentX team
as an area manager. These individuals play a key role in developing and
spreading best practices and products throughout the RentX system and helping to
identify new acquisition targets and start-up store opportunities. In addition,
the Company has hired or formed alliances with several prominent industry
veterans, which increases the Company's credibility and broadens its network
throughout the industry.
STORE FORMAT AND RETAIL INITIATIVES
RentX intends to expand its customer base by implementing a number of
initiatives designed to provide a pleasant and satisfactory rental experience
for its customers and increase awareness of the benefits and possibilities of
equipment rental. To this end, RentX has developed a store format and a set of
retail initiatives for the homeowner and light commercial markets which
management believes are unique in the equipment rental industry. The following
is a discussion of the Company's existing stores as well as the retailing
initiatives and store appearance and signage changes the Company is currently
implementing.
Store Location and Layout. The Company's stores typically are located in
convenient suburban, urban or rural areas with proximity to both contractor and
homeowner customers. Store layouts incorporate an indoor sales floor which
displays smaller rental equipment as well as tie-in merchandise with informative
signage, an outdoor equipment yard for larger equipment and for storage of
multiple units of equipment displayed indoors and a maintenance area. Store
sizes range from 2,800 to 20,400 square feet and outdoor storage yards range
from 6,000 to 90,000 square feet. The size and layout of the store are dependent
on a variety of factors including the economics of the site and the
characteristics of the market.
Store Appearance and Merchandising. As the Company continues to acquire
stores, it expects to improve both store appearance and merchandising to reflect
the RentX business model. Start-up stores will be sized and merchandised to fit
the particular market, but will be based upon the RentX developed format. While
local managers retain flexibility in equipment and merchandise selection, most
external and internal enhancements and practices are applied Company-wide. The
Company's distinctive red and blue logo is featured both on the store front and
throughout the store on associate uniforms, merchandise and signage. Store
interiors are clean, uncluttered and well lit. High profile signage directs
customers to equipment categories and a tagging program identifies equipment and
merchandise as either for sale or for rent and indicates rental rates or prices.
In addition, the Company attractively merchandises tie-in items according to
flexible planograms strategically placing merchandise near related rental
equipment, and uses fixtures such as endcaps to influence impulse purchases and
efficiently utilize square footage.
Best Products and Practices. The Company has implemented a number of other
retail initiatives through its best products and practices program. Through this
program, particular expertise of a given store or area is disseminated to other
RentX stores. For instance, through "best products" the Company has added a far
larger selection of tie-in merchandise at its stores to provide the convenience
of one-stop shopping and incremental revenues. Propane refills, for example,
generate significant
44
<PAGE> 46
traffic for the Company, and RentX now regularly carries gas grill tie-in
merchandise such as lava rocks, extra tanks and cleaning tools. Through "best
practices" the Company prepares and provides concise product safety and
operating instruction sheets for most items of power equipment rented.
Customer Service, Employee Training and Compensation. RentX strives to
develop the technical and interpersonal skills of its store personnel to ensure
that customers consistently receive knowledgeable and courteous assistance. The
Company seeks to retain the employees of the acquired companies and benefit from
their combined experience, pre-existing knowledge level and customer
relationships. Associates actively provide equipment information, instructions
and project assistance both in the store and in the equipment yard. The Company
is developing extensive training for all of its associates aimed at improving
customer service and the understanding of project solutions and equipment use.
Customer satisfaction is enhanced through the proper and regular maintenance of
the rental equipment. RentX associates are expected to support equipment
reliability, even visiting the project site to render assistance or replace
equipment if necessary. If the Company does not have a piece of equipment
requested by a customer, RentX associates attempt to obtain the equipment from a
distributor or competitor to satisfy the customer's needs. Furthermore, the
Company's sophisticated management information system is designed to prompt
associates to suggest merchandise or other rental equipment to help customers
arrive at a satisfactory project solution. The system is also important in
ensuring that the customer experiences easy in-and-out service.
The Company attempts to attract, retain and motivate qualified personnel
through a compensation system structured to reward associates who contribute to
the achievement of the Company's goals. Associates are reviewed periodically and
annual compensation decisions are based on the performance record established by
these reviews. The associates in each area are eligible for team incentive
bonuses based on the performance of the stores in the area compared to budgeted
revenues and profitability. All salaried employees, including assistant store
managers, field sales personnel and maintenance supervisors, are eligible to
receive stock options under the Company's Stock Option Plans. The RentX
structure provides a career path for associates whose skills and knowledge of
the Company's operations show continuing growth.
PRODUCTS
The Company believes that it offers a comprehensive and well-maintained
rental equipment inventory designed to meet the needs of its homeowner, light
commercial and special events target segments. The Company offers over 3,200
different types of rental equipment on an hourly, daily, weekly or monthly
basis. The breadth and depth of each store's product mix is tailored to satisfy
the needs and preferences of the local customer base. In fiscal 1996, equipment
rental accounted for approximately 85.1% of the Company's total revenues.
In addition to equipment rental, RentX stores offer a wide range of
merchandise used in conjunction with the rental equipment. In doing so, the
Company seeks to attract and retain customers by offering the convenience of
one-stop shopping, while generating incremental sales of high margin
merchandise. For example, a customer refinishing a floor may visit a store
intending only to rent a floor sander, but may also purchase gloves, sand paper,
a safety mask and goggles. In fiscal 1996, 12.3% of the Company's total revenues
were from sales of merchandise.
45
<PAGE> 47
The following table gives selected examples of equipment rented by the
Company and related merchandise:
<TABLE>
<CAPTION>
LIGHT GENERAL SPECIAL TIE-IN
CONSTRUCTION TOOL EVENTS MERCHANDISE
- ------------------ --------------- ------------------ -----------------
<S> <C> <C> <C>
Backhoes Carpentry tools Canopies Cleaning fluids
Compressors Carpet cleaners China and flatware Extension cords
Forklifts Detectors Dance floors Garden
Generators Drills Grills implements
Hydraulic tools Floor polishers Helium tanks Gloves
Mini excavators Heaters Staging Goggles
Mixers Lawn and garden Tables and chairs Nails
Platform lifts equipment Table linens Propane and tanks
Pumps Paint sprayers Tents Sandpaper
Skid steer loaders Power sanders Saw blades
Tractors Saws Tape
Tile cutters
</TABLE>
The Company also routinely sells its used rental equipment in order to
maintain an economically competitive inventory and to adjust to fluctuations in
the demand for specific rental products. The Company believes that its
maintenance program is an important factor in maximizing the resale value of
used equipment. In fiscal 1996, the sale of used equipment accounted for
approximately 2.6% of the Company's total revenues. The Company also sells some
new equipment, but its revenues from such sales are not material.
ASSET MANAGEMENT
Asset Utilization. The Company believes that its sophisticated management
information system, when fully implemented, combined with its ability to
redeploy equipment among stores, will allow RentX to better manage its equipment
and achieve high utilization rates. With the Company's information systems, an
employee at any store can locate a specific piece of equipment, whether out on
rent, in maintenance or ready to rent. Once identified, the equipment can be
reserved for a customer through the system and scheduled for delivery or pick-up
at the store of choice. Management can review overall utilization of equipment
by asset, asset class, store or area. The Company is then able to further
enhance asset utilization and reduce capital expenditures by identifying and
deploying equipment to those stores where it will likely generate the highest
return.
An additional benefit of the Company's management information system is the
ability to track missed rentals and instances in which the Company obtains
equipment from a distributor or competitor to meet a customer's needs, a
statistic which can help management assess when to purchase new equipment or
transfer equipment between stores. The Company's information system also will
keep track of and schedule preventive maintenance for each piece of equipment
and thus enhance the reliability of its equipment, extend the useful life of its
inventory and attain favorable resale value for its used rental equipment. To
support its efforts at efficient asset management, monthly bonuses for store
personnel are based upon revenues and profits within an area, rather than at a
particular store, and annual bonuses of area managers and regional directors are
based in part on asset utilization Company-wide.
Purchasing. As a result of volume purchasing and the creation of a
dedicated purchasing function, the Company increasingly receives significant
discounts. The Company has achieved national account status with vendors who are
expected to supply approximately 50% of the new rental equipment to be purchased
in the year ending January 31, 1998, based on the cost of equipment purchased
and expected to be purchased in that year. National account status establishes
prices, usually at a discount, of many major items across the country for a year
at a time, which allows the Company to both acquire more cost-effectively and
budget more precisely. National accounts carry
46
<PAGE> 48
additional benefits such as service contracts, terms, spare parts stocking and
co-op advertising. The Company maintains relationships with at least two
suppliers in every major category of equipment. The Company believes that its
purchasing power will continue to grow as it increases in size.
Used Rental Equipment Disposition. Optimizing the disposition of used
equipment is an important part of the Company's asset management program. The
Company monitors the age, repair record and, in appropriate cases, hours of
operation of its rental equipment in an effort to dispose of used equipment at
the projected optimum point in its useful life based on resale values and
expected maintenance costs. By consolidating its used equipment sales
nationwide, the Company expects to have access to sales channels that might not
be available on a local level. For example, the Company intends to explore
international markets for used equipment, particularly those with high duties on
new equipment, where the prices for used equipment can be significantly higher
than in domestic markets.
MANAGEMENT INFORMATION SYSTEM
The Company has invested significant time and capital in an integrated
management, accounting, inventory and point-of-sale system which management
believes will enhance revenues and profitability. The system will link all RentX
stores to each other and to the home office and will enable home office and
regional management to continually monitor and analyze the performance of
individual stores, areas and the Company as a whole. Of the Company's 57 stores,
52 are operating on the new system and management anticipates that the remaining
stores will be fully integrated into the system by September 30, 1997. As of
July 31, 1997, the Company had spent approximately $1.1 million on the system
and anticipates an additional capital expenditure of approximately $0.1 million
to complete the integration of all existing stores.
In the stores, the system will allow associates to monitor equipment
availability system-wide on a real-time basis, prompt associates to suggest
related rental equipment and tie-in merchandise and accumulate information for a
customer database. The system has the capability to capture information from
rental and merchandise transactions which can be analyzed in a number of ways,
including: (i) revenues by store, customer, area or equipment category; (ii)
margin by store or area; (iii) asset utilization by individual asset, asset
class, store, or area; (iv) revenues and margin by merchandise category; and (v)
labor productivity by store or area. In addition, the system is designed to
integrate back office functions, including purchasing, accounts receivable,
accounts payable and general ledger.
The software and hardware for the system were selected for their
functionality and scalability. The software, which is being customized to meet
the Company's specifications, includes a point-of-sale subsystem which is
designed to support expansion to 150 stores with current hardware, and which can
be upgraded beyond those levels with additional hardware investment. RentX is
training area system specialists who train and support individual stores
throughout the RentX system, as well as providing general system support. The
hardware/telecommunications network provides for maximum up-time, with 56 KB
lines tying together stores with local switching offices (and an independent
network monitoring vendor), connected via T1 to an HP 9000, and via partial T1
to the Company's home office in Denver.
CUSTOMERS
The Company serves a large number of small customers, none of which
accounts for a meaningful portion of its revenues. The composition of RentX's
customer base varies by store and is determined by several factors, including
the business composition of the local economy and the character of the
neighborhood in which the store is located. For fiscal 1996, management
estimates that over 90% of the Company's total pro forma revenues were derived
from the homeowner, light commercial and special events segments of the
equipment rental market. The loss of any one customer would not have a material
adverse effect on the Company's business.
47
<PAGE> 49
The majority of the Company's customers are homeowners who rent either
general tools or special event items. RentX's customers in the light commercial
segment are small contractors, a wide variety of other business customers and
governmental units, all of which are primarily motivated by the same factors
that are important to homeowners. RentX believes that, because the cost of each
transaction is relatively low, customer service, convenience and equipment
availability are generally more important to its customers than price.
MARKETING AND SALES
In an effort to build the RentX brand, increase public awareness and
enhance revenues, the Company is designing and implementing a new marketing and
sales program.
Marketing. Rental companies in the homeowner, light commercial and special
events segments of the market have traditionally limited their advertising to
telephone directories. The Company believes that the targeted marketing
techniques commonly used in other industries can be successfully employed in its
segments of the equipment rental industry. The Company's existing customer
database provides targeted mailing lists for seasonal specials and specific
promotions. The Company's general marketing program will combine coordinated
local newspaper, radio and billboard advertising designed to tie projects in
areas such as home improvements, gardening and special events to equipment
suggestions and the RentX name. In addition, the Company has company-wide
guidelines for store front, in-store, and on-vehicle signage which prominently
features the RentX logo and, where appropriate, the 1-888-88-RENTX phone number.
Sales. The Company's sales are primarily conducted within the stores by
RentX sales associates. See "-- Store Format and Retail Initiatives." The
Company also has a dedicated field sales force for both commercial and special
events rentals. All areas have at least one field sales representative who will
be responsible for calling on commercial accounts. In addition, a number of
locations will have dedicated special events rental representatives who visit
event sites to help customers assess their rental needs and plan event equipment
logistics. Management believes that, besides helping to increase rental
revenues, these dedicated field sales representatives emphasize its "project
solutions" approach and contribute to its competitive distinction among rental
companies focused primarily on its market segments. Management also believes
that the sales representatives can help expand the total market by calling on
potential customers who have not traditionally been contacted by such field
sales efforts.
48
<PAGE> 50
ACQUISITION HISTORY
Since May 1996, the Company has acquired 14 businesses with a total of 57
locations in 10 states. The following table summarizes those acquisitions.
<TABLE>
<CAPTION>
LOCATION AND YEARS IN
COMPANY NUMBER OF BUSINESS
DATE ACQUIRED STORES BEFORE ACQUISITION
---- ---------------- ----------------------- ------------------
<S> <C> <C> <C>
May 1996 Zodiac Denver, CO(1) 23
Aurora, CO(3)
Parker, CO(1)
Castle Rock, CO(1)
Westminster, CO(1)
Littleton, CO(1)
Thornton, CO(1)
May 1996 A to Z Spokane, WA(4) 35
August 1996 E-Z Way Silverthorne, CO(1) 21
and January 1997 Vail, CO(1)
Eagle, CO(1)
Craig, CO(1)
Glenwood Spgs., CO(1)
November 1996 U-Rent Oklahoma City, OK(1) 22
Lawton, OK(1)
Chickasha, OK(1)
Newcastle, OK(1)
December 1996 U-Do-It Coeur d'Alene, ID(1) 12
and January 1997 Sandpoint, ID(1)
February 1997 Hays Arkadelphia, AR(1) 23
Hot Springs, AR(1)
El Dorado, AR(1)
Magnolia, AR(1)
Camden, AR(1)
March 1997 CVR Waynesboro, VA(1) 23
Harrisonburg, VA(1)
Culpeper, VA(1)
Charlottesville, VA(2)
Staunton, VA(1)
April 1997 Scotty Rents Lafayette, CA(1) 27
Pleasant Hill, CA(1)
Walnut Creek, CA(1)
Danville, CA(1)
May 1997 A-1 Las Cruces, NM(3) 18
Silver City, NM(1)
Alamogordo, NM(1)
June 1997 Suburban Novi, MI(2) 37
Livonia, MI(1)
South Lyon, MI(1)
Brighton, MI(1)
Westland, MI(1)
Plymouth, MI(1)
July 1997 A-Z Rents It Fort Collins, CO(1) 39
July 1997 A-1 Rent All Tyler, TX(2) 37
Jacksonville, TX(1)
July 1997 A-1 Rent All of Marshall, TX(1) 17
Marshall
July 1997 Duncan Duncan, OK(1) 16
</TABLE>
The Company has combined two of the acquired stores in New Mexico and has
opened a start-up store in Spokane, Washington.
49
<PAGE> 51
STORES AND FACILITIES
At August 31, 1997, the Company operated 57 rental stores, including one
start-up store opened in May 1997, in the following 10 states: Arkansas (5),
California (4), Colorado (15), Idaho (2), Michigan (7), New Mexico (4), Oklahoma
(5), Texas (4), Virginia (6) and Washington (5). The Pending Acquisition for
which the Company has signed a letter of intent would give the Company two
stores in Tennessee. There can be no assurance that the Pending Acquisition will
be consummated.
The Company's rental stores are generally situated in industrial,
commercial or mixed-use zones. These locations typically range from one-half
acre to one and one-quarter acres, with hub locations as large as three acres,
and include a customer showroom, an equipment service area and storage
facilities. All of the Company's rental stores are leased, with lease terms
expiring from 1998 to 2014, most with multiple options to extend. In many
instances, the Company's rental locations are leased from the former owners of
businesses acquired by the Company.
The Company also leases its home office facilities in Denver, Colorado,
under a lease expiring November 30, 2001, with an option to renew for an
additional three-year term. The home office consists of approximately 8,470
square feet, with options to lease an additional 2,800 square feet.
COMPETITION
The equipment rental industry is highly fragmented and competitive with
limited barriers to entry. All of the 10 largest equipment rental companies are
primarily in the heavy equipment segment of the market. Management believes that
RentX is the only equipment rental company currently pursuing a national
consolidation focused on the homeowner, light commercial and special events
segments of the market. The Company's competitors in various segments of its
business include independent businesses with one to four rental stores in a
single geographic area or regional competitors that operate in more than one
state; larger national equipment rental companies; home improvement and hardware
retailers; and equipment vendors and dealers who both sell and rent equipment
directly to customers.
RentX believes that it competes in the markets it serves primarily on the
basis of customer service, convenience and equipment availability. The success
of a rental operator in the Company's targeted segments is predicated on its
customer service and problem solving abilities; quality, condition and servicing
of its equipment; availability of equipment (both depth and breadth); delivery
capabilities; management information systems; location of its stores in relation
to its customer base; overall operation of its business; and price. The Company
believes that it competes favorably on the basis of these factors.
Some of the Company's competitors have greater financial resources and a
longer operating history than the Company, with a substantial local customer
base, and consequently have greater name recognition than the Company. Because
the capital investment required to establish a rental store in the homeowner,
light commercial and special events segments is relatively low, the barriers to
entry are also relatively low. There can be no assurance that the Company will
not encounter increased competition from existing competitors or new market
entrants that may be significantly larger and have greater financial and
marketing resources then the Company. Increased competition is likely to result
in, among other things, reduced operating margins, loss of market share and
diminished brand value, any of which could have a material adverse effect on the
Company. One equipment rental company which operates primarily in the heavy
equipment segment has significantly reduced prices on longer term rentals of
certain pieces of heavy equipment. In addition, existing or future competitors
may compete with the Company for acquisition candidates and sites for new
stores, which could have the effect of increasing the price for acquisitions or
reducing the number of suitable acquisition candidates or new store locations.
Currently, the largest companies in the equipment rental industry, including a
number which are actively pursuing consolidation and growth strategies, are
primarily in the heavy equipment segment of the market, but also compete in the
Company's targeted segments. Some or all of these companies may increase their
focus on one or more of the market segments in which the Company is active,
which would significantly increase competition for customers, acquisitions and
locations for new stores. In addition, there can be no assurance that foreign
companies that
50
<PAGE> 52
focus on the Company's market segments will not aggressively enter the U.S.
market. See "Risk Factors -- Competition; Limited Barriers to Entry."
GOVERNMENT AND ENVIRONMENTAL REGULATION
The Company and its operations are subject to a variety of federal, state,
local and common laws and regulations governing, among other things, worker
safety, air emissions, water discharge and the generation, handling, storage,
transportation, treatment and disposal of hazardous or toxic substances located
on or in, or emanating from, its property, as well as related costs of
investigation and property damage. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. In connection with its
acquisitions and new stores, the Company generally obtains environmental
assessment reports prepared by independent environmental consultants and
environmental indemnities from the sellers. Initially, an environmental
assessment consists of a site visit, historical record review, interviews and
report, with the purpose of identifying potential environmental conditions
associated with the subject real estate. Soil, ground water and other samples
are taken where and when appropriate. There can be no assurance, however, that
such assessments or sampling have fully identified contamination which may be
present on a property. Further, there can be no assurance that acquired or
leased locations have been operated in compliance with environmental laws and
regulations or that future uses or conditions will not result in the imposition
of environmental liability upon the Company or expose the Company to third-party
actions such as tort suits.
The Company dispenses petroleum products from above-ground storage tanks
located at certain rental locations that it owns or leases. The Company
maintains an environmental compliance program that includes the implementation
of required technical and operational activities designed to minimize the
potential for leaks and spills, maintenance of records and the regular testing
and monitoring of tank systems for tightness. There can be no assurance,
however, that these tank systems have been or will at all times remain free from
leaks or that the use of these tanks has not or will not result in spills or
other releases. The Company also uses hazardous materials such as solvents to
clean and maintain its rental equipment. In addition, the Company generates and
disposes of waste such as used motor oil, radiator fluid and solvents, and may
be liable under various federal, state and local laws for environmental
contamination at facilities where its waste is or has been transported for
treatment, storage, disposal or recycling. The Company believes that it
currently conducts its operations in material compliance with all applicable
laws and regulations. Compliance by the Company with applicable environmental
laws has not had a material adverse effect on the Company's financial condition
or competitive position to date. See "Risk Factors -- Government and
Environmental Regulation."
LEGAL PROCEEDINGS
From time to time the Company is a party to litigation involving claims
incidental to the business of the Company. The Company does not believe that any
pending litigation will have a material adverse effect on its business or
financial condition.
EMPLOYEES
At September 4, 1997, the Company employed 620 people, including 527
in-store rental associates, 14 field sales associates, 52 operational associates
and 27 corporate and regional management personnel. None of these associates is
represented by a union or a collective bargaining agreement. The Company
considers its labor relations to be good.
51
<PAGE> 53
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information as of the date of this
Prospectus with respect to the directors, executive officers and key employees
of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- -------------------------------------------
<S> <C> <C>
Arnold A. Bernstein....................... 54 President, Chief Executive Officer and
Director
Gary J. Kulesza........................... 46 Executive Vice President, Chief Operating
Officer and Secretary
Thomas D. Nugent.......................... 54 Executive Vice President, Chief Financial
Officer and Treasurer
Larry W. Davidson......................... 59 Vice President of Purchasing/Merchandising
George A. Evans........................... 52 Vice President of Corporate Development
Charles E. Baker.......................... 54 Vice President of Store Development
Stephen T. Carlson........................ 37 Vice President and Controller
Mary Ann Milton........................... 35 Vice President of Human Resources
Hershel A. Manning........................ 57 Western Regional Director of Store
Operations
James J. Conley........................... 54 Eastern Regional Director of Store
Operations
Darcy A. Erickson......................... 46 Director of Marketing
Richard M. Tyler(2)....................... 39 Director
Craig J. Zoellner(1)...................... 40 Director
Thomas E. Galuhn(2)....................... 47 Director
James A. Gordon(1)........................ 47 Director
William P. Sutter, Jr.(1)................. 40 Director
Margaret G. Fisher........................ 47 Director
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Arnold A. Bernstein has been President and Chief Executive Officer of the
Company since November 1996 and a director since September 1997. From August
1982 until August 1994, he held various senior management positions with
Musicland Stores Corp., a specialty retail chain with a variety of product lines
including prerecorded music, prerecorded videos, blank audio and video tapes,
books, software and accessories. At Musicland Stores Corp., he served as
President from March 1992 to August 1994, Executive Vice President of Operations
and Marketing from March 1989 to March 1992, Senior Vice President of Store
Operations from March 1985 to March 1989, and Senior Vice President of
Merchandising and Marketing from August 1982 to March 1985. During Mr.
Bernstein's employment, Musicland grew from approximately 350 to approximately
1,200 stores. Prior to that, Mr. Bernstein was Senior Vice President of Frank's
Nursery and Crafts, Inc., a large lawn, garden and crafts chain which grew from
six to 90 stores during the 14 years that Mr. Bernstein was employed. From
August 1994 until November 1996, Mr. Bernstein pursued personal interests.
Gary J. Kulesza has been Executive Vice President and Chief Operating
Officer of the Company since April 1996 and Secretary since July 1997. From May
1994 to January 1996, Mr. Kulesza was the owner of GJK Investment & Advisory
Services, which provided advisory and consulting services to companies and
entrepreneurs. From November 1992 to May 1994, he was Chief Financial Officer of
Sweet Life Foods, Inc., a privately held food distribution company. Prior to
that he served as President and Chief Operating Officer -- International of
Computerland Corp., a specialty retail chain of computer stores. In that
capacity, he directed the operations of Computerland in 40 countries and managed
its acquisition and expansion program. In 1988 and 1989, Mr. Kulesza served as
Vice President
52
<PAGE> 54
and Corporate Controller of Coast America Inc., which operated the
Coast-to-Coast Hardware store chain. In that capacity, he was actively involved
in financial management, systems and controls, acquisitions and the ultimate
sale of the company.
Thomas D. Nugent has been Executive Vice President and Chief Financial
Officer of the Company since April 1997 and Treasurer since July 1997. From
October 1993 until November 1996, he was Executive Vice President and Chief
Financial Officer of Teach & Play Smart, Inc., an education superstore chain
that he co-founded. Prior to that, from July 1991 to May 1993, he served as
Senior Vice President of Operations and Chief Financial Officer of Bizmart
Office Products, an office products superstore chain, which grew from 57 stores
in 1991 to 105 stores in 1993, when it was purchased by Office Max, Inc., a
subsidiary of K-Mart Corporation. From March 1986 to March 1991, Mr. Nugent
served as Executive Vice President -- Administration, Chief Financial Officer,
Secretary/Treasurer and a Director of The Wholesale Club, Inc., a public company
in the cash-and-carry wholesale membership industry.
Larry W. Davidson has been Vice President of Purchasing/Merchandising of
the Company since May 1996, when the Company acquired the assets of Zodiac
Rentals, Inc., a rental company that he co-founded with Mr. Evans in 1974. Mr.
Davidson served as Director of Marketing of Zodiac from its inception until it
was acquired by the Company.
George A. Evans has been Vice President of Corporate Development of the
Company since May 1996, when the Company acquired the assets of Zodiac Rentals,
Inc., a rental company that he co-founded with Mr. Davidson in 1974. Mr. Evans
served as Director of Operations of Zodiac from its inception until it was
acquired by the Company. He is the Immediate Past President and current Chairman
of the American Rental Association.
Charles E. Baker has been Vice President of Store Development of the
Company since March 1997. From November 1995 to April 1996, he was an executive
recruiter for Kenzer Corp., an executive recruiting firm. From March 1995 to
October 1995, he was a partner in Twin City Consulting, a business consulting
firm. From October 1984 to February 1995, Mr. Baker was Vice President, Human
Resources and Administration and Store Operations/Field Merchandising of
Musicland Stores Corp., a specialty retail chain. Before joining Musicland, Mr.
Baker held various positions with B. Dalton Booksellers, Inc., including Vice
President/Store Director.
Stephen T. Carlson has been Vice President/Controller of the Company since
April 1997. From September 1996 to April 1997, he was Controller of Coors
Ceramics Co., a manufacturer of ceramic products. From February 1996 until
September 1996, he served as a financial consultant to Wynkoop Brewing Company
L.L.C. and Broadway Brewing Company L.L.C. Prior to that time, Mr. Carlson was
Vice President of Manufacturing and Distribution for two years and Vice
President, Controller for five years at Vicorp Restaurants, Inc., a restaurant
operating company and integrated food manufacturer.
Mary Ann Milton has been Vice President of Human Resources of the Company
since July 1996. Prior to joining the Company, Ms. Milton was Director of Human
Resources at Cahners Publishing Company, a business-to-business technical trade
publisher, from July 1990 to June 1996. From June 1987 until July 1990, she was
Personnel Manager for Lechmere, Inc. Mrs. Milton has 14 years of human resources
experience and is a Senior Professional in Human Resources.
Hershel A. Manning has been Western Regional Director of Store Operations
of the Company since May 1997, when the Company acquired the assets of A-1
Rental Centers, a rental company in New Mexico he founded in 1974. Mr. Manning
served as President and CEO of A-1 Rental Centers from its inception until it
was acquired. He is a former President and Chairman of the Board of the American
Rental Association.
James J. Conley has been Eastern Regional Director of Store Operations of
the Company since August 1997. For more than five years prior to joining the
Company, Mr. Conley served as Operations Manager of Handy Rent All Centers in
New York, a prominent general rental group in the Hudson Valley. He has also
served as a consultant for rental companies in other areas of the country.
53
<PAGE> 55
Mr. Conley has over 30 years of experience in the rental industry and currently
serves the American Rental Association as Chairman of the General Tool Special
Interest Group and as a member of the Board of Directors.
Darcy A. Erickson has been Director of Marketing of the Company since
September 1997. From April 1991 to August 1997 Ms. Erickson was Vice President
of Marketing for Grease Monkey International, Inc., a quick lube franchise
organization with more than 200 centers in the United States and Mexico. From
November 1987 to March 1991 she served as senior partner in Marketing Savvy, a
marketing consulting group she co-founded. Prior to that she was Creative
Director and Director of Advertising Services of Kinzley-Hughes Inc., an
advertising and public relations firm.
Richard M. Tyler has been a director of the Company since May 1996. From
May 1996 until November 1996, Mr. Tyler served as President of the Company and
from November 1996 to July 1997, he served as a Vice President and Secretary.
Since November 1988, he has been a member of BACE (or a partner in its
predecessor partnership), a private investment group that pursues consolidations
in targeted fragmented industries, and since October 1995 has been a member of
BACE Investments, LLC, which is a principal stockholder of the Company.
Craig J. Zoellner has been a director of the Company since May 1996. From
May 1996 until July 1997, Mr. Zoellner served as a Vice President and Treasurer
of the Company. Since November 1988, he has been a member of BACE (or a partner
in its predecessor partnership), a private investment group that pursues
consolidations in targeted fragmented industries, and since October 1995 has
been a member of BACE Investments, LLC, which is a principal stockholder of the
Company.
Thomas E. Galuhn has been a director of the Company since May 1996. Mr.
Galuhn is a Senior Managing Director of Mesirow Private Equity Investments, Inc.
and Vice President of Mesirow Financial Services, Inc. Mr. Galuhn has been
associated with affiliates of Mesirow Financial Holdings, Inc. since 1987.
Mesirow Financial Services is the General Partner of Mesirow Capital Partners VI
("Mesirow"), which is a principal stockholder of the Company. Mr. Galuhn serves
on the board of directors of Mesirow Financial Holdings, Inc.
James A. Gordon has been a director of the Company since May 1996. Since
February 1992, Mr. Gordon has been President of Gordon Management, Inc. ("GMI"),
a company he formed to serve as the general partner of the Edgewater private
equity and venture capital funds. Mr. Gordon has been active in the venture
capital and private equity markets since 1982. Prior to forming GMI, Mr. Gordon
was an executive officer of Gordon Wholesale, Inc. ("GWI") from May 1971 to
February 1992, working in all departments before assuming the Presidency in
1976. GWI was a distributing company which was sold to a multinational
conglomerate in 1986. Mr. Gordon serves on the boards of directors of Imnet
Systems, Inc., Advanced Photonix, Inc., Microware Systems Corporation and
HealthDesk Corporation, all of which are public companies.
William P. Sutter, Jr. has been a director of the Company since May 1996.
Mr. Sutter is a Senior Managing Director of Mesirow Private Equity Investments,
Inc. and a Vice President of Mesirow Financial Services, Inc. Mr. Sutter has
been associated with affiliates of Mesirow Financial Holdings, Inc. since 1984.
He serves on the board of directors of New West Eyeworks, Inc.
Margaret G. Fisher has been a director of the Company since September 1997.
Ms. Fisher is a co-founder and general partner of INROADS Capital Partners,
L.P., a venture capital fund that has made equity investments in electronics,
financial services, specialty retailing and manufacturing industries. Ms. Fisher
has been active in the venture capital industry for seventeen years. Prior to
founding INROADS, Ms. Fisher was a founding general partner of Seidman Fisher &
Co., a venture capital firm. Before co-founding Seidman Fisher & Co., Ms. Fisher
was a portfolio manager with Allstate Venture Capital.
Officers of the Company serve at the discretion of the Board of Directors.
Directors hold office until the next annual meeting of stockholders and until
their successors are elected and qualified.
54
<PAGE> 56
There are no family relationships among any of the directors, officers or key
employees of the Company.
Pursuant to a Stockholders Agreement among the Company, BACE Investments,
LLC, Mesirow, the Edgewater Private Equity Fund II, L.P. ("Edgewater") and each
of the other existing stockholders of the Company (the "Stockholders
Agreement"), each party has agreed, for a period of two years following the
offering, to vote its shares of Common Stock in each election of directors for
three designees of BACE Investments LLC, four designees of Mesirow and
Edgewater, the Chief Executive Officer of the Company and a ninth director
selected by the directors so designated. Currently, Messrs. Tyler and Zoellner
serve on the Board of Directors as the designees of BACE Investments, LLC and
Messrs. Galuhn, Gordon and Sutter and Ms. Fisher serve on the Board of Directors
as the designees of Mesirow and Edgewater. BACE Investments LLC has not yet
exercised its right to designate a third director, but has indicated that it
intends to do so within 90 days after the offering. The current directors have
also indicated that they intend to add an additional independent director to the
Board within 90 days after the offering. Those two new directors will fill the
existing vacancies on the Company's nine-person Board of Directors. The parties
to the Stockholders Agreement hold an aggregate of 5,722,018 shares of Common
Stock, which will represent approximately 63.2% of the Common Stock outstanding
after the offering. See "Certain Transactions -- Stockholders Agreement."
From January 1995 until November 1996, Richard M. Tyler and Craig J.
Zoellner were Vice President and Secretary and Vice President and Assistant
Secretary, respectively, of SoftWorld Services Corporation, which provided
turnkey manufacturing and fulfillment services to software developers. In April
1997, SoftWorld filed a petition for relief under the Federal Bankruptcy Code
and is currently in the process of liquidation.
COMMITTEES
The Company has an Audit Committee composed of Messrs. Gordon, Sutter and
Zoellner. The Audit Committee has the responsibility of making recommendations
to the Board of Directors concerning the engagement of independent public
accountants, reviewing the overall scope and results of the annual audit and
performing such other functions as may be prescribed by the Board of Directors.
The Company has a Compensation Committee composed of Messrs. Galuhn and
Tyler. The Compensation Committee is authorized to review the compensation of
the officers of the Company and to make recommendations to the Board of
Directors concerning officers' salaries, stock options and any other forms of
compensation, to review recommendations to the Board of Directors concerning the
compensation of the directors and to perform such other functions as the Board
of Directors may direct.
COMPENSATION OF DIRECTORS
Prior to the offering, the Company has not paid any fees or remuneration to
directors for their service on the Board of Directors or any Board committee,
but has reimbursed directors for their out-of-pocket expenses incurred in
connection with attending meetings of the Board. After the offering, the Company
intends to pay directors who are not employees of the Company (and are not
employees, members, officers, directors, managers or partners of BACE
Investments, LLC, Mesirow, Edgewater, Inroads Capital Partners, L.P.
("Inroads"), Trustees of Grinnell College ("Grinnell") or any affiliate of any
thereof) an annual retainer of $5,000 in cash plus $1,000 for each regular or
special meeting attended and $500 for each committee meeting attended. Under
this policy, none of the Company's current directors are entitled to
compensation. The Company will continue to reimburse all directors for
out-of-pocket expenses incurred in attending meetings. Each director who is
entitled to compensation as described above also will receive stock options to
purchase 5,000 shares of common stock upon election to the Board of Directors
and an annual grant of options to purchase 2,500 shares thereafter.
55
<PAGE> 57
The exercise price of such options will be the fair market value of the Common
Stock on the date of grant. See "-- Stock Option Plans."
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer of the Company and the only other executive
officer of the Company who held office during fiscal 1996 and earned a salary
and bonus in excess of $100,000 during fiscal 1996 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- LONG-TERM COMPENSATION AWARDS
NAME AND PRINCIPAL POSITION(1) SALARY BONUS SECURITIES UNDERLYING OPTIONS(#)
------------------------------ -------- -------- --------------------------------
<S> <C> <C> <C>
Arnold A. Bernstein(2)...................... $41,538 $20,003 103,446
President and Chief Executive Officer
Gary J. Kulesza(3).......................... $81,730 $44,271 51,763
Executive Vice President
and Chief Operating Officer
</TABLE>
- ---------------
(1) The Company's other executive officers are Messrs. Nugent, Evans, Davidson
and Carlson, who are currently being compensated at the rate of $130,000
(with a guaranteed bonus for fiscal 1997 of $35,000), $104,500, $104,500 and
$80,000 (with a guaranteed bonus of $25,000 payable in April 1998) per year,
respectively. Mr. Bernstein's salary is currently $180,000 per year and Mr.
Kulesza's salary is currently $140,000 per year.
(2) Mr. Bernstein joined the Company in November 1996.
(3) Mr. Kulesza joined the Company in April 1996.
OPTION GRANTS
The following table sets forth information concerning individual grants of
stock options made by the Company during fiscal 1996 to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS MARKET ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE ON DATE OPTION TERM
OPTIONS IN FISCAL PRICE PER OF EXPIRATION ------------------------------
NAME(1) GRANTED YEAR SHARE GRANT DATE 0% 5% 10%
------- ---------- ---------- --------- ------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arnold A. Bernstein... 38,462(2) 21% $0.15 $1.61 11/11/06 $56,155 $95,091 $154,824
64,984(3) 35% $8.00 $1.61 11/11/06 --(4) --(4) --(4)
Gary J. Kulesza....... 19,231(2) 10% $0.10 $1.61 04/01/06 $29,039 $48,507 $ 78,374
32,532(3) 18% $8.00 $1.61 04/01/06 --(4) --(4) --(4)
</TABLE>
56
<PAGE> 58
- ---------------
(1) The Company has also granted the following options to executive officers
other than the Named Executive Officers: on January 31, 1997, each of
Messrs. Evans and Davidson were granted options to purchase 2,000 shares at
$1.00 per share; on April 14, 1997, Mr. Carlson was granted options to
purchase 2,500 shares at $1.00 per share; and on May 19, 1997, Mr. Nugent
was granted options to purchase 40,000 shares at $7.00 per share. All of
these options become exercisable as to 20% of the shares on each of the
first five anniversaries of the date of grant. See "-- Stock Option Plans."
(2) The option was vested and exercisable with respect to all of the option
shares on the grant date. See "-- Employment Agreements."
(3) The option will vest and become exercisable as to 50 percent of the shares
on January 31, 1999 and as to 25 percent of the shares on each of January
31, 2000 and 2001. See "-- Employment Agreements."
(4) Based on the $1.61 per share market price on the date of grant, at the
assumed rates of appreciation, the market value of the stock would be less
than the exercise price of the option at the end of the option term.
The following table sets forth certain information with respect to stock
options held by the Named Executive Officers as of January 31, 1997. No options
were exercised by the Named Executive Officers during fiscal 1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT JANUARY 31, 1997 OPTIONS AT JANUARY 31, 1997(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------------------- ------------------------------
<S> <C> <C>
Arnold A. Bernstein.......................... 38,462/64,984 $56,155/$0
Gary J. Kulesza.............................. 19,231/32,532 $29,039/$0
</TABLE>
- ---------------
(1) Based on the deemed fair market value of the Company's Common Stock at
January 31, 1997, less the exercise price payable per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Bernstein, Galuhn and Tyler served as members of the Compensation
Committee during the 1996 fiscal year. Mr. Bernstein is Chief Executive Officer
and President of the Company. Mr. Galuhn is a principal of Mesirow and Mr. Tyler
is a member of BACE and BACE Investments, LLC and was President or a Vice
President and Secretary of the Company during the fiscal year ended January 31,
1997. Messrs. Tyler and Zoellner, who served as executive officers of the
Company during the fiscal year ended January 31, 1997, are directors and
executive officers of Pride Industries, Inc. and participated in compensation
decisions for that company. See "Certain Transactions" for a description of
certain transactions involving these individuals and certain of these entities.
EMPLOYMENT AGREEMENTS
In connection with their initial employment by the Company, each of Messrs.
Bernstein, Kulesza and Nugent entered into a letter agreement with the Company
describing the terms of his employment. The employment relationships are at will
and can be terminated by the employee or the Company at any time. The stock
options granted to Messrs. Bernstein, Kulesza and Nugent as described under
"-- Option Grants," were granted pursuant to those agreements rather than under
the Stock Option Plans. In connection with the granting of those options,
Messrs. Bernstein, Kulesza and Nugent entered into noncompetition agreements
under which they are prohibited from competing with the Company anywhere in the
United States during the term of their employment and for a period of two years
thereafter. The Company has no further material obligations under these letter
agreements, other than to pay salaries at the levels described under
"-- Executive Compensation" while the employment relationships continue.
57
<PAGE> 59
The Company has an Employment and Noncompetition Agreement with each of
George A. Evans and Larry W. Davidson, Vice President of Corporate Development
and Vice President of Purchasing/ Merchandising, respectively, of the Company,
which were entered into in conjunction with the Company's acquisition of Zodiac
Rentals, Inc. from Mr. Evans and Mr. Davidson in May 1996. See "Certain
Transactions -- Zodiac Acquisition." Each such Agreement provides for minimum
compensation of $8,334 per month during the 24-month term of the Agreement. Each
Agreement is terminable by the Company at any time with or without cause, but
cannot be terminated by the employee prior to the end of the 24-month term.
401(K) PLAN
Effective November 1, 1996, the Company adopted a 401(k) Retirement Savings
Plan (the "401(k) Plan") to provide retirement and other benefits to employees
of the Company. The 401(k) Plan is intended to be a tax-qualified plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Employees of the Company become eligible to participate in the 401(k) Plan and
to have salary deferral contributions made on their behalf after they complete
six months of service and attain the age of 18.
Participants may elect to defer, in the form of contributions to the 401(k)
Plan, up to the $9,500 limitation imposed by Code Section 402(g). Under the
401(k) Plan, the Company may make discretionary profit sharing contributions on
behalf of participants who have completed 1,000 hours of service during the plan
year and are employed on the last day of the plan year (or have retired after
attaining age 65, died or incurred a disability in a plan year), based on
compensation. The Company did not make a contribution to the 401(k) Plan in
fiscal 1997.
The contributions by participants are fully vested and nonforfeitable.
Participants become vested in the Company's profit sharing and matching
contributions based on a five year vesting schedule (or upon a participant's
retirement after attaining age 65, death or disability, if earlier).
Participants are entitled to receive the vested amounts in their accounts in a
single lump-sum payment on death, disability, retirement or termination of
employment. In certain circumstances, participants may receive loans and
hardship withdrawals from their accounts in the 401(k) Plan.
STOCK OPTION PLANS
Nonqualified Plans. In January, May and June 1997 the Company adopted the
Nonqualified Stock Option Plan -- January 1997, the Nonqualified Stock Option
Plan -- May 1997 and the Nonqualified Stock Option Plan -- June 1997 (the
"Nonqualified Plans"). Under the Nonqualified Plans, a total of 53,099 shares of
the Company's Class B Common Stock were available for option grants to key
employees and consultants on such terms as the Board of Directors determined.
Options to purchase all of the shares of Class B Common Stock available under
the Nonqualified Plans have been granted. All of the options granted under the
Nonqualified Plans become exercisable as to 20% of the shares covered thereby on
each of the first five anniversaries of the date of grant. As a result of the
conversion of the Class B Common Stock to Common Stock upon consummation of this
offering, the outstanding options under the Nonqualified Plans will represent
the right to purchase 53,099 shares of Common Stock at a weighted average
exercise price of $2.48 per share.
Employee Plan. In September 1997, the Board adopted and the stockholders
approved the Stock Option Plan For Employees (the "Employee Plan"). An aggregate
of 277,000 shares are available for grant under the Employee Plan. No options
have yet been granted under the Employee Plan, but upon the completion of this
offering, the Company intends to grant options to purchase a total of
shares with an exercise price equal to the offering price. The Employee Plan is
administered by the Compensation Committee (the "Committee"). Options may be
granted under the Employee Plan as incentive stock options ("ISOs") or
non-qualified stock options. The Employee Plan expires in September 2007, unless
it is terminated earlier by the Committee, but options granted prior to such
date may extend beyond that date.
58
<PAGE> 60
The Committee determines the number of shares underlying an option as well
as the exercise date, the exercise price and the exercise period of an option,
subject to the following restrictions: (i) options will not be exercisable for
more than 10 years from the date of grant (five years if the optionee is a
holder of more than 10% of the combined voting power of the Company and any
parent or subsidiary (a "10% stockholder") and the option is an ISO); and (ii)
the exercise price of an ISO may not be less than the fair market value of the
underlying shares on the date of grant (110% of fair market value if the
optionee is a 10% stockholder). ISOs are subject to additional requirements
under the Employee Plan and the Code.
Payment for options granted under the Employee Plan may be made (i) in cash
or by check, (ii) through delivery of unencumbered shares of Common Stock, or
(iii) any combination of the consideration provided for in (i) and (ii).
In the event of a merger or consolidation of the Company with or into
another corporation, if the stockholders of the Company will own less than a
majority of the stock of the surviving corporation, all outstanding options
under the Employee Plan become exercisable immediately prior to the effective
date of the transaction and any unexercised options will terminate on such
effective date. In the event of the acquisition by another corporation or person
of all or substantially all of the Company's assets or 50% or more of the
Company's then outstanding voting stock, or the liquidation or dissolution of
the Company, the Committee may, in its discretion, make any provision for
outstanding options it deems appropriate, including, without limitation,
accelerating exercisability, settling the options for cash or exchanging the
options for similar options of the acquiring company.
Non-Employee Directors Plan. In September 1997 the Board adopted and the
stockholders approved the Stock Option Plan for Non-Employee Directors (the
"Directors Plan"). As defined in the Directors Plan, a Non-Employee Director
includes any director who is not an employee of the Company (and is not an
employee, member, officer, director, manager or partner of BACE Investments,
LLC, Mesirow, Edgewater, Inroads, Grinnell or any affiliate of any thereof). A
total of 25,000 shares of Common Stock are available for grant under the
Directors Plan. Each Non-Employee Director automatically receives options to
purchase 5,000 shares of Common Stock upon election to the Board of Directors,
which are immediately exercisable as to 2,500 shares on the date of grant and
become exercisable as to an additional 500 shares on each of the first five
anniversaries of the date of grant. Thereafter, each Non-Employee Director
automatically receives an annual grant of options to purchase 2,500 shares of
Common Stock, which become exercisable as to 500 shares on each of the first
five anniversaries of the date of grant. The exercise price of all options
granted under the Directors Plan is equal to the fair market value of the Common
Stock on the date of grant and all options have a ten-year term. Upon a merger,
consolidation, sale of assets or stock or liquidation or dissolution of the
Company, outstanding options under the Directors Plan will or may be accelerated
or otherwise affected as described above for options granted under the Employee
Plan.
INDEMNIFICATION OF DIRECTORS AND LIMITATION OF LIABILITY
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty as
a director. At this time, Delaware General Corporation Law does not permit
indemnification for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which the director derived an improper personal benefit.
As permitted by Section 145 of the Delaware General Corporation Law, the
Certificate of Incorporation and Bylaws of the Company provide that (i) the
Company is required to indemnify its directors and officers to the fullest
extent permitted by the Delaware General Corporation Law, (ii) the Company is
required, with certain exceptions, to advance expenses, as incurred, to its
directors and officers in connection with a legal proceeding to the fullest
extent permitted by the Delaware
59
<PAGE> 61
General Corporation Law, (iii) the rights conferred in the Bylaws are not
exclusive and (iv) the Company is authorized to enter into indemnity agreements
with its directors, officers, employees and agents.
The Company plans to enter into indemnity agreements with each of its
directors and officers to give such directors and officers additional
contractual assurances regarding the scope of the indemnification set forth in
the Company's Bylaws and to provide additional procedural protection. At present
there is no pending litigation or proceeding involving a director, officer or
employee of the Company regarding which indemnification is sought, nor is the
Company aware of any threatened litigation that may result in claims for
indemnification.
CERTAIN TRANSACTIONS
CONSULTING AGREEMENT
Pursuant to a Consulting Agreement, BACE provides consulting services to
the Company concerning acquisitions, financing and other matters. Messrs. Tyler
and Zoellner, who are directors of the Company, are members of BACE and are also
the members of BACE Investments, LLC, which is the beneficial owner of
approximately 32% of the Company's outstanding Common Stock prior to this
offering. Services provided by BACE under the Consulting Agreement include the
identification, negotiation and consummation of the Company's acquisitions,
working in conjunction with Company management. BACE is compensated for its
services under a fee structure with two components. The first component varies
from $150,000 to $300,000 per year (subject to increase based on the Consumer
Price Index) depending on the Company's annual sales. The first component of the
fee is paid monthly based on the Company's annualized sales rate for each month.
The second component is paid at the end of each fiscal year and is based on the
relationship between the trailing 12-month earnings of the companies acquired by
RentX during the year and a target established by the Company each year. In no
event can the total fees under both components exceed $600,000 in any year
(subject to increase based on the Consumer Price Index). For fiscal 1996, the
Company paid a total of $283,513 in fees to BACE under the Consulting Agreement.
Fees during that year were determined based on factors other than those
considered by the components described above. The Company is also obligated to
reimburse BACE for expenses incurred in providing services under the Consulting
Agreement and to provide insurance benefits for certain employees of BACE who
render services to the Company.
The Consulting Agreement continues in effect until terminated according to
its terms. The Company may terminate the Consulting Agreement for cause
(including gross negligence, willful disregard of instructions from the Board of
Directors and material breach). The Consulting Agreement terminates
automatically if Messrs. Tyler and Zoellner (or their affiliates, including BACE
and BACE Investments, LLC, or family members) own less than 603,846 shares of
the Company's Common Stock, the Company sells all or substantially all of its
assets or is acquired for cash by an unaffiliated party, or the Company becomes
the subject of a proceeding under Chapter 11 of the Federal Bankruptcy Code.
SALES OF PREFERRED STOCK
In May 1996, the Company entered into an Investment Agreement with Mesirow
and Edgewater covering the sale to those entities (and other investors to be
designated by them) of shares of the Company's Series A Preferred Stock at a
price of $1,000 per share to fund a portion of the purchase price of the
Company's acquisitions. Other investors have subsequently become parties to that
Agreement, including Inroads, Grinnell and certain former owners of businesses
acquired and executive officers of the Company. Pursuant to the Investment
Agreement, during the period from May 1996 until June 1997, the Company sold
17,195 shares of Series A Preferred Stock for a total of $17,195,000. The
outstanding Series A Preferred Stock will convert into a total of 3,439,000
shares of Common Stock upon consummation of this offering. The following table
summarizes the shares of Series A Preferred Stock purchased by each person who
is an executive officer or director of the
60
<PAGE> 62
Company or who beneficially owns 5% or more of the Company's Common Stock or may
be deemed an affiliate of such persons and the number of shares of Common Stock
into which such Series A Preferred Stock will be converted upon consummation of
this offering:
<TABLE>
<CAPTION>
SHARES OF SHARES OF
SERIES A COMMON STOCK
INVESTOR PREFERRED STOCK ISSUABLE UPON CONVERSION
-------- --------------- ------------------------
<S> <C> <C>
Mesirow Capital Partners VI.................... 4,065 813,000
The Edgewater Private Equity Fund II, L.P...... 4,065 813,000
Trustees of Grinnell College................... 4,065 813,000
Inroads Capital Partners, L.P.................. 2,805 561,000
Arnold A. Bernstein............................ 250 50,000
Gary J. Kulesza................................ 100 20,000
Thomas D. Nugent............................... 125 25,000
George A. Evans................................ 300 60,000
Larry W. Davidson.............................. 200 40,000
</TABLE>
The Investment Agreement contains customary types of representations and
warranties by the Company and obligates the Company to indemnify the purchasers
against certain matters, including breaches of those representations and
warranties and claims under environmental laws.
In June 1997, the Company sold 813 shares of Series C Preferred Stock to
Mesirow, 813 shares of Series C Preferred Stock to Edgewater, 813 shares of
Series C Preferred Stock to Grinnell and 561 shares of Series C Preferred Stock
to Inroads for aggregate consideration of $3,000,000. Upon completion of this
offering, the Series C Preferred Stock sold to Mesirow, Edgewater, Grinnell and
Inroads will convert into 127,771, 127,771, 127,771 and 88,167 shares of Common
Stock, respectively.
Messrs. Galuhn and Sutter, who are directors of the Company, are officers
or principals of Mesirow, and Mr. Gordon, who is a director of the Company, is a
principal of Edgewater. After this offering, each of Mesirow, Edgewater,
Grinnell and Inroads will own more than 5% of the Company's outstanding Common
Stock. See "Management" and "Principal Stockholders."
In May 1996, the Company sold 1,000 shares of Class A Common Stock and 200
shares of Series B Preferred Stock to BACE Investments, LLC for $500 and
$200,000, respectively. Upon completion of this offering, the Class A Common
Stock will be reclassified as Common Stock, without change in the number of
shares, and the Series B Preferred Stock will convert into a total of 1,810,538
shares of Common Stock. Messrs. Tyler and Zoellner, both directors of the
Company, are members of BACE Investments, LLC, After this offering, BACE
Investments, LLC will own more than 5% of the Company's outstanding Common
Stock. See "Management" and "Principal Stockholders."
STOCKHOLDERS AGREEMENT
The Company, BACE Investments, LLC, Mesirow, Edgewater and all other
stockholders of the Company prior to this offering are parties to a Stockholders
Agreement pursuant to which they have agreed to vote their shares for the
election of three directors designated by BACE, four directors designated by
Mesirow and Edgewater, the Chief Executive Officer of the Company and a ninth
director selected by the other directors. To date, BACE Investments, LLC has
designated only two directors pursuant to this provision. In addition, the
Stockholders Agreement obligates each party to give the other parties the
opportunity to participate in proportion to their respective holdings in any
proposed sale of Common Stock, other than sales pursuant to a registration
statement or under Rule 144 under the Securities Act. The Stockholders Agreement
expires two years after this offering.
ZODIAC ACQUISITION
On May 15, 1996 the Company acquired all of the assets of Zodiac, of which
George A. Evans and Larry W. Davidson were equal co-owners, for $11,327,241 in
cash and the Company's subordinated
61
<PAGE> 63
promissory note in the principal amount of $936,517, bearing interest at 5.37%
per annum, payable in 24 monthly installments. As part of the asset purchase
transaction, Messrs. Evans and Davidson have leased seven stores and a related
building in the Denver metropolitan area to the Company. Each lease is for an
initial term of three years, with four options to renew for terms of three years
each. The aggregate annual rent for the initial three-year term is $316,853.04.
Rent for the option periods will be adjusted to reflect any increase in the
Consumer Price Index. Messrs. Evans and Davidson also entered into employment
agreements with the Company. See "Management -- Employment Agreements."
62
<PAGE> 64
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 31, 1997 and as adjusted to
reflect the sale of the Common Stock offered hereby by: (i) each person known by
the Company to own beneficially 5% or more of the outstanding shares of Common
Stock; (ii) each director and Named Executive Officer of the Company; and (iii)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED(1)
------------------------
BEFORE AFTER
NAME AND ADDRESS NUMBER OF SHARES(1) OFFERING OFFERING
---------------- ------------------- -------- --------
<S> <C> <C> <C>
Mesirow Capital Partners VI(2)............ 940,771 16.44% 10.39%
The Edgewater Private Equity
Fund II, L.P.(3)........................ 940,771 16.44% 10.39%
Trustees of Grinnell College.............. 940,771 16.44% 10.39%
Inroads Capital Partners, L.P.(4)......... 649,167 11.35% 7.17%
BACE Investments, LLC(5).................. 1,811,538 31.66% 20.01%
Arnold A. Bernstein(6).................... 88,462 1.54% *
Gary J. Kulesza(7)........................ 39,231 * *
Richard M. Tyler(5)....................... 1,811,538 31.66% 20.01%
Craig J. Zoellner(5)...................... 1,811,538 31.66% 20.01%
Thomas E. Galuhn(2)....................... 940,771 16.44% 10.39%
James A. Gordon(3)........................ 940,771 16.44% 10.39%
William P. Sutter, Jr.(2)................. 940,771 16.44% 10.39%
Margaret G. Fisher(4)..................... 649,167 11.35% 7.17%
Directors and executive officers
as a group (10 persons)(8).............. 4,594,940 79.50% 49.79%
</TABLE>
- ---------------
* Less than 1.0%.
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares of Common Stock subject to options that are currently exercisable or
exercisable within 60 days of the date of the table set forth above are
deemed to be outstanding and to be beneficially owned by the holder of such
options in calculating the percentage ownership of such stockholder, but are
not deemed to be outstanding as to any other person.
(2) Messrs. Galuhn and Sutter are officers of the general partner of Mesirow and
the shares reflected in the table for Messrs. Galuhn and Sutter are the
shares owned by Mesirow. The address of Mesirow and of Messrs. Galuhn and
Sutter is 350 North Clark Street, Chicago, Illinois 60610.
(3) Mr. Gordon is an officer of the general partner of Edgewater and the shares
reflected in the table for Mr. Gordon are the shares owned by Edgewater. The
address of Edgewater and of Mr. Gordon is 666 Grand Avenue, Suite 200, Des
Moines, Iowa 50309.
(4) Ms. Fischer is a general partner of Inroads and the shares reflected in the
table for Ms. Fisher are the shares owned by Inroads. The address of Inroads
and Ms. Fisher is 1603 Orrington Avenue, Suite 2030, Evanston, Illinois
60221.
(5) Messrs. Tyler and Zoellner are members of BACE Investments, LLC, and the
shares reflected in the table for Messrs. Tyler and Zoellner are the shares
owned by BACE Investments, LLC. The address of BACE Investments, LLC and of
Messrs. Tyler and Zoellner is 1522 Blake Street, Denver, Colorado 80202.
(6) Includes 38,462 shares issuable under options that are currently
exercisable. See "Management -- Option Grants."
(7) Includes 19,231 shares issuable under options that are currently
exercisable. See "Management -- Option Grants."
(8) Includes 57,693 shares issuable under options owned by executive officers
that are currently exercisable. See "Management -- Option Grants."
63
<PAGE> 65
DESCRIPTION OF CAPITAL STOCK
GENERAL
The discussion below does not purport to be complete, and is subject to and
qualified in its entirety by reference to applicable Delaware law and to the
provisions of the Amended and Restated Certificate of Incorporation and Bylaws
of the Company, which are filed as exhibits to the Registration Statement of
which this Prospectus is a part.
At the closing of this offering, the authorized capital stock of the
Company will consist of 19,000,000 shares of Common Stock, $.01 par value per
share, and 1,000,000 shares of Preferred Stock, $.01 par value per share (the
"Preferred Stock"). Immediately following the completion of this offering, an
aggregate of 9,055,351 shares of Common Stock will be issued and outstanding and
no shares of Preferred Stock will be issued and outstanding. All of the Series
A, Series B and Series C Preferred Stock and Class A and Class B Common Stock
outstanding prior to this offering will automatically be converted or
reclassified into shares of Common Stock, and such series and classes will no
longer be authorized.
COMMON STOCK
Each share of Common Stock is entitled to one vote at all meetings of
stockholders of the Company for the election of directors and all other matters
submitted to stockholder vote. There are no cumulative voting rights.
The rights, privileges and preferences of the holders of Common Stock are
subject to the rights of the holders of any shares of preferred stock that may
be designated and issued by the Company in the future. Subject to any
restrictions contained in preferred stock issued by the Company, if any, and to
restrictions imposed by certain debt agreements of the Company, holders of
Common Stock are entitled to receive dividends when and if declared by the Board
of Directors out of legally available assets of the Company. See "Dividend
Policy."
The Common Stock has no preemptive or similar rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. Holders of
Common Stock are not liable to further call or assessment by the Company. Upon
any liquidation, dissolution or winding up of the Company, after payment of the
debts and other liabilities of the Company and subject to the rights of holders
of shares of preferred stock, if any, holders of Common Stock are entitled to
share pro rata in any distribution to the stockholders. All outstanding shares
of Common Stock are, and the shares offered hereby will be, when issued and
sold, fully paid and nonassessable.
PREFERRED STOCK
The Company's Board of Directors, without the approval of the holders of
the Common Stock, is authorized to issue from time to time, in one or more
designated series, any or all of the authorized but unissued shares of preferred
stock, in such number of series and with such rights, preferences, privileges
and any qualifications, limitations or restrictions thereon (including without
limitation voting rights) as the Board of Directors may determine. Issuance of
preferred stock, while providing flexibility in connection with possible
acquisitions, may adversely affect the rights, privileges and preferences
afforded the holders of Common Stock, including a decrease in the amount
available for distribution to holders of the Common Stock in the event of a
liquidation or payment of preferred stock dividends. Issuance of preferred stock
may also have the effect of preventing or delaying a change in control of the
Company.
DELAWARE LAW AND LIMITATIONS ON CHANGES IN CONTROL
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). Section 203 of the DGCL contains certain
provisions which may make more
64
<PAGE> 66
difficult the acquisition of control of the Company by means of a tender offer,
open market purchase, proxy fight or otherwise. These provisions are designed to
encourage persons seeking to acquire control of the Company to negotiate with
the Board of Directors. However, these provisions could have the effect of
discouraging a prospective acquirer from making a tender offer or otherwise
attempting to obtain control of the Company. To the extent that these provisions
discourage takeover attempts, they could deprive stockholders of opportunities
to realize takeover premiums for their shares or could depress the market price
of shares. Set forth below is a description of the relevant provisions of
Section 203 of the DGCL. This description is intended as a summary only and is
qualified in its entirety by reference to Section 203 of the DGCL.
Section 203 of the DGCL prevents an "interested stockholder" (defined in
Section 203, generally, as a person owning 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" with a
publicly-held Delaware corporation for three years following the date such
person became an interested stockholder unless (i) before such person became an
interested stockholder, the board of directors of the corporation approved the
transaction in which the interested stockholder became an interested stockholder
or approved the business combination, (ii) upon consummation of the transaction
that resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer),
or (iii) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder. A "business combination"
includes mergers, asset sales and other transactions resulting in financial
benefit to a stockholder. Section 203 could prohibit or delay mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.
The Company's Bylaws will generally require 50 days advance notice of any
action to be proposed at any meeting of stockholders and set forth other
specific procedures that a stockholder must follow. There are also specific
procedures, including advance notice, for the nomination of a person to the
Board of Directors when such person is nominated other than at the direction of
the Board. In addition, the Company's Bylaws provide that a special meeting of
the Company's stockholders may only be called by certain officers of the Company
or by the Board of Directors; no such meeting may be called by the stockholders.
These provisions could have the effect of delaying, deferring or preventing a
change in control of the Company or the removal of existing management. See
"Risk Factors -- Control by Existing Stockholders" and "-- Anti-Takeover
Provisions."
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement dated May 15, 1996, as
amended, by and among the Company, BACE Investments, LLC, Mesirow, Edgewater and
certain other stockholders of the Company (the "Rights Agreement"), holders of
5,722,018 shares of Common Stock (the "Registrable Securities") have been
granted piggyback registration rights with respect to Common Stock owned by such
stockholders as of such date. Subject to the 180-day lock-up period described
under "Underwriting," if the Company proposes to register any of its securities
under the Securities Act, either for its own account or the account of other
stockholders, the holders of Registerable Securities are entitled to notice of
such registration and are entitled to include their Registrable Securities
therein. In addition, if at any time after May 15, 1999, the Company receives a
request from holders of at least 50% or more of the then outstanding Registrable
Securities, the Company is obligated to cause such shares to be registered under
the Securities Act. Holders of Registrable Securities have the right to cause
two such demand registrations. The holders' rights with respect to all such
registrations are subject to certain conditions, including the right of the
underwriters to limit the number of shares included in any such
65
<PAGE> 67
registration. The Company has agreed to pay all expenses related to the
registration of the shares, except for underwriting discounts and commissions to
effect the sale of the Registrable Securities.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock of the Company is
Harris Trust Company of California.
66
<PAGE> 68
SHARES AVAILABLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of
the Company and there can be no assurance that a significant public market for
the Common Stock will develop or be sustained after this offering. Future sales
of substantial amounts of Common Stock in the public market could adversely
affect market prices prevailing from time to time and could impair the Company's
ability to raise capital through sale of its equity securities. As described
below, no shares outstanding prior to this offering will be available for sale
immediately after this offering due to certain contractual restrictions on
resale. Sales of substantial amounts of Common Stock of the Company in the
public market after the restrictions lapse could adversely affect the prevailing
market price and the ability of the Company to raise equity capital in the
future.
Upon the consummation of this offering, the Company will have outstanding
9,055,351 shares of Common Stock (9,555,351 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, all of the shares
sold in this offering will be freely tradeable without restriction under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act. The remaining shares held by
existing stockholders are subject to lock-up agreements providing that, with
certain limited exceptions, the stockholder will not offer, sell, contract to
sell, grant an option to purchase, make a short sale or otherwise dispose of or
engage in any hedging or other transaction that is designed or reasonably
expected to lead to a disposition of any shares of Common Stock or any option or
warrant to purchase shares of Common Stock or any securities exchangeable for or
convertible into shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of Robertson, Stephens &
Company. As a result of these lock-up agreements, notwithstanding possible
earlier eligibility for sale under the provisions of Rules 144, 144(k) and 701,
none of these shares will be saleable until 180 days after the date of this
Prospectus. Beginning 180 days after the date of this Prospectus, 4,758,738 of
these shares will be eligible for sale in the public market, subject to certain
volume limitations. The remaining 963,280 of such shares will become eligible
for sale under Rule 144 at various times through June 1998, subject to certain
volume limitations.
In general, under Rule 144 as in effect after April 29, 1997, beginning 90
days after the date of this Prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least one year
(including the holding period of any prior owner except an affiliate) would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of: (i) 1% of the number of shares of Common Stock then
outstanding (which will equal 90,553 shares immediately after this offering); or
(ii) the average weekly trading volume of the Common Stock during the four
calendar weeks preceding the filing of a Form 144 which respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information about
the Company. Under Rule 144(k), a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period requirement,
of Rule 144. Any employee, officer or director of or consultant to the Company
who purchased his or her shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701. Rule 701
permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell such shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares are
required to wait until 90 days after the date of this Prospectus before selling
such shares. However, all shares issued pursuant to Rule 701 are subject to
lock-up agreements and will only become eligible for sale upon the expiration of
the 180 day lock-up agreements unless sooner released by Robertson, Stephens &
Company.
67
<PAGE> 69
No earlier than 180 days after this offering, the Company intends to file a
registration statement under the Securities Act covering shares of Common Stock
subject to outstanding options under the Company's Employee Plan or reserved for
issuance under the Company's stock option and stock purchase plans. Based on the
number of shares subject to outstanding options at July 31, 1997 and currently
reserved for issuance under all such plans, such registration statement would
cover approximately 550,308 shares. Such registration statement will
automatically become effective upon filing. Accordingly, shares registered under
such registration statement will, subject to Rule 144 volume limitations
applicable to affiliates of the Company, be available for sale in the open
market immediately after the 180 day lock-up agreements expire. Also, beginning
six months after the date of this offering, certain holders of shares of Common
Stock will be entitled to certain rights with respect to the registration of
such shares of Common Stock for offer and sale to the public. See "Description
of Capital Stock -- Registration Rights."
68
<PAGE> 70
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
among the Company and each of the underwriters named below (the "Underwriting
Agreement"), the Company has agreed to sell to each of the Underwriters, and
each of the Underwriters, for whom Robertson, Stephens & Company and BT Alex.
Brown Incorporated are acting as the Representatives, severally have agreed to
purchase from the Company the number of shares of Common Stock set forth
opposite its name below. In the Underwriting Agreement, the Underwriters have
severally agreed, subject to the terms and conditions set forth therein, to
purchase all of the shares of Common Stock offered hereby, if any are purchased.
In the event of default by an Underwriter, the Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the nondefaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Robertson, Stephens & Company LLC...........................
BT Alex. Brown Incorporated.................................
---------
Total............................................. 3,333,333
=========
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus, and to certain dealers at
such price less a concession not in excess of $ per share of Common
Stock. The Underwriters may allow, and such dealers may reallow, a discount not
in excess of $ per share of Common Stock on sales to certain other
dealers. After the initial public offering, the public offering price,
concessions and discount may be changed.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to an additional 500,000
shares of Common Stock to cover over-allotments, if any, at the initial public
offering price set forth on the cover page hereof, less the underwriting
discount. If the Underwriters exercise this option, each Underwriter will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the foregoing table is of the 3,333,333 shares of
Common Stock initially offered hereby.
The Company, all officers and directors of the Company, all stockholders of
the Company and certain optionholders of the Company have agreed, subject to
certain exceptions, not to, directly or indirectly, (i) sell or grant any option
to purchase or otherwise transfer or dispose of any shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock or
file a registration statement under the Securities Act with respect to the
foregoing or (ii) enter into any swap or other agreement or transaction that
transfers, in whole or in part, the economic consequence of ownership of the
Common Stock, without the prior written consent of Robertson, Stephens &
Company, for a period of 180 days after the date of this Prospectus.
The Company has agreed to indemnify the several Underwriters against
certain liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of the Common Stock offered hereby to any accounts over
which they exercise discretionary authority.
Prior to this offering, there has been no market for the Common Stock of
the Company. The initial public offering price will be determined through
negotiations among the Company and the Representatives. Among the factors to be
considered in determining the initial public offering price, in addition to
prevailing market conditions, are price/earnings ratios of publicly traded
companies that the Representatives believe to be comparable to the Company,
certain financial information of the
69
<PAGE> 71
Company, the history of, and the prospects for, the Company and the industry in
which it competes, an assessment of the Company's management, its past and
present operations, the prospects for, and timing of, future revenues of the
Company, the present state of the Company's development, and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. There can be no assurance that an
active trading market will develop for the Common Stock or that the Common Stock
will trade in the public market subsequent to the offering at or above the
initial public offering price.
Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when the shares of Common Stock sold by the syndicate member are
purchased in syndicate covering transactions. Such transactions may be effected
on The Nasdaq National Market, in the over-the-counter market, or otherwise.
Such stabilizing, if commenced, may be discontinued at any time.
Application has been made for quotation of the Common Stock on The Nasdaq
National Market under the symbol "RNTX."
70
<PAGE> 72
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain other legal
matters in connection with this offering will be passed upon for the Company by
Sherman & Howard L.L.C., Denver, Colorado. Certain legal matters in connection
with this offering will be passed upon for the Underwriters by Brobeck Phleger &
Harrison LLP, Palo Alto, California.
EXPERTS
The following financial statements appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein:
- RentX Industries, Inc. as of January 31, 1997 and for the period from May
15, 1996 (commencement of operations) through January 31, 1997
- Rental Country U.S.A., Inc., Rifle Rentals, Inc., G.R.M. Company, Inc.,
and Rocky Mountain Rentals, Inc., each dba E-Z Way Rentals, for the years
ended December 31, 1994 and 1995 and the seven months ended July 31, 1996
- Redwine Enterprises, Inc., fka U-Rent, Inc., for the period from January
1, 1996 through October 31, 1996
- Hays Rental and Sales of El Dorado, Inc., Hays Rental and Sales of
Camden, Inc., Hays Rental and Sales of Magnolia, Inc., Hays Rental and
Sales of Hot Springs, Inc., Hays Rental and Sales of Arkadelphia, Inc.
and Hays Leasing Company, Inc. (each dba Hays Rental and Sales) as of
October 31, 1996 and 1995 and for each of the three years in the period
ended October 31, 1996
- CVR, Inc., fka Central Virginia Rental Company, as of December 31, 1995
and 1996 and for each of the three years in the period ended December 31,
1996
- Newmanco, Inc. (dba A-1 Rental Centers) as of September 30, 1995 and 1996
and for each of the three years in the period ended September 30, 1996
- Titus Rental Service Companies, Inc. (dba Suburban Rent-It and Able Party
Rental) as of March 31, 1996 and 1997 and for each of the three years in
the period ended March 31, 1997
- Mer-Cal Enterprises, Inc. (dba Duncan Rent-Alls) as of December 31, 1995
and 1996 and for each of the three years in the period ended December 31,
1996
- Redi Rentals, Inc. as of May 31, 1996 and 1997 and for the years ended
May 31, 1995, 1996 and 1997.
These financial statements are included in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
The combined financial statements of Zodiac Rentals as of December 31, 1995
and May 14, 1996 and for the years ended December 31, 1994 and 1995 and the
period from January 1, 1996, to May 14, 1996, appearing in this Prospectus and
Registration Statement have been audited by Pester & Company Certified Public
Accountants, P.C., independent auditors, as set forth in their report thereon
appearing elsewhere herein and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of A to Z Rentals and Sales, Inc., for the years
ended December 31, 1994 and 1995 and the period from January 1, 1996 to May 28,
1996, appearing in this Prospectus and Registration Statement have been audited
by LeMaster & Daniels PLLC, independent auditors, as set forth in their report
thereon appearing elsewhere herein and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
71
<PAGE> 73
The combined statements of income and changes in equity of U-Do-It Rental
Centers, Inc. and Affiliate for the years ended December 31, 1994, 1995 and
1996, appearing in this Prospectus and Registration Statement have been audited
by Williams & Parsons, PA, independent auditors, as set forth in their report
thereon appearing elsewhere herein and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits and
schedules thereto, certain items of which are omitted in accordance with the
rules and regulations of the Commission. For further information pertaining to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. Statements contained in
this Prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement and the exhibits and
schedules thereto may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
at its Chicago Regional Office, 500 W. Madison Street, 14th Floor, Chicago,
Illinois 60661; and at its New York Regional Office, Seven World Trade Center,
13th Floor, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as the Company, that file
electronically with the Commission. Information concerning the Company is also
available for inspection at the offices of the Nasdaq National Market Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006.
72
<PAGE> 74
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
RENTX UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Financial
Information............................................ F-3
Unaudited Pro Forma Income Statement for the Six Months
Ended July 31, 1997.................................... F-5
Unaudited Pro Forma Income Statement for fiscal 1996...... F-6
Unaudited Pro Forma Balance Sheet......................... F-7
Notes to Unaudited Pro Forma Financial Statements......... F-8
RENTX INDUSTRIES, INC.
Report of Independent Auditors............................ F-9
Balance Sheets............................................ F-10
Statements of Operations.................................. F-11
Statements of Stockholders' Deficit....................... F-12
Statements of Cash Flows.................................. F-13
Notes to Financial Statements............................. F-14
ZODIAC RENTALS
Independent Auditors' Report.............................. F-24
Combined Balance Sheets................................... F-25
Combined Statements of Operations......................... F-26
Combined Statements of Stockholders' Equity............... F-27
Combined Statements of Cash Flows......................... F-28
Notes to Combined Financial Statements.................... F-29
A TO Z RENTALS AND SALES, INC.
Independent Auditors' Report.............................. F-33
Statements of Income...................................... F-34
Statements of Stockholders' Equity........................ F-35
Statements of Cash Flows.................................. F-36
Notes to Financial Statements............................. F-37
E-Z WAY RENTALS
Report of Independent Auditors............................ F-40
Combined Statements of Income............................. F-41
Combined Statements of Stockholders' Equity............... F-42
Combined Statements of Cash Flow.......................... F-43
Notes to Combined Financial Statements.................... F-44
REDWINE ENTERPRISES, INC., dba U-RENT, INC.
Report of Independent Auditors............................ F-46
Statement of Income....................................... F-47
Statement of Stockholders' Equity......................... F-48
Statement of Cash Flows................................... F-49
Notes to Financial Statements............................. F-50
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
Independent Auditor's Report.............................. F-52
Combined Income Statements................................ F-53
Combined Statements of Changes in Equity.................. F-54
Combined Statements of Cash Flows......................... F-55
Notes to Combined Financial Statements.................... F-56
</TABLE>
F-1
<PAGE> 75
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
HAYS RENTAL AND SALES AND AFFILIATES
Report of Independent Auditors............................ F-61
Combined Balance Sheets................................... F-62
Combined Statements of Income............................. F-63
Combined Statements of Stockholders' Equity............... F-64
Combined Statements of Cash Flows......................... F-65
Notes to Combined Financial Statements.................... F-66
CVR, INC.
Report of Independent Auditors............................ F-71
Balance Sheets............................................ F-72
Statements of Income...................................... F-73
Statements of Stockholders' Equity........................ F-74
Statements of Cash Flows.................................. F-75
Notes to Financial Statements............................. F-76
NEWMANCO, INC., dba A-1 RENTAL CENTERS
Report of Independent Auditors............................ F-80
Balance Sheets............................................ F-81
Statements of Operations.................................. F-82
Statements of Stockholders' Equity........................ F-83
Statements of Cash Flows.................................. F-84
Notes to Financial Statements............................. F-85
TITUS RENTAL SERVICES COMPANIES, INC., dba SUBURBAN
Report of Independent Auditors............................ F-90
Balance Sheets............................................ F-91
Statements of Operations.................................. F-92
Statements of Stockholders' Equity........................ F-93
Statements of Cash Flows.................................. F-94
Notes to Financial Statements............................. F-95
MER-CAL ENTERPRISES, INC., dba DUNCAN RENT-ALLS
Report of Independent Auditors............................ F-98
Balance Sheets............................................ F-99
Statements of Operations.................................. F-100
Statements of Stockholders' Deficiency.................... F-101
Statements of Cash Flows.................................. F-102
Notes to Financial Statements............................. F-103
REDI RENTALS, INC.
Report of Independent Auditors............................ F-108
Balance Sheets............................................ F-109
Statements of Operations.................................. F-110
Statements of Stockholders' Equity........................ F-111
Statements of Cash Flows.................................. F-112
Notes to Financial Statements............................. F-113
</TABLE>
F-2
<PAGE> 76
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of the Company
presents the unaudited pro forma statements of operations for the fiscal year
ended January 31, 1997 ("fiscal 1996"), and the six months ended July 31, 1997,
and the unaudited pro forma balance sheet at July 31, 1997. The pro forma
statement of operations for fiscal 1996 has been adjusted to give effect to (i)
the Company's acquisition of 14 separate rental businesses with a total of 57
stores on or before July 31, 1997 (the "Completed Acquisitions") and (ii) the
Company's proposed acquisition of an additional business with two stores under
an existing letter of intent (the "Pending Acquisition"), in each case, as if
such transactions had occurred on February 1, 1996. See "Background of the
Company" and "Business -- Acquisition History" for information as to the dates
of and companies acquired in the Completed Acquisitions and to be acquired in
the Pending Acquisition. The pro forma statement of operations for the six
months ended July 31, 1997 has been adjusted to give effect to the Completed
Acquisitions that were consummated after January 31, 1997 and the Pending
Acquisition as if such acquisitions had occurred on February 1, 1997. The pro
forma balance sheet gives effect to the Pending Acquisition as if such
acquisition had occurred on July 31, 1997. There can be no assurance that the
Pending Acquisition will be consummated. Pro forma adjustments relating to the
Completed Acquisitions and the Pending Acquisition are referred to herein
collectively as the "Acquisition Adjustments."
Since inception in March 1996, the Company has effected the Completed
Acquisitions as follows: (i) Zodiac, acquired on May 15, 1996, with nine
locations in and around Denver, Colorado; (ii) A to Z, acquired on May 29, 1996,
with four locations in Spokane, Washington; (iii) E-Z Way, acquired on August 2,
1996 (four locations) and January 31, 1997 (one location), located in five
Colorado mountain and resort towns; (iv) U-Rent, acquired on November 1, 1996,
with four locations in Oklahoma; (v) U-Do-It, acquired on December 20, 1996 and
January 6, 1997, with two locations in Idaho; (vi) Hays, acquired on February
14, 1997, with five locations in Arkansas; (vii) CVR, acquired on March 14,
1997, with six locations in Virginia; (viii) A-1 acquired on May 22, 1997, with
five locations in New Mexico; (ix) Suburban, acquired on June 26, 1997, with
seven locations in and around Detroit, Michigan; (x) Duncan, acquired on July
31, 1997, with one location in Oklahoma; and (xi) and four other insignificant
acquisitions with nine locations in Colorado, California and Texas.
The Company has entered into a letter of intent with respect to the Pending
Acquisition, which would add two locations in Tennessee. The audited financial
statements of the business to be acquired in the Pending Acquisition are
included elsewhere herein.
The pro forma as adjusted statements of operations for fiscal 1996 and the
six months ended July 31, 1997, and the pro forma as adjusted balance sheet give
additional effect to (i) the sale by the Company of 3,333,333 shares of Common
Stock offered hereby at an assumed initial public offering price of $9.00 per
share, (ii) a reduction in interest expense as a result of a reduction in
indebtedness upon application of a portion of the net proceeds from the offering
and (iii) the conversion of all of the Company's Series A, Series B and Series C
Preferred Stock and Class A Common Stock into a total of 5,722,018 shares of
Common Stock upon the consummation of this offering and the payment of the
related accrued preferred stock dividends, as though they had occurred at the
beginning of the periods covered by such statements of operations or as of the
date of such balance sheet. The pro forma adjustments relating to the
transactions referred to in clauses (i), (ii) and (iii) are referred to herein
collectively as the "Offering Adjustments." See "Use of Proceeds."
The Acquisition Adjustments and Offering Adjustments represent the
Company's determination of all adjustments necessary to present fairly the
Company's pro forma results of operations and financial position and are based
upon available information and certain assumptions considered reasonable under
the circumstances. The pro forma financial information presented herein does not
purport to present what the Company's financial position or results of
operations would actually have been had such events leading to the Acquisition
Adjustments and Offering Adjustments in fact occurred on the date or at the
beginning of the periods indicated or to project the Company's financial
position or results of operations for any future date or period.
F-3
<PAGE> 77
The unaudited pro forma financial information should be read in conjunction
with the historical financial statements of the Company and the notes thereto
and management's discussion thereof contained elsewhere in this Prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's financial statements and the notes thereto.
RentX has a fiscal year ending January 31. Certain of the businesses
acquired by RentX had fiscal years which ended more than 93 days from RentX's
fiscal year end. For pro forma purposes, the historical financial statements of
these acquired businesses have been adjusted to year ends within 93 days of
RentX's fiscal year end. In addition, the income statement information for
Suburban for the period from January 1 through March 31, 1997, and for the
Pending Acquisition and one of the insignificant acquisitions for the period
from December 1, 1996 through April 30, 1997 are included in both the pro forma
income statements for the year ended January 31, 1997 and the six months ended
July 31, 1997.
F-4
<PAGE> 78
RENTX INDUSTRIES, INC.
PRO FORMA INCOME STATEMENT
<TABLE>
<CAPTION>
Six Months Ended July 31, 1997
-----------------------------------------------------------------------------------------
Historical Insignificant Pending Acquisition
Company A-1 Suburban Duncan Acquisitions Acquisition Adjustments
---------- ---------- -------- ------ ------------- ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Rental revenue.................... $13,598 $ 611 $1,072 $344 $2,176 $1,517 $ --
Rental equipment Sales............ 537 -- 85 -- 74 -- --
Merchandise revenues.............. 1,934 146 160 84 301 278 --
------- ----- ------ ---- ------ ------ ------
Total revenues.............. 16,069 757 1,317 428 2,551 1,795 --
Cost of revenues
Rental equipment expense.......... 1,634 210 -- 28 228 112 --
Rental equipment depreciation..... 1,176 80 146 84 322 174 (305)(1)
Cost of rental equipment sales.... 512 -- 60 -- 7 -- 76(2)
Cost of merchandise and new
equipment sales................. 1,204 76 121 79 253 223 --
Direct operating expense.......... 6,763 340 799 92 1,190 1,035 16(3)
------- ----- ------ ---- ------ ------ ------
Total cost of revenues...... 11,289 706 1,126 283 2,000 1,544 (213)
Store contribution.................. 4,780 51 191 145 551 251 213
Selling, general and administrative
expenses.......................... 3,504 180 570 71 512 516 (752)(4)
Depreciation and amortization,
excluding rental equipment
depreciation...................... 422 15 35 14 38 38 (24)(5)
------- ----- ------ ---- ------ ------ ------
Operating income.................... 854 (144) (414) 60 1 (303) 989
Other (income) expense, net......... (38) -- -- -- -- -- --
Interest expense, related parties... 6 -- -- -- -- -- --
Interest expense, other............. 1,289 19 5 30 67 15 396(7)
------- ----- ------ ---- ------ ------ ------
Income (loss) before income taxes... (403) (163) (419) 30 (66) (318) 593
Income tax expense.................. -- -- (80) -- (15) (117) (106)(8)
------- ----- ------ ---- ------ ------ ------
Net income (loss)................... (403) (163) (339) 30 (51) (201) 699
Preferred stock dividends........... (384) -- -- -- -- -- (116)
------- ----- ------ ---- ------ ------ ------
Net income (loss) available to
common stockholders............... $ (787) $(163) $ (339) $ 30 $ (51) $ (201) $ 583
======= ===== ====== ==== ====== ====== ======
Store contribution margin........... 29.7% 6.7% 14.5% 33.9% 21.6% 14.0% --
Operating margin.................... 5.3% (19.0)% (31.4)% 14.0% 0.1% (16.9)% --
Net income (loss) per common
share(12)......................... $ (.07)
=======
Common shares used in computing net
income (loss) per common
share(12)......................... 5,812
=======
<CAPTION>
Six Months Ended July 31, 1997
----------------------------------------
Offering Pro Forma
Pro Forma Adjustments(9) As Adjusted
--------- -------------- -----------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues
Rental revenue.................... $19,318 $ -- $19,318
Rental equipment Sales............ 696 -- 696
Merchandise revenues.............. 2,903 -- 2,903
------- ------- -------
Total revenues.............. 22,917 -- 22,917
Cost of revenues
Rental equipment expense.......... 2,212 -- 2,212
Rental equipment depreciation..... 1,677 -- 1,677
Cost of rental equipment sales.... 655 -- 655
Cost of merchandise and new
equipment sales................. 1,956 -- 1,956
Direct operating expense.......... 10,235 -- 10,235
------- ------- -------
Total cost of revenues...... 16,735 -- 16,735
Store contribution.................. 6,182 -- 6,182
Selling, general and administrative
expenses.......................... 4,601 -- 4,601
Depreciation and amortization,
excluding rental equipment
depreciation...................... 538 -- 538
------- ------- -------
Operating income.................... 1,043 -- 1,043
Other (income) expense, net......... (38) -- (38)
Interest expense, related parties... 6 -- 6
Interest expense, other............. 1,821 (1,000)(10) 821
------- ------- -------
Income (loss) before income taxes... (746) 1,000 254
Income tax expense.................. (318) 420(8) 102
------- ------- -------
Net income (loss)................... (428) 580 152
Preferred stock dividends........... (500) 500(11) --
------- ------- -------
Net income (loss) available to
common stockholders............... $ (928) $ 1,080 $ 152
======= ======= =======
Store contribution margin........... 27.0% -- 27.0%
Operating margin.................... 4.6% -- 4.6%
Net income (loss) per common
share(12)......................... $ (.07) $ .02
======= =======
Common shares used in computing net
income (loss) per common
share(12)......................... 5,812 3,333 9,145
======= ======= =======
</TABLE>
F-5
<PAGE> 79
RENTX INDUSTRIES, INC.
PRO FORMA INCOME STATEMENT
<TABLE>
<CAPTION>
RENT X
MAY 15, 1996
(COMMENCEMENT
OF OPERATIONS) FISCAL 1996
THROUGH --------------------------------------------------------------
JANUARY 31,
1997 ZODIAC A TO Z E-Z WAY U-RENT U-DO-IT HAYS CVR
-------------- ------ ------ ------- ------ ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Rental revenue........................... $ 9,221 $1,808 $1,167 $1,199 $1,659 $ 953 $2,533 $4,467
Rental equipment sales................... 280 193 -- 59 5 82 -- --
Merchandise revenues..................... 1,337 379 -- 68 -- 126 854 532
------- ------ ------ ------ ------ ------ ------ ------
Total revenues...................... 10,838 2,380 1,167 1,326 1,664 1,161 3,387 4,999
Cost of revenues
Rental equipment expense................. 1,285 175 223 160 262 173 234 485
Rental equipment depreciation............ 436 356 34 196 254 116 165 703
Cost of rental equipment sales........... 272 143 -- 40 -- 55 -- --
Cost of merchandise and new equipment
sales.................................. 625 168 -- -- 62 99 651 411
Direct operating expense................. 4,864 1,179 302 155 -- -- 1,023 2,297
------- ------ ------ ------ ------ ------ ------ ------
Total cost of revenues.............. 7,482 2,021 559 551 578 443 2,073 3,896
Store contribution........................ 3,356 359 608 775 1,086 718 1,314 1,103
Selling, general and administrative
expense.................................. 2,351 442 265 539 755 709 895 557
Depreciation and amortization, excluding
rental equipment depreciation............ 293 19 4 22 5 12 191 30
------- ------ ------ ------ ------ ------ ------ ------
Operating income.......................... 712 (102) 339 214 326 (3) 228 516
Other (income) expense, net............... 4 -- (548) 8 13 (55) (9) --
Interest expense, related parties......... 28 -- -- -- -- -- -- --
Interest expense, other................... 756 76 (4) -- 119 82 113 128
------- ------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes......... (76) (178) 891 206 194 (30) 124 388
Income tax expense........................ -- -- 35 21 57 (14) 59 167
------- ------ ------ ------ ------ ------ ------ ------
Net income (loss)......................... (76) (178) 856 185 137 (16) 65 221
Preferred stock dividends................. (302) -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------ ------ ------
Net income (loss) available to common
stockholders............................. $ (378) $(178) $ 856 $ 185 $ 137 $ (16) $ 65 $ 221
======= ====== ====== ====== ====== ====== ====== ======
Store contribution margin................. 31.0% 15.1% 52.1% 58.4% 65.3% 61.8% 38.8% 22.1%
Operating margin.......................... 6.6% (4.3)% 29.0% 16.1% 19.6% (0.3)% 6.7% 10.3%
Net income (loss) per common share(12).... $ (.01)
=======
Common shares used in computing net income
(loss) per common share(12).............. 5,812
=======
<CAPTION>
FISCAL 1996
----------------------------------------------------------------------------------
INSIGNIFICANT PENDING ACQUISITION
A-1 SUBURBAN DUNCAN ACQUISITIONS ACQUISITION ADJUSTMENTS PRO FORMA
------ -------- ------ ------------- ----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Rental revenue........................... $2,776 $3,284 $ 698 $6,836 $3,547 $ -- $40,148
Rental equipment sales................... -- 147 -- 220 -- -- 986
Merchandise revenues..................... 621 454 224 808 518 -- 5,921
------ ------ ----- ------ ------ ------- -------
Total revenues...................... 3,397 3,885 922 7,864 4,065 -- 47,055
Cost of revenues
Rental equipment expense................. 652 -- 125 878 243 -- 4,895
Rental equipment depreciation............ 240 264 130 954 342 (1,415)(1) 2,775
Cost of rental equipment sales........... -- 106 -- 85 -- 206(2) 907
Cost of merchandise and new equipment
sales.................................. 336 312 209 617 414 -- 3,904
Direct operating expense................. 1,274 2,085 184 3,830 2,182 94(3) 19,469
------ ------ ----- ------ ------ ------- -------
Total cost of revenues.............. 2,502 2,767 648 6,364 3,181 (1,115) 31,950
Store contribution........................ 895 1,118 274 1,500 884 1,115 15,105
Selling, general and administrative
expense.................................. 503 700 141 1,062 677 (875)(4) 8,721
Depreciation and amortization, excluding
rental equipment depreciation............ 43 79 28 129 76 13(5) 944
------ ------ ----- ------ ------ ------- -------
Operating income.......................... 349 339 105 309 131 1,977 5,440
Other (income) expense, net............... -- -- -- 14 -- 590(6) 17
Interest expense, related parties......... -- -- -- -- -- -- 28
Interest expense, other................... 140 12 52 221 20 1,275(7) 2,990
------ ------ ----- ------ ------ ------- -------
Income (loss) before income taxes......... 209 327 53 74 111 112 2,405
Income tax expense........................ 96 120 -- 38 41 404(8) 1,024
------ ------ ----- ------ ------ ------- -------
Net income (loss)......................... 113 207 53 36 70 (292) 1,381
Preferred stock dividends................. -- -- -- -- -- (697) (999)(11)
------ ------ ----- ------ ------ ------- -------
Net income (loss) available to common
stockholders............................. $ 113 $ 207 $ 53 $ 36 $ 70 $ (989) $ 382
====== ====== ===== ====== ====== ======= =======
Store contribution margin................. 26.3% 28.8% 29.7% 19.1% 21.7% -- 32.1%
Operating margin.......................... 10.3% 8.7% 11.4% 3.9% 3.2% -- 11.6%
Net income (loss) per common share(12).... $ .24
=======
Common shares used in computing net income
(loss) per common share(12).............. 5,812
=======
<CAPTION>
FISCAL 1996
----------------------------
OFFERING PRO FORMA
ADJUSTMENTS(9) AS ADJUSTED
-------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenues
Rental revenue........................... $ -- $40,148
Rental equipment sales................... -- 986
Merchandise revenues..................... -- 5,921
------- -------
Total revenues...................... -- 47,055
Cost of revenues
Rental equipment expense................. -- 4,895
Rental equipment depreciation............ -- 2,775
Cost of rental equipment sales........... -- 907
Cost of merchandise and new equipment
sales.................................. -- 3,904
Direct operating expense................. -- 19,469
------- -------
Total cost of revenues.............. -- 31,950
Store contribution........................ -- 15,105
Selling, general and administrative
expense.................................. -- 8,721
Depreciation and amortization, excluding
rental equipment depreciation............ -- 944
------- -------
Operating income.......................... -- 5,440
Other (income) expense, net............... -- 17
Interest expense, related parties......... -- 28
Interest expense, other................... (2,000)(10) 990
------- -------
Income (loss) before income taxes......... 2,000(8) 4,405
Income tax expense........................ 741 1,765
------- -------
Net income (loss)......................... 1,259 2,640
Preferred stock dividends................. 999(11) --
------- -------
Net income (loss) available to common
stockholders............................. $ 2,258 $ 2,640
======= =======
Store contribution margin................. -- 32.1%
Operating margin.......................... -- 11.6%
Net income (loss) per common share(12).... $ .29
=======
Common shares used in computing net income
(loss) per common share(12).............. 3,333 9,145
=======
</TABLE>
F-6
<PAGE> 80
RENTX INDUSTRIES, INC.
PRO FORMA BALANCE SHEET
AS OF JULY 31, 1997
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PENDING OFFERING AS
COMPANY ACQUISITION PRO FORMA ADJUSTMENTS(9) ADJUSTED
---------- ----------- --------- --------------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Cash.......................... $ 2,671 $ -- $ 2,671 $ 190 $ 2,861
Accounts receivable, net...... 3,519 120 3,639 -- 3,639
Prepaid expenses.............. 312 -- 312 -- 312
Prepaid income taxes.......... 386 -- 386 -- 386
Merchandise inventories....... 1,395 120 1,515 -- 1,515
Rental equipment, net......... 27,261 1,380 28,641 -- 28,641
Property and equipment, net... 2,093 100 2,193 -- 2,193
Intangible assets, net........ 28,697 2,280 30,977 -- 30,977
Other assets.................. 1,656 -- 1,656 (840) 816
------- ------ ------- -------- -------
Total assets........ $67,990 $4,000 $71,990 $ (650) $71,340
======= ====== ======= ======== =======
LIABILITIES AND EQUITY
Accounts payable.............. $ 3,339 $ -- $ 3,339 $ (314) $ 3,025
Payroll and other accrued
expenses.................... 3,475 -- 3,475 (750) 2,725
Accrued dividends............. 686 -- 686 (686)(11) --
Accrued interest payable...... 131 -- 131 -- 131
Bank debt and other long term
obligations................. 40,798 4,000 44,798 (25,000)(10) 19,798
Notes payable related
parties..................... 323 -- 323 -- 323
------- ------ ------- -------- -------
Total liabilities... 48,752 4,000 52,752 (26,750) 26,002
Preferred stock............... 20,295 -- 20,295 (20,295)(11) --
Common stock.................. -- -- -- 91(11) 91
Other paid in capital......... 108 -- 108 46,304 46,412
Accumulated deficit........... (1,165) -- (1,165) -- (1,165)
------- ------ ------- -------- -------
Stockholders'
(deficit)
equity............ (1,057) -- (1,057) 46,395 45,338
------- ------ ------- -------- -------
Total liabilities
and equity........ $67,990 $4,000 $71,990 $ (650) $71,340
======= ====== ======= ======== =======
</TABLE>
F-7
<PAGE> 81
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENTS
(1) For each acquisition, the acquired business' historical asset carrying
values and depreciation expense were eliminated and the acquired assets were
revalued at their estimated fair market value for purchase accounting.
Depreciation expense was then recalculated by applying the Company's policies
for depreciation expense.
(2) Although the cost of goods sold for used rental equipment sales by the
acquired businesses was approximately 60% on a combined historical basis, for
purposes of the pro forma presentation, the cost of used rental equipment sales
was recalculated, as necessary, to equal to 90% of revenues from the sale of
used rental equipment, the Company's estimate of the cost of used rental
equipment sold for the year.
(3) For each acquisition, facility rentals were adjusted to rental rates
currently being paid by the Company.
(4) For each acquisition, salary and benefits payable to former owners of
the acquired businesses or members of their families were reduced or eliminated,
as necessary, to reflect employment arrangements entered into at the time of the
acquisitions. Additionally the costs for the Company's infrastructure were
added.
(5) For each acquisition, the historical cost for other depreciable assets
and intangible assets was eliminated and replaced by the purchase accounting
valuations applied by the Company. Depreciation and amortization were then
recalculated using the Company's depreciation and amortization policies.
(6) For each acquisition, nonrecurring gains and losses were eliminated.
(7) For each acquisition, historical debt balances and interest expense
were eliminated and replaced with debt balances as if the debt incurred or to be
incurred by the Company to finance the acquisition were in place on the first
day of the period. Historically, the Company has financed its acquisitions with
a combination of bank borrowings and proceeds from the sale of preferred stock.
(8) For each acquisition, historical income tax expense was eliminated and
replaced by income tax expense using the Company's effective tax rate.
(9) Assumes the sale of 3,333,333 shares of Common Stock in the offering at
an assumed initial public offering price of $9.00 per share, the application of
the estimated net proceeds thereof as described herein and conversion of all
outstanding Series A, Series B and Series C Preferred Stock and Class A Common
Stock into Common Stock upon consummation of the offering.
(10) Represents a reduction in interest expense and bank debt as a result
of utilizing a portion of the estimated net proceeds of the offering to reduce
the debt of the Company.
(11) Represents the conversion of the outstanding Preferred Stock to Common
Stock and the resulting elimination of the Preferred Stock dividend requirement.
(12) Historical and pro forma earnings per share were calculated by
assuming the conversion of the outstanding Preferred Stock of the Company into
Common Stock equivalents and the exercise of all stock options issued within one
year of the initial filing of the Registration Statement of which this
Prospectus is a part. The calculation utilizes the as-if converted method for
Preferred Stock and the treasury stock method for stock options. Pro forma as
adjusted earnings per share also assumes the issuance of 3,333,333 shares of
Common Stock in this offering.
F-8
<PAGE> 82
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
RentX Industries, Inc.
We have audited the accompanying balance sheet of RentX Industries, Inc.
(the "Company") as of January 31, 1997, and the related statements of
operations, stockholders' deficit, and cash flows for the period from May 15,
1996 (commencement of operations) through January 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company at January 31,
1997, and the results of its operations and its cash flows for the period from
May 15, 1996 (commencement of operations) through January 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
August 29, 1997
F-9
<PAGE> 83
RENTX INDUSTRIES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
STOCKHOLDERS'
JANUARY 31, JULY 31, EQUITY
1997 1997 JULY 31, 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash........................................................ $ 707,712 $ 2,670,887
Accounts receivable, net of allowance for doubtful accounts
of
$246,893 and $663,916..................................... 1,358,412 3,518,933
Prepaid expenses............................................ 399,800 312,269
Prepaid income taxes........................................ 380,400 386,230
Merchandise inventories..................................... 374,932 1,394,847
Rental equipment, net....................................... 9,086,540 27,261,094
Property and equipment, net................................. 1,146,217 2,093,051
Intangible assets, net...................................... 15,500,366 28,696,713
Other assets................................................ 128,186 1,655,543
----------- -----------
Total assets....................................... $29,082,565 $67,989,567
=========== ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Accounts payable............................................ $ 549,052 $ 3,338,889
Payroll and other accrued expenses.......................... 1,313,806 3,475,592
Accrued dividends........................................... 302,140 685,762
Accrued interest payable.................................... 89,480 130,573
Bank debt and other long-term obligations................... 16,443,288 40,798,032
Notes payable to related parties............................ 604,932 323,018
----------- -----------
Total liabilities........................................... 19,302,698 48,751,866
Commitments and contingencies (Note 7)
Redeemable preferred stock, cumulative, convertible, $1 par
value:
Series A preferred stock, 17,195 shares authorized, 9,950
and 17,195 shares issued and outstanding (entitled in
liquidation to $9,950,000 and $17,195,000) as of January
31, 1997 and
July 31, 1997, respectively; pro forma no shares issued
and outstanding......................................... 9,850,000 17,095,000 $ --
Series B preferred stock, 200 shares authorized, issued
and outstanding (entitled in liquidation to $200,000);
pro forma no shares issued and outstanding.............. 200,000 200,000 --
Series C preferred stock, 0 and 3,000 shares authorized,
issued and outstanding (entitled in liquidation to $0
and $3,000,000) as of January 31, 1997 and July 31,
1997, respectively; pro forma no shares issued and
outstanding............................................. -- 3,000,000 --
----------- ----------- -----------
Total redeemable preferred stock............................ 10,050,000 20,295,000 --
Stockholders' deficit:
Class A common stock, $.01 par value; 5,061,538 and
5,964,326 shares authorized, 1,000 shares issued and
outstanding............................................. 1 1 --
Class B common stock, $.01 par value; 192,308 and 242,308
shares authorized, none issued and outstanding.......... -- -- --
Common stock, $.01 par value; 19,000,000 shares
authorized; 5,722,018 shares issued and outstanding pro
forma................................................... -- -- 57,220
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares issued and outstanding............ -- -- --
Paid-in capital........................................... 107,543 107,543 20,345,324
Accumulated deficit....................................... (377,677) (1,164,843) (1,164,843)
----------- ----------- -----------
Total stockholders' deficit (equity)........................ (270,133) (1,057,299) $19,237,701
----------- ----------- ===========
Total liabilities and stockholders' deficit........ $29,082,565 $67,989,567
=========== ===========
</TABLE>
See accompanying notes.
F-10
<PAGE> 84
RENTX INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 15, 1996
(COMMENCEMENT
OF OPERATIONS) SIX MONTHS ENDED JULY 31,
THROUGH --------------------------
JANUARY 31, 1997 1996 1997
---------------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Rental revenue...................................... $ 9,221,035 $2,529,690 $13,598,456
Rental equipment sales.............................. 280,212 83,744 536,856
Merchandise sales................................... 1,337,117 387,762 1,933,337
----------- ---------- -----------
Total revenues.............................. 10,838,364 3,001,196 16,068,649
Cost of revenues:
Rental equipment expense............................ 1,284,902 230,949 1,633,675
Rental equipment depreciation....................... 436,250 127,492 1,175,538
Cost of rental equipment sales...................... 272,258 75,366 511,568
Cost of merchandise sales........................... 625,040 175,094 1,204,072
Direct operating expense............................ 4,863,825 1,159,131 6,763,689
----------- ---------- -----------
Total cost of revenues...................... 7,482,275 1,768,032 11,288,542
----------- ---------- -----------
Store contribution.................................... 3,356,089 1,233,164 4,780,107
Selling, general and administrative expense........... 2,351,023 655,982 3,504,061
Depreciation and amortization, excluding rental
equipment depreciation.............................. 293,364 79,091 421,748
----------- ---------- -----------
Operating income...................................... 711,702 498,091 854,298
Other income (expense), net........................... (4,117) 1,337 38,397
Interest expense, related parties..................... (28,102) (11,754) (6,581)
Interest expense, other............................... (755,020) (174,011) (1,289,658)
----------- ---------- -----------
Income (loss) before income taxes..................... (75,537) 313,663 (403,544)
Income taxes.......................................... -- -- --
----------- ---------- -----------
Net income (loss)..................................... (75,537) 313,663 (403,544)
Preferred stock dividends............................. (302,140) (70,625) (383,622)
----------- ---------- -----------
Net income (loss) attributable to common
stockholders........................................ $ (377,677) $ 243,038 $ (787,166)
=========== ========== ===========
Net income (loss) per common share.................... $ (0.01) $ 0.05 $ (0.07)
=========== ========== ===========
Common shares used in computing net income (loss) per
common share........................................ 5,811,808 5,811,808 5,811,808
=========== ========== ===========
</TABLE>
See accompanying notes.
F-11
<PAGE> 85
RENTX INDUSTRIES, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- PAID-IN ACCUMULATED STOCKHOLDERS'
CLASS A CLASS B CAPITAL DEFICIT DEFICIT
------- ------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of 1,000 Class A common shares
at inception........................... 1 -- -- -- 1
Issuance of compensatory stock options... -- -- 107,543 -- 107,543
Net loss................................. -- -- -- (75,537) (75,537)
Preferred stock dividends................ -- -- -- (302,140) (302,140)
---- ---- -------- ----------- -----------
Balance at January 31, 1997.............. 1 -- 107,543 (377,677) (270,133)
Net loss (unaudited)..................... -- -- -- (403,544) (403,544)
Preferred stock dividends (unaudited).... -- -- -- (383,622) (383,622)
---- ---- -------- ----------- -----------
Balance at July 31, 1997 (unaudited)..... $ 1 $ -- $107,543 $(1,164,843) $(1,057,299)
==== ==== ======== =========== ===========
</TABLE>
See accompanying notes.
F-12
<PAGE> 86
RENTX INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 15, 1996
(COMMENCEMENT
OF OPERATIONS) SIX MONTH PERIOD ENDED JULY 31,
THROUGH -------------------------------
JANUARY 31, 1997 1996 1997
---------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................ $ (75,537) $ 313,663 $ (403,544)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................. 729,614 207,583 1,623,495
(Gain) loss on sale/disposal of rental
equipment................................... 19,753 (950) (25,288)
Provision for doubtful accounts................ 73,172 29,991 169,252
Issuance of compensatory stock options......... 85,193 29,038 --
Changes in operating assets and liabilities,
net of effect of business acquisitions:
Accounts receivable......................... (235,034) (469,888) (1,130,480)
Prepaid expenses............................ (224,800) (9,319) 87,531
Prepaid income taxes........................ (380,400) -- (5,830)
Other assets................................ (85,835) -- --
Merchandise inventories..................... (87,493) (71) 125,131
Accounts payable............................ 549,052 427,530 2,789,838
Payroll and other accrued expenses.......... 1,298,438 666,083 1,212,976
------------ ------------ ------------
Net cash provided by operating activities........ 1,666,123 1,193,660 4,443,081
INVESTING ACTIVITIES
Acquisitions of rental operations, net of cash
acquired....................................... (26,525,768) (18,755,878) (27,747,247)
Purchases of rental equipment and operating
equipment...................................... (1,468,766) (97,781) (7,911,660)
Purchases of fixed assets and other.............. (342,309) (189,362) (1,675,685)
Proceeds from sale of rental equipment........... 280,212 76,316 536,856
------------ ------------ ------------
Net cash used in investing activities............ (28,056,631) (18,966,705) (36,797,736)
FINANCING ACTIVITIES
Borrowings on bank debt.......................... 17,552,288 10,658,629 27,557,591
Payments on bank debt............................ (1,109,000) -- (3,202,847)
Borrowings on notes payable...................... 1,161,726 844,925 --
Payments on notes payable........................ (556,794) (91,591) (281,914)
Proceeds from issuance of preferred stock, net of
issuance costs................................. 10,050,000 7,107,000 10,245,000
------------ ------------ ------------
Net cash provided by financing activities........ 27,098,220 18,518,963 34,317,830
------------ ------------ ------------
Net increase in cash............................. 707,712 745,918 1,963,175
Cash at beginning of period...................... -- -- 707,712
------------ ------------ ------------
Cash at end of period............................ $ 707,712 $ 745,918 $ 2,670,887
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid.................................... $ 681,699 $ 26,201 $ 144,672
Income taxes paid................................ 380,400 -- 5,830
</TABLE>
See accompanying notes.
F-13
<PAGE> 87
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997 AND JULY 31, 1997
(INFORMATION SUBSEQUENT TO JANUARY 31, 1997
IS UNAUDITED)
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
RentX Industries, Inc. (the "Company"), a Delaware corporation, was formed
on March 7, 1996 and commenced operations on May 15, 1997. No significant
expenses were incurred by the Company from the date of formation until the date
of commencement of operations. The Company is primarily involved in
consolidating businesses that focus upon the short-term rental of small tools,
general purpose construction and special event equipment, and to a lesser
extent, selling complementary merchandise, parts, and new and used equipment. At
January 31, 1997, the Company operated 24 equipment rental stores located in
four states across the western region of the United States.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheet is presented
on an unclassified basis.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Rental revenue is recorded under the operating method. Rental revenue in
the statement of operations includes revenue earned on equipment rentals, fuel
sales, and rental equipment delivery fees. Revenue from the sale of rental
equipment, merchandise and new equipment is recorded at the time of delivery or
pickup by the customer.
CREDIT POLICY
A significant portion of the Company's business is on a credit basis. The
Company extends credit to its commercial customers based on evaluations of
ability to pay and generally no collateral is required. These evaluations are
conducted at the store level. The Company has diversified its customer base by
operating rental locations in four states as of January 31, 1997. Subsequent to
period end, the Company furthered its diversification by acquiring businesses in
five additional states. The Company maintains reserves it believes adequate for
potential credit losses.
RENTAL EQUIPMENT, NET
Rental equipment purchased new by the Company is recorded at cost. Rental
equipment obtained through acquisition of a subsidiary is recorded at estimated
fair market value at the time of acquisition. Acquired rental equipment is
depreciated on a straight-line basis averaging six years to an estimated salvage
value of 22% of acquired cost. Purchased rental equipment is depreciated on a
straight-line basis over four to ten years to an estimated salvage value of
0%-30% of original cost. Accumulated depreciation on rental equipment at January
31, 1997 was $411,878.
Ordinary maintenance and repair costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and accumulated
depreciation are removed from the
F-14
<PAGE> 88
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
respective accounts. Proceeds from the disposal and the related net book value
of the equipment are recognized in the period of disposal and reported as
revenue from rental equipment sales and cost of rental equipment sales in the
statement of operations.
INTANGIBLE ASSETS
Intangible assets are recorded at cost and are amortized using the
straight-line method over their estimated useful lives of five years for
covenants not to compete and 40 years for goodwill. The recoverability of
goodwill attributable to the Company's acquisitions is analyzed periodically
based on actual and projected levels of profitability and cash flows of the
businesses acquired on an undiscounted basis.
PROPERTY AND EQUIPMENT
Property and equipment purchased new by the Company is recorded at cost.
Property and equipment obtained through acquisition of a subsidiary is recorded
at estimated fair market value at the time of acquisition. Depreciation is
computed on a straight-line basis over the following estimated useful lives:
<TABLE>
<S> <C>
Vehicles, machinery and equipment........................... 10 years
Furniture and fixtures...................................... 10 years
Computer equipment.......................................... 5 years
</TABLE>
Ordinary maintenance and repair costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any gains
or losses are included in results of operations.
MERCHANDISE INVENTORIES
Merchandise inventories consist principally of parts, commodity type
supplies and small- to medium-sized equipment for sale. All merchandise
inventories are valued at the lower of cost (first-in, first-out) or market.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. Under the liability method, deferred taxes are determined based on
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in the years in which the differences are
expected to reverse. Recognition of deferred tax assets is limited to amounts
considered by management to be realizable, more likely than not in future
periods.
DEBT COSTS
Deferred financing costs are amortized using the effective interest method
over the life of the related debt.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically reviews its valuation for long-lived assets used
in operations when indicators of impairment are present. If the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles.
F-15
<PAGE> 89
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING EXPENSE
Advertising costs are expensed as incurred. Advertising expense was
$144,850 for the period ended January 31, 1997.
CONCENTRATIONS OF CREDIT RISK
The Company's primary financial instrument that is potentially subject to
significant concentrations of credit risk is accounts receivable. The
concentration of credit risk is limited due to the large number of customers the
Company maintains and the Company's geographic dispersion.
DEFERRED COSTS TO ESTABLISH EQUITY
Deferred costs to establish equity incurred in conjunction with
acquisitions made by the Company were offset against the value of redeemable
preferred stock. At January 31, 1997, there were $100,000 of such costs.
EARNINGS PER COMMON SHARE
Pursuant to Securities and Exchange Commission Staff Accounting Bulletins
and Staff Policy, common equivalent shares issued during the 12-month period
prior to initial public offering at prices below the public offering price are
presumed to have been issued in contemplation of the public offering, even if
antidilutive, and have been included in the calculation as if these common
equivalent shares were outstanding for all periods presented (using the as-if
converted method for preferred stock and the treasury stock method for stock
options, and the estimated initial public offering price for the Company's
Common Stock).
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash, accounts
receivable, accounts payable and accrued liabilities approximate fair value
because of the immediate or short-term maturity of these financial instruments.
The fair value of long-term debt is determined using current applicable interest
rates as of January 31, 1997 and approximates the carrying value of such debt
because the underlying instruments include provisions to adjust note balances
and interest rates to approximate fair value.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying balance sheet at July 31, 1997 and the statements of
operations, stockholders' deficiency and cash flows for the six-month periods
ended July 31, 1996 and 1997 are unaudited and have been prepared on the same
basis as the audited financial statements included herein. In the opinion of
management, such unaudited financial statements include all adjustments
necessary to present fairly the information set forth therein, which consist
solely of normal recurring adjustments. The results of operations for such
interim periods are not necessarily indicative of results for the full
respective year.
2. BUSINESS ACQUISITIONS
A principal component of the Company's business strategy is to grow through
acquisitions which augment its present operations as well as enter into new
geographic markets. In keeping with this strategy, the Company has made several
acquisitions of rental operations. These acquisitions have been accounted for as
purchases and, accordingly, the acquired tangible and identifiable intangible
assets and liabilities have been recorded at their estimated fair values at the
dates of acquisition with any
F-16
<PAGE> 90
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
excess purchase price being reflected as goodwill in the accompanying financial
statements. The operations of the acquired businesses are included in the
statements of operations from the date of acquisition.
The following table sets forth the net assets acquired, liabilities assumed
and cash purchase price for these acquisitions:
<TABLE>
<S> <C>
Assets acquired............................................. $10,887,032
Goodwill and covenants not to compete....................... 15,743,584
Less liabilities assumed.................................... (104,848)
-----------
Cash purchase price......................................... $26,525,768
===========
Number of acquisitions...................................... 5
</TABLE>
3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
<TABLE>
<S> <C>
Vehicles, machinery and equipment........................... $1,086,482
Furniture and fixtures...................................... 70,041
Computer equipment.......................................... 39,840
----------
Total............................................. 1,196,363
Less accumulated depreciation............................... (50,146)
----------
$1,146,217
==========
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<S> <C>
Covenants not to compete.................................... $ 530,790
Goodwill.................................................... 15,212,794
-----------
Total............................................. 15,743,584
Less accumulated amortization............................... (243,218)
-----------
$15,500,366
===========
</TABLE>
The Company has entered into noncompetition agreements with the former
owners of certain acquired businesses. The agreements are generally for terms of
five years and prohibit the former owners from competing with the Company in the
business of renting equipment in certain counties located in the area of the
acquired business.
F-17
<PAGE> 91
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. BANK DEBT AND LONG-TERM OBLIGATIONS
Bank debt and long-term obligations consist of the following:
<TABLE>
<S> <C>
Notes payable to related parties:
Note payable to former owners, interest payable monthly at
5.37%, due in
April 1998............................................. $ 379,722
Note payable to related party for covenant not to compete,
payable monthly, due January 31, 2002.................. 225,210
-----------
604,932
Bank debt and other long-term obligations:
Revolving line of credit, interest payable monthly at
LIBOR plus 2.5% (8.25% at January 31, 1997)............ 429,000
Term credit commitment, interest payable monthly at LIBOR
plus 2.5% (8.25% at January 31, 1997).................. 406,500
Term credit commitment, interest payable monthly at
domestic rate plus 2% (8.0% at January 31, 1997)....... 14,686,629
American Equipment Leasing, Draws 1 and 2, interest
payable monthly in arrears at 9.08%.................... 524,746
American Equipment Leasing, Draw 3, interest payable
monthly in arrears
at 9.67%............................................... 396,413
-----------
16,443,288
-----------
Total notes payable to related parties, bank debt and other
long-term obligations..................................... $17,048,220
===========
</TABLE>
The Company's agreement with the bank provides for a revolving line of
credit of $5,620,408 maturing no later than May 31, 1999 and term loans up to
$39,342,857 that mature on May 31, 1999. In no event shall the total credit
facility exceed $39,342,857. The revolving and term credit commitment agreements
include restrictions as to limitations upon certain ratios of funded debt to
contributed equity and minimum ratios of debt to pro forma cash flows. The
credit facility also includes limitations upon lease terms, the number of new
stores developed versus those acquired, and the amounts of other debt and lease
financing the Company may obtain. Substantially all rental equipment, property
and equipment, and notes and accounts receivable of the Company are pledged as
collateral for the bank line of credit, senior notes, and notes related to
purchases of certain businesses. The Company pays a commitment fee of 0.5% on
the unused portion of the outstanding credit facility calculated quarterly based
on the average daily balance.
As of April 30, 1997, the Company was in violation of a debt covenant under
the debt agreement with the bank. Compliance with the covenant is measured at
the Company's year end and at the end of each fiscal quarter. The bank waived
compliance with this covenant for the quarter ended April 30, 1997. In addition,
the credit agreement was amended and the affected covenant was changed for each
of the quarters July 31, 1997 through April 30, 1998. At the same time, the bank
increased the total credit facility to $39,342,000. Accordingly, the maturity of
the bank indebtedness is shown as being due in accordance with the terms of the
credit agreement in the maturities of debt table.
The Company's secured loan agreement with American Equipment Leasing Co.
("AEL") provides for a line of credit not to exceed $3,000,000. Monthly payments
of principal and interest are made on the current outstanding balance.
Termination of the line of credit occurs when the $3,000,000 limit is reached or
at December 28, 1997, whichever occurs first. At the termination date, the line
of credit becomes a term loan and principal and interest payments continue as
before. The debt is secured by
F-18
<PAGE> 92
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
rental equipment. The loan agreement provides reporting and insurance
requirements and disallows third party liens against secured equipment. As of
May 7, 1997, the line of credit was fully drawn and converted to a term loan as
described above.
The Company incurred interest expense of $28,102 on borrowings from related
parties for the period ended January 31, 1997.
Maturities of debt are as follows at January 31, 1997:
<TABLE>
<S> <C>
1998........................................................ $ 601,032
1999........................................................ 15,787,829
2000........................................................ 287,262
2001........................................................ 297,508
2002........................................................ 74,589
Thereafter.................................................. --
-----------
$17,048,220
===========
</TABLE>
6. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
REDEEMABLE PREFERRED STOCK
The redeemable preferred stock is subject to redemption at the option of
the stockholder and can only occur in the event of default, as defined in the
Certificate, and is cumulative at a rate of 5% per annum (7% per annum during
the continuance of an Event of Default, as defined in the Certificate), computed
on a daily basis. The redeemable preferred stock is convertible at any time into
the number of fully paid and nonassessable shares of Class A common stock
determined by the class specific conversion rate. Holders of Series A preferred
stock shall be entitled to a number of votes equal to the respective number of
shares of Class A common stock that would have been issuable if converted on the
record date. Upon liquidation, the redeemable preferred stock carries a
liquidation preference of $1,000 per share, before any payment shall be made or
any assets distributed to the holders of common stock. After the payment or
distribution to the holders of redeemable preferred stock of the full
preferential amounts, the common stockholders are entitled to all remaining
assets of the Company to be distributed.
PROPOSED PUBLIC OFFERING OF COMMON STOCK
The Company's Board of Directors has authorized the Company to proceed with
an initial public offering of the Company's common stock. If the offering is
consummated, all of the currently outstanding preferred stock will automatically
convert into 5,721,018 shares of common stock. The unaudited pro forma
stockholders' equity at July 31, 1997 gives effect to the conversion of all
outstanding convertible preferred stock into 5,721,018 shares of common stock
upon the completion of the Company's initial public offering of shares.
COMMON STOCK
In the event of a public offering, as defined in the Certificate, all
shares of Class B common stock shall convert to Class A common stock on a
one-for-one basis. Holders of Class B common stock have no voting rights. The
unaudited pro forma stockholders' equity at July 31, 1997 also reflects the
conversion of the Company's Series A, Series B and Series C preferred stock and
Class A Common Stock, into a single class of Common Stock upon completion of an
initial public offering pursuant to the Company's Amended and Restated
Certificate of Incorporation dated June 25, 1997.
F-19
<PAGE> 93
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTION PLAN
On January 31, 1997, the Board of Directors of the Company adopted a stock
option plan whereby under the plan, officers, directors, and key employees may
be granted options to purchase the Company's nonvoting Class B common stock at a
price set by the Board of Directors with respect to the optionee's stock option.
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25"), and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, Accounting for Stock-Based Compensation, requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of a portion of the
Company's employee stock options was less than the market price of the
underlying stock on the date of grant, compensation expense totaling $85,193 was
recognized.
Statement No. 123 requires that companies electing to continue to use the
intrinsic value method make pro forma disclosure of net income and net income
per share as if the fair value based method of accounting had been applied. The
pro forma net income based on Statement No. 123's fair value based method for
the period ended January 31, 1997 was not materially different than the recorded
net income. However, the effects of applying Statement No. 123 during the period
ended January 31, 1997 are not likely to be representative of the effects on pro
forma net income for future years because the vesting of options and additional
option grants will cause additional incremental expense to be recognized in
future periods. A summary of the Company's stock option activity and related
information for the period ended January 31, 1997 follows:
<TABLE>
<CAPTION>
EMPLOYEE STOCK OPTION PLAN
-----------------------------
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Options outstanding at March 7, 1996...................... --
Granted at $1.00 exercise price........................... 36,641
Granted at $0.15 exercise price........................... 38,462
Granted at $8.00 exercise price........................... 97,516
Granted at $0.10 exercise price........................... 19,231
-------
Options outstanding at January 31, 1997................... 191,850 $4.30
=======
</TABLE>
A summary of outstanding options, by year they become exercisable, follows:
<TABLE>
<CAPTION>
EMPLOYEE STOCK OPTION PLAN
-----------------------------
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
1997...................................................... 57,693 $0.13
1998...................................................... 7,328 1.00
1999...................................................... 56,087 7.09
2000...................................................... 31,707 6.38
2001...................................................... 31,707 6.38
2002...................................................... 7,328 1.00
-------
Options outstanding at January 31, 1997................... 191,850 4.30
=======
</TABLE>
F-20
<PAGE> 94
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Exercise price range of the options outstanding is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER WEIGHTED-AVERAGE REMAINING
OF SHARES EXERCISE PRICE CONTRACTUAL LIFE
- --------- ---------------- -----------------
<C> <C> <C>
19,231 $0.10 10 years
38,462 0.15 10 years
36,641 1.00 10 years
97,516 8.00 10 years
-------
191,850
</TABLE>
Exercise price range of the options exercisable is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER WEIGHTED-AVERAGE REMAINING
OF SHARES EXERCISE PRICE CONTRACTUAL LIFE
- --------- ---------------- -----------------
<C> <C> <C>
57,693 $0.13 10 years
</TABLE>
The options currently outstanding generally become vested and exercisable
in 20% segments, beginning one year from grant date and thereafter on the grant
date anniversary for four additional years. Generally, the stock options will
expire ten years from the date such options were granted. At January 31, 1997,
192,308 shares were reserved for issuance pursuant to the stock option plan.
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Future minimum rental commitments as of January 31, 1997 under
noncancelable operating leases are:
<TABLE>
<S> <C>
1998............................................. $1,397,694
1999............................................. 1,314,180
2000............................................. 757,963
2001............................................. 183,944
2002............................................. 132,138
Thereafter....................................... --
----------
$3,785,919
==========
</TABLE>
The Company leases certain facilities under operating leases which contain
renewal options and provide for periodic cost of living adjustments. Rental
expense was $652,072 for the period ended January 31, 1997. Substantially all of
the Company's operating leases are with the prior owners of the businesses
acquired by the Company. In many instances, these individuals are now employees
of the Company. These leases require monthly payments aggregating approximately
$116,000.
LEGAL MATTERS
The Company is party to legal proceedings and potential claims arising in
the ordinary course of its business. In the opinion of management, the Company
has adequate legal defense, reserves or insurance coverage with respect to these
matters so that the ultimate resolution will not have a material adverse effect
on the Company's financial position, results of operations or cash flows.
F-21
<PAGE> 95
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ENVIRONMENTAL MATTERS
The Company and its operations are subject to various laws and related
regulations governing environmental matters. Under such laws, an owner or lessee
of real estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances located on or in, or emanating from, such
property, as well as investigation of property damage. As part of the Company's
acquisition due diligence, the Company performs extensive environmental
analysis. The remediation has typically been the responsibility of the prior
owner and is addressed prior to closing.
8. RELATED PARTY TRANSACTIONS
In May 1996, the Company entered into a consulting agreement (the
"Consulting Agreement") with BACE Industries, LLC ("BACE"), which owns 100% of
the Company's Class A common stock and 2% of the Company's preferred stock.
Under the Management Agreement, BACE provided consulting services concerning
business planning, acquisitions, financing and other management matters to the
Company. The Company reimbursed BACE for any out-of-pocket costs incurred by
BACE in connection with such services. Additionally, the Company paid a fixed
consulting fee based on the Company's sales and a variable fee based on the
"Adjusted Income Exceeding the Minimum Hurdle" as defined by the Agreement, not
to exceed the amount of the fixed consulting fee. Total consulting fee expense,
included in selling, general and administrative expense, was $242,680 for the
period ended January 31, 1997. As of January 31, 1997, the consulting fee
payable was $121,340.
9. DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan (the "Plan") covering all
full-time employees over the age of eighteen who have completed ninety days of
service. Employees may contribute up to 15% of their annual compensation,
limited to the maximum contribution allowable under Internal Revenue Service
guidelines. Employer contributions under the Plan are discretionary. There were
no employer contributions made during the period March 7, 1996 (date of
incorporation) through January 31, 1997.
10. INCOME TAXES
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company had no
significant temporary differences at January 31, 1997.
F-22
<PAGE> 96
RENTX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. SUBSEQUENT EVENTS
Subsequent to year end, the Company made additional business acquisitions.
As with the acquisitions which took place prior to year end, the following were
accounted for as purchase business combinations:
<TABLE>
<CAPTION>
NUMBER OF CASH
STORES DATE OF PURCHASE
NAME OF ENTITY ACQUIRED ACQUISITION PRICE
-------------- --------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Hays Rental and Sales.................... 5 February 14, 1997 $4,605
CVR, Inc................................. 6 March 14, 1997 4,585
Scotty Rents, Inc........................ 4 April 21, 1997 3,827
Newmanco, Inc............................ 5 May 22, 1997 3,686
Titus Rental Service Companies, Inc...... 7 June 26, 1997 5,186
AZ Rents It Fort Collins................. 1 July 17, 1997 2,091
A-1 Rent All of Tyler/Marshall........... 4 July 24, 1997 2,400
Mer-Cal Enterprises, Inc................. 1 July 31, 1997 1,030
</TABLE>
On July 15, 1997, the Company entered into a letter of intent to purchase
the Common Stock of Redi Rentals, Inc.
In an amendment to the Certificate of Incorporation dated June 24, 1997,
additional shares of stock were authorized by the Board of Directors. In
addition, a third series of preferred stock (Series C) was authorized. Series C
preferred stock has the same respective voting powers and preferences as Series
A and B preferred stock. The total authorized shares within each of the stock
classes are as follows:
<TABLE>
<CAPTION>
STOCK CLASS AUTHORIZED SHARES
----------- -----------------
<S> <C>
Class A common stock........................................ 5,964,326
Class B common stock........................................ 248,308
Series A preferred stock.................................... 17,195
Series B preferred stock.................................... 200
Series C preferred stock.................................... 3,000
</TABLE>
Additional draws on the Company's revolver and term loans were made
subsequent to year end to partially fund the above acquisitions and for general
operating expenses. Balances on the revolver and term loans at August 29, 1997
were $2,191,000 and $32,805,279, respectively.
F-23
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Zodiac Rentals
Denver, Colorado
We have audited the accompanying combined balance sheets of Zodiac Rentals
as of May 14, 1996 and December 31, 1995, and the related combined statements of
operations, stockholders' equity and cash flows for the period from January 1,
1996 to May 14, 1996, and the years ended December 31, 1995 and 1994. These
financial statements are the responsibility of the management of Zodiac Rentals.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Zodiac Rentals as
of May 14, 1996 and December 31, 1995, and the combined results of its
operations and cash flows for the period from January 1, 1996 to May 14, 1996
and the years ended December 31, 1995 and 1994, in accordance with generally
accepted accounting principles.
Pester & Company
Certified Public Accountants P.C.
Denver, Colorado
May 9, 1997, except for Note 6, as to which the date was May 15, 1997.
F-24
<PAGE> 98
ZODIAC RENTALS
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MAY 14,
1995 1996
------------ ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 651,071 $ 201,680
Accounts receivable....................................... 717,072 573,177
Advances to shareholders.................................. 4,240 4,055
Inventory................................................. 163,582 155,869
Due from RentX............................................ -- 15,188
Payroll tax receivable.................................... 3,006 --
---------- ----------
Total Current Assets.............................. 1,538,971 949,969
---------- ----------
PROPERTY AND EQUIPMENT
Rental equipment and vehicles............................. 6,312,446 7,291,864
Furniture and fixtures.................................... 189,896 189,896
Leasehold improvements.................................... 44,775 47,650
---------- ----------
6,547,117 7,529,410
Less accumulated depreciation............................. 3,944,650 4,307,668
---------- ----------
Net Property and Equipment........................ 2,602,467 3,221,742
---------- ----------
OTHER ASSETS
Deposits.................................................. 1,332 1,332
Intangibles, less accumulated amortization................ 91,111 88,611
---------- ----------
Total Other Assets................................ 92,443 89,943
---------- ----------
TOTAL ASSETS...................................... $4,233,881 $4,261,654
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 162,693 $ 116,612
Accrued salaries, taxes and expenses...................... 186,639 181,592
Due to stockholders....................................... 5,030 1,859
Note payable, bank, current portion....................... 598,709 300,000
Long-term debt, current portion........................... 479,323 509,953
---------- ----------
Total Current Liabilities......................... 1,432,394 1,110,016
---------- ----------
LONG TERM DEBT
Note payable, bank, net of current portion................ 699,028 1,852,464
Long-term debt, net of current portion.................... 586,018 365,720
---------- ----------
TOTAL LIABILITIES........................................... 2,717,440 3,328,200
---------- ----------
STOCKHOLDERS' EQUITY
Common stock:
Zodiac Rentals, 49,000 shares of no par value
authorized, 1,724 shares issued and outstanding....... 600,276 600,276
Zodiac Three, Inc., 50,000 shares of no par value
authorized, 300 shares issued and outstanding......... 1,759 1,759
Retained earnings......................................... 914,406 331,419
---------- ----------
Total Stockholders' Equity........................ 1,516,441 933,454
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $4,233,881 $4,261,654
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE> 99
ZODIAC RENTALS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1996
----------------------- TO
1994 1995 MAY 14, 1996
---------- ---------- ---------------
<S> <C> <C> <C>
Revenues:
Rental revenue....................................... $4,501,745 $6,215,264 $2,123,006
Merchandise sales.................................... 865,233 1,066,210 461,462
Other income......................................... 194,955 209,620 37,293
Rental equipment sales............................... 88,373 99,460 192,571
---------- ---------- ----------
Total revenues............................... 5,650,306 7,590,554 2,814,332
Cost of revenues:
Cost of rental equipment sales....................... 64,349 90,619 149,225
Rental equipment expense............................. 450,141 508,889 213,512
Rental equipment depreciation........................ 546,356 1,068,832 462,603
Cost of merchandise.................................. 628,806 461,997 203,192
Direct operating expense............................. 2,435,418 3,296,877 1,407,876
---------- ---------- ----------
Total cost of revenues....................... 4,125,070 5,427,214 2,436,408
Store contribution..................................... 1,525,236 2,163,340 377,924
Selling, general and administrative expense............ 1,093,918 1,486,200 554,360
Depreciation and amortization, excluding rental
equipment depreciation............................... 30,604 20,906 19,848
---------- ---------- ----------
Operating income (loss)................................ 400,714 656,234 (196,284)
Other expense, net
Interest expense..................................... 112,742 215,975 92,964
---------- ---------- ----------
Net income (loss)...................................... $ 287,972 $ 440,259 $ (289,248)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 100
ZODIAC RENTALS
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ZODIAC RENTALS, INC. ZODIAC THREE, INC.
COMMON STOCK COMMON STOCK TOTAL
--------------------- ------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT EARNINGS EQUITY
-------- ---------- -------- -------- ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993...... 1,724 $600,276 300 $1,759 $ 564,682 $1,166,717
Net income........................ 287,972 287,972
Stockholder distributions......... (123,082) (123,082)
----- -------- --- ------ --------- ----------
Balance at December 31, 1994...... 1,724 600,276 300 1,759 729,572 1,331,607
Net income........................ 440,259 440,259
Stockholder distributions......... (255,425) (255,425)
----- -------- --- ------ --------- ----------
Balance at December 31, 1995...... 1,724 600,276 300 1,759 914,406 1,516,441
Net income........................ (289,248) (289,248)
Stockholder distributions......... (293,739) (293,739)
----- -------- --- ------ --------- ----------
Balance at May 14, 1996........... 1,724 $600,276 300 $1,759 $ 331,419 $ 933,454
===== ======== === ====== ========= ==========
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE> 101
ZODIAC RENTALS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1996
------------------------- TO
1994 1995 MAY 14, 1996
----------- ----------- ---------------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................. $ 287,972 $ 440,259 $ (289,248)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation and amortization................... 576,960 1,089,738 482,451
(Increase) decrease in assets
Accounts receivable........................... (82,232) (178,481) 143,895
Inventory..................................... (20,344) (68,450) 7,713
Other current assets.......................... 116,858 9,301 3,006
Deposits...................................... -- 4,266 --
Net advances to (from) stockholders........... -- 8,907 (2,985)
Advance to related party...................... (29,400) 38,050 (15,188)
Increase (decrease) in liabilities
Accounts payable.............................. 156,973 17,459 (46,082)
Accrued expenses.............................. 35,925 54,303 (5,047)
----------- ----------- -----------
Total adjustments.......................... 754,740 975,093 567,763
Net cash provided by operating
activities............................... 1,042,712 1,415,352 278,515
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangibles............................ (100,000) -- --
Purchases of equipment............................. (1,536,088) (1,545,049) (1,099,225)
Net cash used by investing activities...... (1,636,088) (1,545,049) (1,099,225)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank and long-term debt.............. 1,684,991 1,322,626 1,050,000
Distributions to stockholders...................... (123,082) (255,425) (293,739)
Payments on note payable, bank..................... (216,621) (398,822) (195,273)
Payments on long-term debt......................... (421,261) (475,590) (189,669)
----------- ----------- -----------
Net cash provided by financing
activities............................... 924,027 192,789 371,319
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ 330,651 63,092 (449,391)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD/YEAR........................................ 257,328 587,979 651,071
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD/YEAR........ $ 587,979 $ 651,071 $ 201,680
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 102
ZODIAC RENTALS
NOTES TO COMBINED FINANCIAL STATEMENTS
MAY 14, 1996
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Zodiac Rentals (the Companies) is a Colorado corporation whose principal
activities are short-term rentals of equipment and sales of related merchandise
to commercial and retail customers located in the Denver, Colorado metropolitan
area. Operations are conducted through the Companies' nine retail locations. A
significant portion of revenues is derived from rentals and sales to businesses
in the construction industry.
Summary of Significant Accounting Policies
a. Basis of Presentation. The combined financial statements consist of two
affiliated corporations under shared management and common ownership,
collectively referred to in these financial statements as the "Companies." The
corporations are Zodiac Rentals, Inc. and Zodiac Three, Inc.
Aurora Rentals, Inc. was incorporated on February 16, 1974. There are
49,000 shares of no par value common stock authorized with 1,724 shares issued
and outstanding as of May 14, 1996. As of January 1, 1995, Aurora Rentals, Inc.
changed its name to Zodiac Rentals, Inc.
Zodiac Three, Inc. was incorporated on January 1, 1990 with an outside
unrelated third party who owns one-third of the common stock. There are 50,000
shares of no par value common stock authorized with 300 shares issued and
outstanding as of May 14, 1996. Zodiac Three, Inc. operates one store located in
Parker, Colorado.
b. Year End. The Companies maintain a year ending on December 31 for
financial reporting and income tax purposes. As disclosed in Note 6, the
Companies sold all their assets to RentX Industries, Inc., effective May 15,
1996. Accordingly, the accompanying 1996 financial statements are presented for
the period from January 1, 1996 to May 14, 1996.
c. Combination of Entities under Common Control. As of January 1, 1995,
Zodiac Rentals, Inc. combined all the store locations except Zodiac Three, Inc.
into Zodiac Rentals, Inc. in a business combination accounted for as a
combination of entities under common control. The net assets of the entities
were transferred to Zodiac Rentals, Inc. at their historical cost basis and none
of the companies recognized a gain or loss, nor were any assets recognized at an
appreciated fair value.
d. Combining Policy. The accompanying combined financial statements include
the accounts of Zodiac Rentals, Inc. and Zodiac Three, Inc. All material
intercompany transactions and balances have been eliminated in the combination.
e. Cash and Cash Equivalents. Cash and cash equivalents include cash on
hand and cash in financial institutions with maturities of less than three
months. Balances on deposit with high-quality local banks exceed the amounts
insured by the Federal Deposit Insurance Corporation. Management does not
believe such uninsured amounts expose the Company to any material credit risk.
f. Accounts Receivable. Management believes that all accounts receivable as
of May 14, 1996 were fully collectible; therefore, no allowance for doubtful
accounts was recorded. The Companies rent equipment to its commercial customers,
the majority of which are in the construction business in Colorado. The
Companies perform ongoing credit evaluations of its customers and, generally,
require no collateral.
g. Inventories. Inventories consist primarily of parts, supplies and fuel
and are stated at the lower of cost or market on the FIFO (first in, first out)
basis.
F-29
<PAGE> 103
ZODIAC RENTALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
h. Property and Equipment. Property and equipment are stated at cost and
depreciated or amortized using the straight line method over their estimated
useful lives ranging from 5 to 10 years.
i. Advertising. Advertising costs are charged to expense as incurred. Such
expenses totaled $74,879 and $119,852 for the years ended December 31, 1994 and
1995, respectively, and $36,601 for the period ended May 14, 1996.
j. Revenue Recognition. Equipment rental revenue is recorded under the
operating method. Equipment rentals in the statements of income include revenue
earned on equipment rentals, fuel sales, and rental equipment delivery fees.
Revenue from the sale of parts, supplies and equipment is recorded at the time
of the delivery or pick-up by the customer.
k. Income Taxes. Zodiac Rentals, Inc. and Zodiac Three, Inc., with the
consent of their stockholders, have elected under the Internal Revenue Code to
be S corporations. In lieu of corporation income taxes, the stockholders of an S
corporation are taxed on their proportionate share of the Company's taxable
income. Therefore, no provision or liability for federal and state income taxes
has been included in these combined financial statements.
l. Intangible Assets. The Companies amortize a non-compete agreement and
goodwill acquired in the purchase of the Zodiac VII store. The intangible assets
are being amortized over the life of 15 years. Amortization expense for the
period ended May 14, 1996 was $2,500, $6,666 in 1995 and $2,222 in 1994.
m. Use of Estimates. Management uses estimates and assumptions in preparing
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities and the reported revenues and expenses. Actual results
could vary from the estimates that were assumed in preparing the financial
statements.
NOTE 2 -- NOTES PAYABLE, BANK
The Companies have consolidated notes payable with Bank One, Denver, NA
with the majority shareholders listed as co-makers. The notes have a balance
outstanding at May 14, 1996 of $2,152,464. The notes bear interest at prime plus
1% at May 14, 1996 (current rate of 9.5%). The notes mature on August 1, 1997
and are collateralized by a first lien security interest in all accounts
receivable, inventory, equipment, vehicles, and general intangibles. The
minority shareholder has also provided a limited guarantee in the amount of
$200,000. Payments are approximately $61,000 a month for principal and interest.
As of May 14, 1996, maturities of the notes payable, bank are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, AMOUNT
- ------------ ----------
<S> <C> <C>
1997............................................................. $ 300,000
1998............................................................. 1,852,464
----------
Total.................................................. $2,152,464
==========
</TABLE>
Interest paid to the bank was $48,994 for the period ended May 14, 1996,
$113,610 in 1995 and $45,906 in 1994. The note payable, bank was paid off on May
15, 1996.
F-30
<PAGE> 104
ZODIAC RENTALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- LONG TERM DEBT
<TABLE>
<S> <C>
Long term debt consists of the following:
5.9% to 7% various notes payable to Case Power and Equipment
Company, payable in monthly installments of $2,015
principal and interest, collateralized by equipment, due
at various times through September, 1997.................. $ 20,217
7% to 9.6% various notes payable to Bank One Leasing,
payable in monthly installments of $7,716 principal and
interest, collateralized by equipment, due at various
times through February, 1997.............................. 77,799
11.3% to 11.8% notes payable to American Equipment Leasing,
payable in monthly installments of $16,680 principal and
interest, collateralized by equipment, due at various
times through May, 1998................................... 371,030
5.5% to 9.75% notes payable to Kubota Credit Corp, payable
in monthly installments of $9,010 principal and interest,
collateralized by equipment, due at various times through
July, 1997................................................ 77,973
12% note payable to Cathora Corporation, payable in monthly
installments of $9,341 principal and interest,
collateralized by the shareholders' real property, due
September, 1999........................................... 328,654
--------
Total long term debt.............................. 875,673
Less current portion.............................. 509,953
--------
Long Term Debt, net of current portion...................... $365,720
========
</TABLE>
Interest paid on long term debt, including notes that were paid off in
1996, was $43,970, $102,365 in 1995 and $66,837 in 1994.
As of May 14, 1996, maturities of long term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, AMOUNT
- ------------ --------
<S> <C> <C>
1996................................................................ $509,953
1997........................................................... 266,666
1998........................................................... 99,054
--------
Total..................................................... $875,673
========
</TABLE>
All the long-term debt was paid off on May 15, 1996.
NOTE 4 -- RELATED PARTY TRANSACTIONS AND LEASES
The Companies lease some of their operating facilities from a related party
partnership (D & E Enterprises) owned by the shareholders of Zodiac Rentals,
Inc.
F-31
<PAGE> 105
ZODIAC RENTALS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
On January 1, 1995, the Companies entered into leases with D & E
Enterprises for these facilities which expire December 31, 1999. The leases call
for minimum lease payments with adjustments for inflation in years 1996 through
1999. The future minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ----------
<S> <C>
1996........................................................ $ 234,870
1997........................................................ 375,792
1998........................................................ 375,792
1999........................................................ 375,792
----------
Total future minimum lease payments............... $1,362,246
==========
</TABLE>
Rent expense paid to the related party was $127,242 for the period ended
May 14, 1996, $310,774 in 1995 and $324,532 in 1994.
On January 1, 1995, the Companies opened two additional stores, one located
in Thornton, Colorado and one in Littleton, Colorado. The Companies entered into
a new lease for each location with unrelated third parties. The Thornton lease
is from January 1, 1995 to December 31, 1997 and calls for monthly lease
payments of $6,712. The Littleton store lease was from January 1, 1995 to April
16, 1996 and called for monthly lease payments of $7,266. This lease is
currently being renegotiated by the Company. This lease was extended on February
16, 1996 and expired on October 15, 1996. The future minimum lease payments for
these two stores is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1996........................................................ $ 50,340
1997........................................................ 80,544
--------
Total future minimum lease payments............... $130,884
========
</TABLE>
Rent expense on these leases was $55,635 for the period ended May 14, 1996,
and $167,736 in 1995.
NOTE 5 -- INCENTIVE PAY POLICY
The Companies instituted a Team Incentive policy on January 1, 1995, based
on the overall profit of the combined entities on a monthly basis. The incentive
is calculated as 10% of the net profit plus depreciation. The incentive expense
was $32,915 for the period ended May 14, 1996 and $154,777 for the year ended
December 31, 1995.
NOTE 6 -- SUBSEQUENT EVENT
On May 15, 1996, the Companies sold all their assets to RentX Industries,
Inc., an unrelated third party. The terms of the agreement are that RentX
Industries, Inc. paid the Companies $12,263,757 in exchange for all the
inventory, accounts receivable, rental equipment and other assets of the
Companies. At the same time, the Companies used the proceeds from the sale to
pay off all their debt and liabilities. Of the sale price, $750,000 was put into
escrow to pay any unforeseen liabilities. The escrow money is scheduled to be
released to the shareholders on May 15, 1997.
F-32
<PAGE> 106
INDEPENDENT AUDITORS' REPORT
Board of Directors
A to Z Rentals and Sales, Inc.
We have audited the accompanying statements of income, stockholders'
equity, and cash flows of A to Z Rentals and Sales, Inc., for the period from
January 1, 1996 to May 28, 1996, and the years ended December 31, 1995 and 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of A to Z
Rentals and Sales, Inc., for the period from January 1, 1996 to May 28, 1996,
and the years ended December 31, 1995 and 1994, in accordance with generally
accepted accounting principles.
LEMASTER & DANIELS PLLC
Spokane, Washington
May 19, 1997
F-33
<PAGE> 107
A TO Z RENTALS AND SALES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1996
TO
YEARS ENDED MAY 28,
DECEMBER 31, 1996
----------------------- -----------
1994 1995
---------- ----------
<S> <C> <C> <C>
REVENUES:
Rental income and sales.................................. $4,411,111 $4,171,595 $1,351,437
---------- ---------- ----------
COST OF REVENUES:
Rental equipment costs and expense....................... 951,115 638,114 254,845
Rental equipment depreciation............................ 192,095 156,640 43,010
Direct operating expense................................. 1,368,635 1,413,611 456,327
---------- ---------- ----------
Total cost of revenues........................... 2,511,845 2,208,365 754,182
---------- ---------- ----------
STORE CONTRIBUTION......................................... 1,899,266 1,963,230 597,255
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE............... 720,736 1,119,614 273,034
DEPRECIATION, excluding rental equipment depreciation...... 14,125 15,865 3,722
---------- ---------- ----------
INCOME FROM OPERATIONS..................................... 1,164,405 827,751 320,499
---------- ---------- ----------
OTHER INCOME:
Gain on distribution of investments and property......... - - 548,145
Interest and dividends................................... 56,400 78,447 4,094
---------- ---------- ----------
56,400 78,447 552,239
---------- ---------- ----------
INCOME BEFORE INCOME TAX................................... 1,220,805 906,198 872,738
FEDERAL INCOME TAX......................................... -- -- 35,000
---------- ---------- ----------
NET INCOME................................................. $1,220,805 $ 906,198 $ 837,738
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-34
<PAGE> 108
A TO Z RENTALS AND SALES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM JANUARY 1, 1996 TO MAY 28, 1996 AND
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
COMMON RETAINED GAIN ON
STOCK EARNINGS INVESTMENTS
------- ----------- -----------
<S> <C> <C> <C>
BALANCES, DECEMBER 31, 1993............................. $61,000 $ 1,967,864 $ 161,419
ADD (DEDUCT):
Net income for 1994................................... -- 1,220,805 --
Distributions......................................... -- (585,298) --
Unrealized loss on investments........................ -- -- (24,427)
------- ----------- ---------
BALANCES, DECEMBER 31, 1994............................. 61,000 2,603,371 136,992
ADD (DEDUCT):
Net income for 1995................................... -- 906,198 --
Distributions......................................... -- (1,379,957) --
Unrealized gain on investments........................ -- -- 164,569
------- ----------- ---------
BALANCES, DECEMBER 31, 1995............................. 61,000 2,129,612 301,561
ADD (DEDUCT):
Net income, period from January 1, 1996 to May 28,
1996............................................... -- 837,738 --
Distributions......................................... -- (2,681,245) --
Net decrease in unrealized gains on investments....... -- -- (301,561)
------- ----------- ---------
BALANCES, MAY 28, 1996.................................. $61,000 $ 286,105 $ --
======= =========== =========
</TABLE>
F-35
<PAGE> 109
A TO Z RENTALS AND SALES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, PERIOD FROM
------------------------- JANUARY 1, 1996
1994 1995 TO MAY 28, 1996
---------- ----------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $1,220,805 $ 906,198 $ 837,738
---------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 206,224 172,506 46,732
Gain on sale/distribution of assets........... (3,916) (3,092) (548,145)
(Increase) decrease in assets:
Accounts receivable......................... (55,918) 88,886 (6,119)
Inventory................................... (1,031) (3,605) (304)
Prepaid expenses............................ -- -- (20,977)
Increase (decrease) in liabilities:
Accounts payable............................ (4,267) 8,968 14,456
Accrued expenses............................ (248,639) (11,854) 36,161
Accrued federal income tax.................. -- -- 35,000
---------- ----------- -----------
Total adjustments........................ (107,547) 251,809 (443,196)
---------- ----------- -----------
Net cash provided by operating
activities............................. 1,113,258 1,158,007 394,542
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment........................... (208,930) (115,349) --
Proceeds from sales of equipment................. 17,001 3,092 --
Purchases of investments......................... (12,425) (6,289) --
Proceeds from sales of investments............... -- 174,558 --
---------- ----------- -----------
Net cash provided by (used in) investing
activities............................. (204,354) 56,012 --
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholders.................... (585,298) (1,379,957) (1,694,439)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 323,606 (165,938) (1,299,897)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD/YEAR...................................... 1,143,829 1,467,435 1,301,497
---------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD/YEAR...... $1,467,435 $ 1,301,497 $ 1,600
========== =========== ===========
</TABLE>
F-36
<PAGE> 110
A TO Z RENTALS AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION:
A to Z Rentals and Sales, Inc. (the "Company") is a Washington corporation
whose principal activities are short-term rentals of equipment and sales of
related merchandise to businesses and individuals located in the Spokane,
Washington, area. Operations are conducted through the Company's four local
retail stores. A significant portion of revenues is derived from rentals and
sales to businesses in the construction industry.
Summary of Significant Accounting Policies:
a. Year end -- The Company maintains a year ending on December 31 for
financial reporting and income tax purposes. As discussed in note 6, the
Company was dissolved and merged into RentX Industries, Inc., effective May
29, 1996. Accordingly, the accompanying 1996 financial statements are
presented for the period from January 1, 1996 through May 28, 1996.
b. Cash and cash equivalents -- Cash and cash equivalents include cash
on hand, cash in financial institutions, and short-term cash investments
with original maturities of less than three months. Balances on deposit
with high-quality local banks often exceed the amounts insured by the
Federal Deposit Insurance Corporation. Management does not believe such
uninsured amounts expose the Company to any material credit risk.
c. Investment gains and losses -- Unrealized gains and losses on
investments available-for-sale (which are stated at quoted fair value) are
included as a separate component of stockholders' equity. Realized gains
and losses are reported in the statements of income.
d. Depreciation -- Depreciation (based on cost) is provided using
straight-line and accelerated methods over the assets' estimated useful
lives ranging from 5 to 15 years.
e. Advertising -- Advertising costs are charged to expense as
incurred. Such expenses totalled $9,642 in 1996, $47,350 in 1995, and
$50,550 in 1994.
f. Asset impairment -- Impairment losses on long-lived assets used in
operations are recognized when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amounts. No such impairment losses were incurred
for the periods presented.
g. Revenue recognition -- Equipment rental revenue is recorded under
the operating method. Equipment rentals in the statements of income include
revenue earned on equipment rentals, fuel sales, and rental equipment
delivery fees. Revenue from the sale of parts, supplies, and equipment is
recorded at the time of delivery or pick-up by the customer.
h. Income tax -- Through May 15, 1996, the Company had elected to be
treated as an S corporation so the Company's income was taxable to the
stockholders individually. Accordingly, no provision for income tax was
applicable through that date. On May 15, 1996, the S corporation election
was voluntarily terminated, and the Company became a taxable entity
thereafter. The accompanying 1996 financial statements include a provision
for income tax for the period May 16 through 28, 1996, based on the
estimated taxable income earned for that period. There were no material
temporary differences at May 28, 1996, so deferred income tax has not been
provided.
i. Estimates -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from estimates.
F-37
<PAGE> 111
A TO Z RENTALS AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- DISTRIBUTIONS:
In 1996, the Company made various cash and noncash distributions to the
stockholders. Noncash distributions consisted of the Company's marketable equity
securities and certain property and equipment. Such distributions have been
reported in the accompanying financial statements based on the estimated fair
values of the assets distributed, with the resulting gains being reported in the
1996 statement of income. Following is a summary of the noncash assets
distributed:
<TABLE>
<CAPTION>
FINANCIAL
STATEMENT GAIN
BASIS RECOGNIZED
--------- ----------
<S> <C> <C>
Investments, at fair value...................... $533,301 $294,326
Property and equipment, at depreciated cost..... 199,685 253,819
-------- --------
Totals................................ $732,986 $548,145
======== ========
</TABLE>
NOTE 3 -- SUPPLEMENTARY CASH FLOWS DISCLOSURES:
Cash payments of interest and income tax:
The Company had no cash payments of interest or income tax for the periods
presented.
Noncash investing and financing activities:
In 1996, the Company distributed investments and certain property and
equipment to stockholders, as discussed in note 2.
NOTE 4 -- OPERATING LEASES:
Through May 28, 1996, the Company leased certain of its operating
facilities from stockholders and an unrelated party. Effective May 29, 1996 (see
note 5), new operating leases were executed with the now former stockholders.
The leases expire May 31, 1999, and the lessee has renewal options for up to
four additional consecutive three-year periods. Following are the future minimum
lease payments required under the leases in effect at May 29, 1996:
<TABLE>
<S> <C>
May 29, 1996 to December 31, 1996......................... $123,000
Calendar 1997............................................. 210,000
Calendar 1998............................................. 210,000
Calendar 1999............................................. 88,000
</TABLE>
Rent expense consisted of the following minimum rentals:
<TABLE>
<CAPTION>
YEARS ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1996
------------------- THROUGH
1994 1995 MAY 28, 1996
-------- -------- ---------------
<S> <C> <C> <C>
Related parties............................. $140,500 $184,860 $46,200
Unrelated party............................. 9,900 11,400 4,750
-------- -------- -------
Totals............................ $150,400 $196,260 $50,950
======== ======== =======
</TABLE>
NOTE 5 -- SUBSEQUENT EVENT:
Effective May 29, 1996, all of the Company's issued and outstanding common
stock was purchased by RentX Industries, Inc., a Delaware corporation. Also on
May 29, 1996, A to Z Rentals and Sales, Inc., was merged into RentX (and
continues to operate as a part of RentX), and its common stock was
F-38
<PAGE> 112
A TO Z RENTALS AND SALES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
cancelled. In connection with certain RentX financing, its assets were
subsequently pledged as collateral on such loans.
NOTE 6 -- RESTATEMENT:
The Company's financial statements for the years ended December 31, 1995
and 1994, were previously presented on the income tax basis of accounting, which
is a method of accounting other than generally accepted accounting principles.
The accompanying 1995 and 1994 financial statements have been restated to
reflect the presentation, principally for investments, in accordance with
generally accepted accounting principles. The restatement had no effect on
previously reported net income or retained earnings for 1995 and 1994. Income
tax did not apply to the restated items, as the Company was an S corporation
during such periods. Total assets and stockholders' equity were increased by
$301,561, $136,992, and $161,419 at December 31, 1995, 1994, and 1993,
respectively, to retroactively reflect the unrealized gains on investments at
those dates.
F-39
<PAGE> 113
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Rental Country U.S.A., Inc.,
Rifle Rentals, Inc., G.R.M. Company, Inc., and
Rocky Mountain Rentals, Inc. (dba E-Z Way Rentals)
We have audited the accompanying combined statements of income,
stockholders' equity, and cash flows of Rental Country U.S.A., Inc., Rifle
Rentals, Inc., G.R.M. Company, Inc., and Rocky Mountain Rentals, Inc. (dba E-Z
Way Rentals) (the "Company") for the years ended December 31, 1994 and 1995 and
the seven months ended July 31, 1996. These financial statements are the
responsibility of the management of the Company. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall combined financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of operations and cash flows of
the Company for the years ended December 31, 1994 and 1995 and the seven months
ended July 31, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Denver, Colorado
July 2, 1997
F-40
<PAGE> 114
RENTAL COUNTRY U.S.A., INC., RIFLE RENTALS, INC.,
G.R.M. COMPANY, INC., AND ROCKY MOUNTAIN RENTALS, INC.
(DBA E-Z WAY RENTALS)
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SEVEN
MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------- JULY 31,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental revenue........................................... $2,472,200 $2,538,903 $1,361,960
Rental equipment sales................................... -- 133,112 60,163
Merchandise sales........................................ 110,137 120,534 84,345
---------- ---------- ----------
Total revenues................................... 2,582,337 2,792,549 1,506,468
Cost of revenues:
Rental equipment expense................................. 434,445 495,255 209,847
Cost of rental equipment sales........................... -- 53,238 40,718
Rental equipment depreciation............................ 260,055 361,022 229,023
Direct operating expense................................. 425,810 457,459 256,284
---------- ---------- ----------
Total cost of revenues........................... 1,120,310 1,366,974 735,872
---------- ---------- ----------
Store contribution......................................... 1,462,027 1,425,575 770,596
Selling, general and administrative expense................ 917,509 840,849 547,070
Depreciation and amortization, excluding rental equipment
depreciation............................................. 33,710 37,942 22,033
---------- ---------- ----------
Operating income........................................... 510,808 546,784 201,493
Other income (expense)..................................... 9,946 25,674 (7,751)
---------- ---------- ----------
Income before income taxes................................. 520,754 572,458 193,742
Income tax expense......................................... 12,823 42,633 20,864
---------- ---------- ----------
Net income................................................. $ 507,931 $ 529,825 $ 172,878
========== ========== ==========
</TABLE>
See accompanying notes.
F-41
<PAGE> 115
RENTAL COUNTRY U.S.A., INC., RIFLE RENTALS, INC.,
G.R.M. COMPANY, INC., AND ROCKY MOUNTAIN RENTALS, INC.
(DBA E-Z WAY RENTALS)
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
------- ---------- -------------
<S> <C> <C> <C>
Balance on December 31, 1993.......................... $97,586 $1,437,815 $1,535,401
Distributions to stockholders....................... -- (84,338) (84,338)
Net income.......................................... -- 507,931 507,931
------- ---------- ----------
Balance on December 31, 1994.......................... 97,586 1,861,408 1,958,994
Distributions to stockholders....................... -- (300,000) (300,000)
Net income.......................................... -- 529,825 529,825
------- ---------- ----------
Balance on December 31, 1995.......................... 97,586 2,091,233 2,188,819
Distributions to stockholders....................... -- (101,788) (101,788)
Net income.......................................... -- 172,878 172,878
------- ---------- ----------
Balance on July 31, 1996.............................. $97,586 $2,162,323 $2,259,909
======= ========== ==========
</TABLE>
See accompanying notes.
F-42
<PAGE> 116
RENTAL COUNTRY U.S.A., INC., RIFLE RENTALS, INC.,
G.R.M. COMPANY, INC., AND ROCKY MOUNTAIN RENTALS, INC.
(DBA E-Z WAY RENTALS)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SEVEN
MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------ JULY 31,
1994 1995 1996
---------- ---------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 507,931 $ 529,825 $ 172,878
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 293,765 398,964 251,056
Changes in operating assets and liabilities:
Accounts receivable, net........................... (98,031) 18,726 (97,790)
Prepaid expenses................................... 9,083 (315) (7,206)
Other assets....................................... (25) 25 (22,232)
Merchandise inventories............................ -- (8,218) 7,992
Accounts payable and accrued expenses.............. 73,348 (36,779) (4,975)
Deferred tax liability............................. 960 10,093 4,634
--------- --------- ---------
Net cash provided by operating activities............... 787,031 912,321 304,357
INVESTING ACTIVITIES
Purchases of rental equipment and operating equipment... (287,210) (316,370) (15,123)
--------- --------- ---------
Net cash used in investing activities................... (287,210) (316,370) (15,123)
FINANCING ACTIVITIES
Payments on debt........................................ (228,811) (299,355) (242,446)
Distributions to stockholders........................... (84,338) (300,000) (101,788)
--------- --------- ---------
Net cash provided by financing activities............... (313,149) (599,355) (344,234)
--------- --------- ---------
Net increase (decrease) in cash......................... 186,672 (3,404) (55,000)
Cash and cash equivalents at beginning of period........ 321,796 508,468 505,064
--------- --------- ---------
Cash and cash equivalents at end of period.............. $ 508,468 $ 505,064 $ 450,064
========= ========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during 1994, 1995 and 1996 for income taxes was $26,714, $0 and
$31,669, respectively.
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
The Company entered into debt obligations to purchase rental equipment in
the amounts of $299,500, $399,457 and $203,704 during 1994, 1995 and 1996,
respectively.
See accompanying notes.
F-43
<PAGE> 117
RENTAL COUNTRY U.S.A., INC., RIFLE RENTALS, INC.,
G.R.M. COMPANY, INC., AND ROCKY MOUNTAIN RENTALS, INC.
(DBA E-Z WAY RENTALS)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
Rental Country U.S.A., Inc., Rifle Rentals, Inc., G.R.M. Company, Inc. and
Rocky Mountain Rentals, Inc. (dba E-Z Way Rentals) (collectively the "Company")
were formed between 1976 and 1980. The Company comprises four Colorado
corporations (Rental Country U.S.A., Inc., Rifle Rentals, Inc., G.R.M. Company,
Inc. and Rocky Mountain Rentals, Inc.), which have been combined due to common
ownership. All significant intercompany accounts and transactions have been
eliminated. The Company is primarily involved in the short-term rental of
construction related equipment and vehicles, and to a lesser extent special
event items, in the state of Colorado.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying combined balance sheets are
presented on an unclassified basis.
FINANCIAL STATEMENT PRESENTATION
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
statements of income and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Equipment rental revenue is recorded under the operating method. Equipment
rentals in the combined statements of income include revenue earned on equipment
rentals, fuel sales, and rental equipment delivery fees. Revenue from the sale
of parts, supplies, and equipment is recorded at the time of delivery or pickup
by the customer.
CREDIT POLICY
A portion of the Company's business is on a credit basis. The Company
extends credit to its commercial customers based on evaluations of their
financial condition and generally no collateral is required. The Company has
diversified its customer base by operating rental stores in five locations. The
Company maintains reserves it believes adequate for potential credit losses.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Standards No. 109, Accounting for Income
Taxes. Under the liability method, deferred taxes are determined based on the
difference between the combined financial statement and tax bases of assets and
liabilities using enacted tax rates in the years in which the differences are
expected to reverse. Recognition of deferred tax assets is limited to amounts
considered by management to be realizable.
F-44
<PAGE> 118
RENTAL COUNTRY U.S.A., INC., RIFLE RENTALS, INC.,
G.R.M. COMPANY, INC., AND ROCKY MOUNTAIN RENTALS, INC.
(DBA E-Z WAY RENTALS)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
The Company's primary financial instrument that is potentially subject to
significant concentrations of credit risk is accounts receivable. The
concentration of credit risk is limited due to the large number of customers the
Company maintains.
2. RELATED PARTY TRANSACTIONS
The Company leases all of its facilities on a month-to-month basis from a
stockholder of the Company. The rental expense to related parties included in
the statements of income was $140,916, $143,774 and $89,782 for the years ended
December 31, 1994 and 1995 and the seven months ended July 31, 1996,
respectively.
3. INCOME TAXES
The Company consists of four corporations of which two are S corporations
(Rental Country U.S.A., Inc. and Rocky Mountain Rentals, Inc.) and two of which
are C corporations (Rifle Rentals, Inc. and G.R.M. Company, Inc.) for tax
purposes. The S corporations are not liable for federal or state taxes on
income. The earnings of the S corporations will be reported on the stockholders'
federal and state income tax returns.
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Current.............................................. $11,863 $32,540 $16,230
Deferred............................................. 960 10,093 4,634
------- ------- -------
Total provision............................ $12,823 $42,633 $20,864
======= ======= =======
</TABLE>
The reconciliation of income tax attributable to operations computed at the
statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- --------
<S> <C> <C> <C>
Tax at U.S. statutory rates..................... $ 177,056 $ 194,636 $ 65,872
Earnings of S corporations...................... (164,464) (156,246) (49,635)
State taxes..................................... -- 3,954 4,138
Other........................................... 231 289 489
--------- --------- --------
$ 12,823 $ 42,633 $ 20,864
========= ========= ========
</TABLE>
7. SUBSEQUENT EVENTS
On August 2, 1996, the Company entered into an asset purchase agreement
with RentX Industries, Inc. and sold the net assets for three of the four
corporations to RentX Industries, Inc. On January 31, 1997, the Company sold the
net assets of the remaining entity, Rifle Rentals, Inc., to RentX Industries,
Inc.
F-45
<PAGE> 119
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Redwine Enterprises, Inc., fka U-Rent, Inc.
We have audited the accompanying statements of income, stockholders'
equity, and cash flows of Redwine Enterprises, Inc. for the period from January
1, 1996 through October 31, 1996. These financial statements are the
responsibility of the Redwine Enterprises, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Redwine
Enterprises, Inc. for the period from January 1, 1996 through October 31, 1996,
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
July 18, 1997
F-46
<PAGE> 120
REDWINE ENTERPRISES, INC.
STATEMENT OF INCOME
PERIOD FROM JANUARY 1, 1996 THROUGH OCTOBER 31, 1996
<TABLE>
<S> <C>
Revenues:
Rental revenue............................................ $1,794,049
Gain on sales of rental equipment......................... 6,896
----------
Total revenues.................................... 1,800,945
----------
Cost of revenues:
Rental equipment expense.................................. 375,836
Rental equipment depreciation............................. 281,823
Cost of merchandise....................................... 66,442
----------
Total cost of revenues............................ 724,101
----------
Store contribution.......................................... 1,076,844
Selling, general and administrative expense................. 763,374
Depreciation, excluding rental equipment.................... 4,993
----------
Operating income............................................ 308,477
Loss on investments......................................... 12,992
Interest expense............................................ 119,075
----------
Income before income taxes.................................. 176,410
Income tax expense (Note 2)................................. 56,521
----------
Net income.................................................. $ 119,889
==========
</TABLE>
See accompanying notes.
F-47
<PAGE> 121
REDWINE ENTERPRISES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM JANUARY 1, 1996 THROUGH OCTOBER 31, 1996
<TABLE>
<CAPTION>
TOTAL
CAPITAL PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------- -------- -------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1996...................... $500 $192,496 $248,526 $441,522
Net income...................................... -- -- 119,889 119,889
---- -------- -------- --------
Balance at October 31, 1996..................... $500 $192,496 $368,415 $561,411
==== ======== ======== ========
</TABLE>
See accompanying notes.
F-48
<PAGE> 122
REDWINE ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 1, 1996 THROUGH OCTOBER 31, 1996
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 119,889
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 286,816
Gain on sale of fixed assets.............................. (6,896)
Loss on investments....................................... 12,992
Provision for doubtful accounts........................... 4,131
Changes in operating assets and liabilities
Accounts receivable.................................... (24,820)
Inventories............................................ (9,884)
Stockholder advance.................................... 3,194
Other assets........................................... (3,893)
Accounts payable and accrued expenses.................. 79,567
Income taxes payable................................... 56,526
---------
Net cash provided by operating activities................... 517,622
---------
INVESTING ACTIVITIES
Purchases of rental equipment............................... (913,737)
Proceeds from sales of rental equipment..................... 116,185
---------
Net cash used in investing activities....................... (797,552)
---------
FINANCING ACTIVITIES
Proceeds from notes payable................................. 688,032
Repayments of notes payable................................. (399,260)
---------
Net cash provided by financing activities................... 288,772
---------
Net increase in cash........................................ 8,842
Cash at beginning of period................................. 109,075
---------
Cash at end of period....................................... $ 117,917
=========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid............................................... $ 101,701
Income taxes paid........................................... $ --
</TABLE>
See accompanying notes.
F-49
<PAGE> 123
REDWINE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
Redwine Enterprises, Inc. (the "Company"), an Oklahoma corporation, was
formed on July 8, 1994. The Company owns and operates rental equipment stores
involved in the short-term rental of small tools, general purpose construction
and special event equipment, and to a lesser extent, selling complementary
merchandise, parts, and new and used equipment. At October 31, 1996, the Company
operated four equipment rental stores located in and around Oklahoma City.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Rental revenue is recorded under the operating method. Rental revenue in
the statement of operations includes revenue earned on equipment rentals, fuel
sales, and rental equipment delivery fees. Revenue from the sale of rental
equipment, merchandise and new equipment is recorded at the time of delivery or
pickup by the customer.
CREDIT POLICY
A significant portion of the Company's business is on a credit basis. The
Company extends credit to its commercial customers based on evaluations of
ability to pay and generally no collateral is required. These evaluations are
conducted at the store level.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Standards No. 109, Accounting for Income
Taxes. Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in the years in which the differences are
expected to reverse. Recognition of deferred tax assets is limited to amounts
considered by management to be realizable in future periods.
ADVERTISING EXPENSE
Advertising costs are expensed as incurred. Advertising expense was $35,548
for the period ended October 31, 1996.
CONCENTRATIONS OF CREDIT RISK
The Company's primary financial instrument that is potentially subject to
significant concentrations of credit risk is trade accounts receivable. The
concentration of credit risk is limited due to the large number of customers the
Company maintains.
F-50
<PAGE> 124
REDWINE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. INCOME TAXES
Components of the provision for income taxes are as follows:
<TABLE>
<S> <C>
Current..................................................... $50,336
Deferred.................................................... 6,185
-------
$56,521
=======
</TABLE>
The reconciliation of income tax attributable to operations computed at the
statutory tax rates to income tax expense is:
<TABLE>
<S> <C>
Tax at U.S. statutory rates................................. $59,400
Other....................................................... (2,879)
-------
$56,521
=======
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
Future minimum rental commitments as of October 31, 1996 under
noncancelable operating leases are:
<TABLE>
<S> <C>
1996...................................................... $ 15,400
1997...................................................... 98,400
1998...................................................... 98,400
1999...................................................... 54,000
--------
$266,200
========
</TABLE>
The Company leases certain facilities under operating leases which contain
renewal options and provide for periodic cost of living adjustments. Rental
expense was $57,750 for the period ended October 31, 1996.
The Company rents storefront and lot space facilities from a stockholder
under several rental agreements. The company paid rental fees of $29,750 for the
period ended October 31, 1996.
ENVIRONMENTAL MATTERS
The Company and its operations are subject to various laws and related
regulations governing environmental matters. Under such laws, an owner or lessee
of real estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances located on or in, or emanating from, such
property, as well as investigation of property damage.
4. SUBSEQUENT EVENT
Subsequent to October 31, 1996, the Company signed an asset purchase
agreement with RentX Industries, Inc. to sell all the Company's assets,
excluding cash and cash equivalents and the note for the leasehold improvement,
for $2,396,676. In accordance with the agreement, all four stores will operate
as a part of RentX Industries, Inc. as of November 1, 1996.
Subsequent to October 31, 1996 and the sale of Redwine Enterprises, Inc. to
RentX Industries, Inc., all lease agreements for the lease of space were
transferred to RentX Industries, Inc.
F-51
<PAGE> 125
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of U-Do-It Rental Centers, Inc. and
The Partners of CAAR Partnership
Sandpoint, Idaho
We have audited the accompanying combined statements of income, statements
of changes in equity and statements of cash flows of U-Do-It Rental Centers,
Inc. and affiliate for the years ended December 31, 1994, 1995 and 1996. These
combined financial statements are the responsibility of the management of
U-Do-It Rental Centers, Inc. Our responsibility is to express an opinion on
these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the combined income statements, statements of
changes in equity and statements of cash flows are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined income statements, statements of
changes in equity and statements of cash flows. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the income statements, the
statements of changes in equity and statements of cash flows. We believe that
our audits of the statements of income, statements of changes in equity and
statements of cash flows provide a reasonable basis for our opinion.
In our opinion, the combined statements of income, statements of changes in
equity and statements of cash flows referred to above present fairly, in all
material respects, the results of the operations and cash flows of U-Do-It
Rental Centers, Inc. and affiliate for the years ended December 31, 1994, 1995
and 1996 in conformity with generally accepted accounting principles.
WILLIAMS & PARSONS, PA
Certified Public Accountants
Sandpoint, Idaho
June 26, 1997
F-52
<PAGE> 126
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
COMBINED INCOME STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Rental revenue..................................... $ 850,962 $ 934,229 $1,000,119
Merchandise sales.................................. 65,619 98,840 130,746
Sales of rental equipment.......................... 110,420 73,403 84,645
Other revenue...................................... 3,482 7,606 12,866
---------- ---------- ----------
Total revenues............................. 1,030,483 1,114,078 1,228,376
---------- ---------- ----------
DIRECT COSTS OF REVENUE
Rental equipment expense........................... 157,584 144,414 227,971
Rental equipment depreciation...................... 196,995 167,107 126,421
Cost of merchandise sold........................... 44,929 78,235 101,969
Net book value of rental equipment sold............ 97,159 52,182 54,608
---------- ---------- ----------
Total direct cost of revenue............... 496,667 441,938 510,969
---------- ---------- ----------
Store contribution......................... 533,816 672,140 717,407
---------- ---------- ----------
Selling, general and administrative expenses......... 445,064 487,476 709,196
Depreciation and amortization (excluding rental
equipment)......................................... 27,897 21,368 12,286
---------- ---------- ----------
Operating income (loss).................... 60,855 163,296 (4,075)
---------- ---------- ----------
OTHER INCOME AND EXPENSE
Gain on sale of assets to RentX (note 2)........... -- -- 55,242
Interest expense, net of interest income........... (78,851) (81,386) (81,653)
---------- ---------- ----------
Total other income (expense)............... (78,851) (81,386) (26,411)
---------- ---------- ----------
Income (loss) before taxes................. (17,996) 81,910 (30,486)
---------- ---------- ----------
Income tax expense (benefit)....................... (7,917) 13,247 (14,087)
---------- ---------- ----------
Net income (loss).......................... $ (10,079) $ 68,663 $ (16,399)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this presentation.
F-53
<PAGE> 127
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
COMBINED STATEMENTS OF CHANGES IN EQUITY
DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
PARTNERS' COMMON COMMON RETAINED
CAPITAL SHARES STOCK EARNINGS TOTAL
--------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
January 1, 1994........................... $ 19,908 5,000 $31,325 $ -- $ 51,233
Net income (loss) for the year ended
December 31, 1994....................... 20,536 (30,615) (10,079)
Partners' contribution.................... 10,000 10,000
-------- ------ ------- -------- --------
December 31, 1994....................... 50,444 5,000 31,325 (30,615) 51,154
-------- ------ ------- -------- --------
Net income for the year ended December 31,
1995.................................... 24,229 44,434 68,663
Distributions to partners................. (30,000) (30,000)
-------- ------ ------- -------- --------
December 31, 1995....................... 44,673 5,000 31,325 13,819 89,817
-------- ------ ------- -------- --------
Net income (loss) for the year ended
December 31, 1996....................... 19,690 (36,089) (16,399)
Distributions to partners................. (15,001) (15,001)
-------- ------ ------- -------- --------
December 31, 1996....................... $ 49,362 5,000 $31,325 $(22,270) $ 58,417
======== ====== ======= ======== ========
</TABLE>
F-54
<PAGE> 128
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................... $ (10,079) $ 68,663 $ (16,399)
Adjustments to reconcile net income to cash provided by
operations:
Depreciation and amortization....................... 224,892 188,475 138,707
Amortization of loan fees included in interest...... 1,367 1,370 6,255
Gain on sale of rental and other fixed assets....... (13,261) (21,221) (85,279)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable.......... (16,051) (34,782) (71,182)
Decrease (increase) in inventories.................. 2,019 (1,420) 8,130
Decrease (increase) in deferred taxes............... (8,313) 7,877 (10,463)
Decrease (increase) in other current assets......... (1,687)
Increase (decrease) in accounts payable and accrued
liabilities....................................... (24,194) 11,784 (9,435)
Increase (decrease) in pension payable.............. -- -- 56,989
Increase (decrease) in income tax payable........... 416 4,954 (5,370)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 156,796 225,700 10,266
--------- --------- ---------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Cash received on sale of assets........................ 61,648 73,399 572,618
Purchase of capital assets............................. (107,863) (87,611) (76,367)
--------- --------- ---------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES..................................... (46,215) (14,212) 496,251
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contributed by partners of affiliate.............. 10,000
Cash distribution to partners of affiliate............. (30,000) (15,000)
Loans to related parties............................... (43,551) (6,192)
Issuance of note to related party...................... 85,000
Repayment of related party loans....................... 54,143
Issuance of long-term debt............................. 43,541 3,382 784
Repayment of long-term debt............................ (113,736) (160,555) (671,156)
Cash paid for financing fees and start-up costs........ (875) (270) (1,167)
--------- --------- ---------
NET CASH USED BY FINANCING ACTIVITIES............. (104,621) (193,635) (547,396)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH.......................... 5,960 17,853 (40,879)
CASH, BEGINNING OF PERIOD................................ 52,063 58,023 75,876
--------- --------- ---------
CASH, END OF PERIOD...................................... $ 58,023 $ 75,876 $ 34,997
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this presentation.
F-55
<PAGE> 129
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
NONCASH ITEMS
1994
The Company acquired rental equipment with a cost basis of $195,389, in
part through the trade in of assets with a net book value of $48,756 and through
the issuance of notes payable in the amount of $156,397.
The Company acquired rental equipment with a cost basis of $20,800, under a
capital lease obligation.
The Company acquired rental equipment with a cost basis of $24,006, in part
through the issuance of notes payable in the amount of $18,005.
1995
The Company satisfied a bank note payable in the amount of $12,433, through
the issuance of a note payable at a different bank.
The Company acquired operating equipment with a cost basis of $20,000,
through the issuance of a note payable.
1996
The Company acquired rental equipment with a cost basis of $38,593, under a
capital lease obligation.
The Company acquired rental and operating equipment with a cost basis of
$180,546, in part through the issuance of notes payable in the amount of
$156,397.
Notes receivable from related parties in the amount of $54,143, were
satisfied through employee payroll bonuses at year end.
The Company satisfied a bank note payable in the amount of $22,918, through
the issuance of a note payable at a different bank.
The Company acquired operating equipment with a cost basis of $53,480,
through the issuance of a note payable.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
OTHER DISCLOSURES
Cash paid for interest............................. $77,537 $81,178 $76,753
Cash paid for income tax........................... $ 20 $ 416 $ 1,725
</TABLE>
The accompanying notes are an integral part of this presentation.
F-56
<PAGE> 130
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
U-Do-It Rental Centers, Inc. (the Company) is engaged in the rental of
machinery, equipment and household items. The Company has two facilities; one in
the northern portion of Coeur d'Alene, Idaho and the other in Ponderay, Idaho
(approximately one mile north of Sandpoint, Idaho).
The Company was incorporated in the State of Idaho in January 1994. One
shareholder owns 100% of the outstanding stock.
Affiliated Entity
The sole stockholder of the Company is also a 50% owner and managing
partner of the CAAR Partnership (the Affiliate). The other partner in the
Affiliate is the son-in-law of the stockholder. The Partnership was formed in
July, 1993. The Company rents certain pieces of heavy equipment from CAAR and
re-rents the equipment to third party customers. The Company provides all lease
sales and support in return for 15% of the rent revenue. All maintenance and
repair on the Affiliate's assets is paid by the Affiliate.
Combined Affiliate
The combined financial statements include the accounts of U-Do-It Rental
Centers, Inc. and CAAR Partnership (the Affiliate). Material inter-company
transactions and balances have been eliminated.
Cash Equivalents
For the purposes of the statements of cash flows the Company considers all
highly liquid debt instruments with original maturities of three months or less
to be cash equivalents.
Revenue Recognition
Revenue is recognized as items are rented to the customer. On rentals of
greater than one month the customer is billed and revenue recognized monthly.
Inventory
Merchandise inventory is stated at the lower of cost or market, on a
first-in, first-out basis. Inventories consist principally of consumable items
and safety equipment associated with the equipment to be rented. Examples
include sandpaper, fuels, lubricants, paints, hard-hats and safety supplies.
Equipment
Depreciation expense is calculated using accelerated and straight-line
methods based on the following estimated useful lives:
<TABLE>
<S> <C>
Machinery and equipment.................................. 5-10 years
Trucks................................................... 5 years
</TABLE>
Expenditures for maintenance and repairs are charged to expense as
incurred. Renewals and betterments that materially extend the life of the asset
are capitalized. When property, plant and equipment are sold or retired, the
related cost and accumulated depreciation are removed from the accounts, and the
resulting gains or losses are reflected in operations.
F-57
<PAGE> 131
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company accounts for taxes in conformity with Financial Accounting
Standards Board Statement Number 109.
Income taxes are provided for the tax effect of transactions reported in
the financial statements and consist of taxes currently payable plus deferred
taxes related primarily to net operating losses carried forward for tax purposes
and differences between the tax and financial accounting basis of certain assets
and liabilities.
Use of Estimates
The preparation of financial statements in conformance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results can and probably will differ from those
estimates.
The most significant area of estimates in these financial statements
involves the issues of depreciation methods and depreciable lives of the rental
and operating equipment. The Company also made significant estimates when it
allocated the purchase price to the individual assets (mainly rental equipment),
following the acquisition of the business in 1993.
Concentrations of Credit Risk
Essentially all of the Company's sales (and hence accounts receivable) are
to customers in the Sandpoint and Coeur d'Alene, Idaho areas. The Company
requires no collateral from customers when granting credit terms. The Company
has not experienced significant losses from uncollectible accounts.
NOTE 2 -- SUBSEQUENT EVENTS
The Company sold substantially all of the assets (other than accounts
receivable) of the two rental locations and the Affiliate near the end of 1996,
to RentX Industries, Inc. The sale of the Coeur d'Alene location closed on
December 19, 1996. Total sale proceeds of $490,500 were received. Proceeds from
this sale were used in part to repay $489,313 of the Company's long-term debt.
The sale of the Sandpoint location closed January 8, 1997. Total proceeds
of $490,500 were received and a gain of approximately $283,000 will be
recognized in 1997. Proceeds from this sale were used to repay $249,195 of the
Company's long-term debt and capital lease obligations.
The assets of the Affiliate were acquired by RentX on the January 8, 1997
closing.
Subsequent to the sale the Company has been renamed and it has limited
assets, liabilities and operations. The Affiliate has been liquidated.
The sale of the assets of the Company was accompanied by the signing of
employment contracts, containing noncompetition agreements with each of the
shareholder's sons (who manage the two locations). A five year noncompetition
agreement with the shareholder was also signed. Compensation for the
noncompetition agreement will be five annual payments of $45,042.
NOTE 3 -- ECONOMIC DEPENDENCE
The overwhelming majority (approximately 70%) of the Company's sales and
accounts receivable are from customers engaged in the building and construction
industries. Approximately 9% of the Company's revenue is derived from customers
in the wood products industries.
F-58
<PAGE> 132
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
No single customer makes up more than 10% of total sales. The Company's
largest 5 customers make up approximately 15% of total sales. It is the nature
of the Company's business that certain construction industry customers may do a
large volume of business with the Company as a result of one contract, and
therefore be a very large customer in one year. After that contract is complete,
the customer may then revert to a minor customer in subsequent periods.
NOTE 4 -- LEASE COMMITMENTS
The Company leased its locations under noncancelable operating leases.
Lease expense was based on a formula involving base rents and an escalation
factor that involved sales from each of the locations. Rent expense was $67,704,
$64,735, and $59,060 for the years ended December 31, 1996, 1995 and 1994
respectively. The leases were acquired by RentX, when RentX acquired the
business at the end of 1996. Accordingly, the Company has no lease commitments
for the locations subsequent to 1996.
The Company leased a truck under a noncancelable operating lease. Rent
expense was $3,755 for each of the years ended December 31, 1995 and 1994
respectively. The truck was acquired by the Company at the conclusion of the
lease term. Accordingly, the Company has no lease commitment for the truck
subsequent to 1995.
The Company leased certain equipment under noncancelable capital leases:
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1995 1996
------------ ------------
<S> <C> <C>
Cost of assets acquired under capital lease............... $ -- $38,593
Capital lease commitment amounts, net of interest at rates
from 3% to 18%.......................................... $5,286 $34,769
</TABLE>
The amortization related to assets acquired under capital lease is included
with depreciation in the financial statements.
The Company repaid its capital lease obligation at the time of the closing
of the sale of the Sandpoint location in January, 1997 (note 2).
NOTE 5 -- INCOME TAXES
For income tax reporting the Company has a net operating loss carry forward
of $49,000, which will expire in 2011. The Company also has (for state reporting
purposes only), investment tax credit carry forwards in the amount of $3,770
which will expire between 1999 and 2001. It is expected that the net operating
loss will be utilized and the investment tax credit recaptured as a result of
the sale to RentX (note 2).
The income tax provision at December 31, 1995 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1995 1996
------------ ------------
<S> <C> <C>
Deferred tax asset due to net operating loss carry
forward................................................. $ -- $10,681
Deferred tax asset due to increase in allowance........... 436 218
Deferred tax asset due to investment tax credit carry
forwards................................................ 7,155 3,770
Valuation allowance....................................... (7,155) (3,770)
------- -------
Deferred tax asset...................................... $ 436 $10,899
======= =======
</TABLE>
F-59
<PAGE> 133
U-DO-IT RENTAL CENTERS, INC. AND AFFILIATE
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Affiliate (a partnership) is not a tax paying entity for the purpose of
federal and state income taxes; accordingly no provision for income taxes is
recorded in these combined statements related to the operations of the
Affiliate. The income from the Affiliate will be aggregated with the other
income and expense of the partners and will be reported on the partners'
individual income tax returns.
NOTE 6 -- DEFINED CONTRIBUTION PENSION PLANS
The Company adopted two defined contribution pension plans in 1996. The
Money Purchase Plan covers all employees meeting certain eligibility
requirements. The plan requires mandatory contributions of 3.5% of each covered
employee's annual salary in 1996 and in succeeding years, until such time as the
plan is revoked or modified. A contribution of $10,823 was accrued for the year
ended December 31, 1996.
The Profit Sharing Plan covers all employees meeting certain eligibility
requirements. The plan allows for discretionary contributions of up to 15% of
each covered employee's annual salary. A contribution of $46,166 was accrued for
the year ended December 31, 1996. Both plans allow for full and immediate
vesting.
NOTE 7 -- RELATED PARTY TRANSACTIONS
The shareholder loaned $85,000 to the Company in late December of 1996; the
loan was subsequently repaid on January 6, 1997.
The sole stockholder and his two sons each owed amounts to the Company. The
notes were satisfied during 1996 through the payment of bonuses to the
shareholder and his sons.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
As part of the sale of the business to RentX the Company is obliged to
arrange and pay for certain improvements to the wastewater systems at the two
locations and for certain remediation efforts related to underground fuel
storage tanks. The Company's commitment is limited to a maximum cost of $16,000.
As of the date of this report much of the work had already been performed and
the Company expects the cost of the items to be somewhat less than $16,000.
The agreement with RentX contains a variety of warranties and
representations, regarding a wide variety of operational and financial matters.
If at a later time these warranties and representations were found to be
breached or misrepresented, RentX would have a cause to proceed against the
Company and the stockholder for damages.
F-60
<PAGE> 134
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Hays Rental and Sales of El Dorado, Inc., Hays
Rental and Sales of Camden, Inc., Hays Rental and Sales of Magnolia, Inc., Hays
Rental and Sales of Hot Springs, Inc., Hays Rental and Sales of Arkadelphia,
Inc. and Hays Leasing Company, Inc.
We have audited the accompanying combined balance sheets of Hays Rental and
Sales of El Dorado, Inc., Hays Rental and Sales of Camden, Inc., Hays Rental and
Sales of Magnolia, Inc., Hays Rental and Sales of Hot Springs, Inc., Hays Rental
and Sales of Arkadelphia, Inc. and Hays Leasing Company, Inc. (dba Hays Rental
and Sales) (the "Company") as of October 31, 1996 and 1995, and the related
combined statements of income, stockholders' equity and cash flows for each of
the three years in the period ended October 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Company
at October 31, 1996 and 1995, and the combined results of its operations and its
cash flows for each of the three years in the period ended October 31, 1996 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
July 11, 1997
F-61
<PAGE> 135
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31 OCTOBER 31 JANUARY 31
1995 1996 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash................................................... $ 212,093 $ 172,956 $ 238,429
Accounts receivable, net of allowance for doubtful
accounts of $8,808 in 1995, $29,710 in 1996 and
$29,710 at January 31, 1997.......................... 284,783 307,538 239,002
Receivable from shareholder............................ 171,437 148,290 148,290
Merchandise inventories................................ 145,033 165,230 136,863
Rental equipment, net of accumulated depreciation of
$822,697 in 1995, $801,141 in 1996 and $846,875 at
January 31, 1997..................................... 1,145,291 1,245,352 1,259,051
Property and equipment, net of accumulated depreciation
of $382,630 in 1995, $274,423 in 1996 and $289,499 at
January 31, 1997..................................... 255,370 242,820 227,276
Prepaid expenses and other assets...................... 11,242 25,894 27,227
---------- ---------- ----------
Total assets................................. $2,225,249 $2,308,080 $2,276,138
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable....................................... $ 145,297 $ 86,801 $ 62,632
Accrued expenses....................................... 165,685 111,778 121,524
Deferred tax liability................................. 35,648 56,256 56,256
Notes payable.......................................... 1,139,456 1,260,081 1,271,991
Notes payable to related parties....................... 90,000 79,856 --
---------- ---------- ----------
Total liabilities............................ 1,576,086 1,594,772 1,512,403
Commitments and contingencies
Stockholders' equity:
Common stock, at stated value........................ 5,670 5,670 5,670
Paid-in capital...................................... 90,731 90,731 90,731
Retained earnings.................................... 552,762 616,907 667,334
---------- ---------- ----------
Total stockholders' equity................... 649,163 713,308 763,735
---------- ---------- ----------
Total liabilities and stockholders' equity... $2,225,249 $2,308,080 $2,276,138
========== ========== ==========
</TABLE>
See accompanying notes.
F-62
<PAGE> 136
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED YEAR ENDED YEAR ENDED JANUARY 31
OCTOBER 31 OCTOBER 31 OCTOBER 31 -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental revenue............. $1,676,029 $1,936,860 $2,239,630 $ 488,497 $ 537,446
Merchandise and equipment
sales................... 714,619 738,543 854,253 62,295 65,009
Other revenue.............. 192,296 235,524 292,894 207,878 210,120
---------- ---------- ---------- ---------- ----------
Total revenues..... 2,582,944 2,910,927 3,386,777 758,670 812,575
Cost of revenues:
Rental equipment expense... 191,736 190,275 233,821 52,757 63,192
Cost of merchandise and
equipment sold.......... 526,726 518,559 650,690 151,259 157,590
Rental equipment
depreciation............ 180,988 175,511 165,183 42,002 45,734
Direct expenses............ 739,084 901,320 1,023,365 245,914 255,979
---------- ---------- ---------- ---------- ----------
Total cost of
revenues......... 1,638,534 1,785,665 2,073,059 491,932 522,495
Store contribution........... 944,410 1,125,262 1,313,718 266,738 290,080
Selling, general and
administrative expense..... 692,902 797,928 895,277 175,830 130,454
Non-rental depreciation and
amortization............... 87,189 163,677 190,758 45,502 43,251
---------- ---------- ---------- ---------- ----------
Operating income............. 164,319 163,657 227,683 45,406 116,375
Other income................. 2,747 16,814 8,566 -- --
Interest expense............. (84,599) (85,719) (113,272) (22,298) (21,229)
---------- ---------- ---------- ---------- ----------
Income before taxes.......... 82,467 94,752 122,977 23,108 95,146
Income tax expense........... 33,536 67,386 58,832 16,407 44,719
---------- ---------- ---------- ---------- ----------
Net income................... $ 48,931 $ 27,366 $ 64,145 $ 6,701 $ 50,427
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-63
<PAGE> 137
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- --------
<S> <C> <C> <C> <C>
Balance, October 31, 1993.......................... $5,670 $90,731 $476,465 $572,866
Net income......................................... -- -- 48,931 48,931
------ ------- -------- --------
Balance, October 31, 1994.......................... 5,670 90,731 525,396 621,797
Net income......................................... -- -- 27,366 27,366
------ ------- -------- --------
Balance, October 31, 1995.......................... 5,670 90,731 552,762 649,163
Net income......................................... -- -- 64,145 64,145
------ ------- -------- --------
Balance, October 31, 1996.......................... 5,670 90,731 616,907 713,308
Net income (unaudited)............................. -- -- 50,427 50,427
------ ------- -------- --------
Balance, January 31, 1997 (unaudited).............. $5,670 $90,731 $667,334 $763,735
====== ======= ======== ========
</TABLE>
See accompanying notes.
F-64
<PAGE> 138
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED YEAR ENDED YEAR ENDED JANUARY 31
OCTOBER 31 OCTOBER 31 OCTOBER 31 ---------------------------------------
1994 1995 1996 1996 1997
----------------- ----------------- ----------------- ------------------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................. $ 48,931 $ 27,366 $ 64,145 $ 6,701 $ 50,427
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation and
amortization........... 268,177 339,188 355,941 87,504 88,985
Changes in operating
assets and liabilities:
Accounts receivable....... (61,850) (25,265) 392 33,400 68,536
Merchandise inventories... (12,429) 3,983 (20,197) (1,111) 28,367
Prepaid expenses and other
assets................. 20,943 4,409 (14,652) -- (1,333)
Accounts payable and other
liabilities............ (5,468) 208,740 (91,795) (125,588) (14,423)
--------- --------- --------- --------- --------
Net cash provided by
operating
activities................ 258,304 558,421 293,834 906 220,559
INVESTING ACTIVITIES
Purchases of rental
equipment and operating
equipment................. -- (77,107) (23,810) (21,762) (87,140)
--------- --------- --------- --------- --------
Net cash used in investing
activities................ -- (77,107) (23,810) (21,762) (87,140)
FINANCING ACTIVITIES
Borrowings on note
payable................... 140,952 -- 358,607 -- --
Repayments on notes
payable................... (361,731) (437,522) (667,768) (28,413) (67,946)
--------- --------- --------- --------- --------
Net cash provided by (used
in) financing
activities................ (220,779) (437,522) (309,161) (28,413) (67,946)
Net increase (decrease) in
cash...................... 37,525 43,792 (39,137) (49,269) 65,473
Cash at beginning of
period.................... 130,776 168,301 212,093 212,093 172,956
--------- --------- --------- --------- --------
Cash at end of period....... $ 168,301 $ 212,093 $ 172,956 $ 162,824 $238,429
========= ========= ========= ========= ========
Supplemental disclosures of
cash flow information:
Cash paid during the year
for:
Interest............... $ 84,599 $ 85,719 $ 113,272 $ 22,298 $ 21,229
Income taxes........... 19,842 51,832 19,862 -- --
</TABLE>
Supplemental schedule of noncash financing activities:
The Company entered into debt obligations to purchase rental equipment in
the amounts of $370,299, $360,241 and $419,642 during 1994, 1995 and 1996,
respectively and $225,000 for the three months ended January 31, 1997.
See accompanying notes.
F-65
<PAGE> 139
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
NOTES TO COMBINED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(THE INFORMATION AS OF JANUARY 31, 1997 AND FOR THE THREE-MONTH PERIODS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED)
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
Hays Rental and Sales of El Dorado, Inc., Hays Rental and Sales of Camden,
Inc., Hays Rental and Sales of Magnolia, Inc., Hays Rental and Sales of Hot
Springs, Inc., Hays Rental and Sales of Arkadelphia, Inc. and Hays Leasing
Company, Inc. (dba as Hays Rental and Sales) (the "Company") have been combined
in these financial statements due to common ownership. The Company is primarily
involved in the short-term rental of general purpose construction equipment, and
to a lesser extent, selling complementary parts, merchandise, new and used
equipment to commercial and residential construction, industrial and homeowner
customers.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying combined balance sheets are
presented on an unclassified basis.
The accompanying combined financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany accounts
and transactions have been eliminated.
FINANCIAL STATEMENT PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
REVENUE RECOGNITION
Equipment rental revenue is recorded under the operating method. Equipment
rentals in the combined statements of operations include revenue earned on
equipment rentals, fuel sales, and rental equipment delivery fees. Revenues from
the sale of parts, supplies, and equipment are recorded at the time of delivery
or pick up by the customer.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Rental equipment is depreciated on a
straight-line basis over the estimated useful lives of the assets. The estimated
useful lives for rental equipment range from 5 to 10 years.
Ordinary maintenance and repair costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and accumulated
depreciation are removed from the respective accounts. Proceeds from the
disposal and the related net book value of the equipment are
F-66
<PAGE> 140
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
recognized in the period of disposal and reported as merchandise and rental
equipment sales and cost of merchandise and rental equipment sold in the
statements of income.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets, estimating no
salvage value.
The estimated useful lives for property and equipment range from 3 to 5
years for vehicles, 5 to 7 years for furniture, fixtures and computer equipment,
and 15 to 27 years for buildings.
Ordinary maintenance and repairs costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any gains
or losses are included in results of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the combined balance sheets for cash,
accounts receivable, accounts payable and accrued liabilities and notes payable
approximate the fair value because of the short-term maturity of these financial
instruments.
INVENTORIES
Inventory consists of merchandise for sale at the store locations. Parts
and supplies inventories for repairing and maintaining rental equipment are
expensed as incurred. All inventories are valued at the lower of cost (first-in,
first-out) or market.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Standards No. 109, Accounting for Income
Taxes. Under the liability method, deferred taxes are determined based on the
difference between the combined financial statement and tax bases of assets and
liabilities using enacted tax rates in the years in which the differences are
expected to reverse. Recognition of deferred tax assets is limited to amounts
considered by management to be realizable.
CONCENTRATIONS OF CREDIT RISK
The Company's primary financial instrument that is potentially subject to
significant concentrations of credit risk is accounts receivable. The
concentration of credit risk is limited due to the large number of customers the
Company maintains.
ADVERTISING COSTS
The Company advertises primarily through the media. Advertising costs are
expensed as incurred. The Company incurred $62,448, $55,578 and $71,552 in
advertising costs during the years ending October 31, 1994, 1995 and 1996,
respectively.
F-67
<PAGE> 141
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
INTERIM FINANCIAL STATEMENTS
The accompanying balance sheet at January 31, 1997 and the statements of
operations, stockholder's equity and cash flows for the three-month periods
ended January 31, 1996 and 1997 are unaudited and have been prepared on the same
basis as the audited financial statements included herein. In the opinion of
management, such unaudited financial statements include all adjustments
necessary to present fairly the information set forth therein, which consist
solely of normal recurring adjustments. The results of operations for such
interim periods are not necessarily indicative of results for the full year.
2. NOTES PAYABLE
Bank debt and long-term obligations consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31 OCTOBER 31
1995 1996
---------- ----------
<S> <C> <C>
Notes payable secured by rental equipment:
Notes payable to First Financial with interest rates
ranging from 7.5% to 9.75%, due in monthly payments
through dates ranging from March 1997 to October
2001................................................... $ 507,420 $ 561,197
8.5% notes payable to Horizon, due in monthly payments
through August 2000.................................... -- 85,906
7.5% notes payable to Merchant and Planters, paid off
during fiscal year 1996................................ 113,991 --
Notes payable to First Bank of Arkansas with interest
rates ranging from 8.0% to 10.25%, due in monthly
payments through dates ranging from May 1997 to July
1999................................................... 46,531 59,168
Notes payable to Clark Credit, interest at 10.25%, due in
monthly payments through April 1998.................... 11,567 6,487
Notes payable to Arkansas Bank and Trust with interest
rates ranging from 8.5% to 10.25%, due in monthly
payments through dates ranging from July 1997 to June
2000................................................... 13,444 34,459
Notes payable to Ingersoll Rand with interest rates
ranging from 8% to 10%, due in monthly payments through
dates ranging from January 1997 to June 1999........... 60,820 70,088
Notes payable to Kubota with interest rates ranging from
6.0% to 8.0%, due in monthly payments through dates
ranging from April 1997 to November 1999............... 141,410 154,931
Notes payable to Case Credit with interest rates ranging
from 4.9% to 8.9%, due in monthly payments through
dates ranging from June 1999 to May 2000............... -- 78,697
Notes payable to GMAC, interest at 8%, paid off during
fiscal
year 1996.............................................. 11,903 --
Notes payable to Contractors Finance, interest at 7.5%,
due in monthly payments through August 1997............ 22,251 10,675
Notes payable to First Financial with interest at 8.25%
due in monthly payments through June 2007.............. 171,437 148,290
</TABLE>
F-68
<PAGE> 142
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OCTOBER 31 OCTOBER 31
1995 1996
---------- ----------
<S> <C> <C>
Notes payable to Chase Manhattan with interest rates
ranging from 8.3% to 8.5%, due in monthly payments
through dates ranging from October 1998 to June 2001... $ 38,682 $ 50,183
---------- ----------
1,139,456 1,260,081
Notes payable to related parties:
Note payable to Mary Clogston with interest at 9%, due in
monthly payments through January 2002.................. 50,000 39,856
Note payable to Vivian Hays with interest at 9%, due in
monthly payments through January 2003.................. 40,000 40,000
---------- ----------
90,000 79,856
---------- ----------
$1,229,456 $1,339,937
========== ==========
</TABLE>
The Company incurred interest expense of $84,599, $85,719 and $113,272 on
borrowings for the years ended October 31, 1994, 1995 and 1996, respectively.
Interest paid approximated interest expensed.
3. CAPITAL STOCK
Common stock of the Company combines the six corporations Hays Rental and
Sales of El Dorado, Inc., Hays Rental and Sales of Camden, Inc., Hays Rental and
Sales of Magnolia, Inc., Hays Rental and Sales of Hot Springs, Inc., Hays Rental
and Sales of Arkadelphia, Inc. and Hays Leasing Company, Inc. and has 37, 760,
310, 300, 300 and 300 shares issued and outstanding, respectively, and 100,
1,000, 100,000, 100,000, 100,000 and 300 shares authorized, respectively, at
October 31, 1996.
4. INCOME TAXES
The Company consists of six corporations of which two are S corporations
and four are C corporations for tax purposes. The S corporations are not liable
for federal or state taxes on income. The earnings of the S corporations will be
reported on the stockholders' federal and state income tax returns.
Significant components of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax liability:
Depreciation................................................ $20,738 $32,011
Other....................................................... 14,910 24,245
------- -------
Total deferred tax liability................................ 35,648 56,256
------- -------
Net deferred tax liability.................................. $35,648 $56,256
======= =======
</TABLE>
F-69
<PAGE> 143
HAYS RENTAL AND SALES OF EL DORADO, INC., HAYS RENTAL AND SALES OF
CAMDEN, INC., HAYS RENTAL AND SALES OF MAGNOLIA, INC., HAYS RENTAL AND
SALES OF HOT SPRINGS, INC., HAYS RENTAL AND SALES OF ARKADELPHIA, INC. AND
HAYS LEASING COMPANY, INC. (DBA HAYS RENTAL AND SALES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Current............................................... $18,416 $46,858 $38,224
Deferred.............................................. 15,120 20,528 20,608
------- ------- -------
Total provision............................. $33,536 $67,386 $58,832
======= ======= =======
</TABLE>
The reconciliation of income tax attributable to operations computed at the
statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Tax at U.S. statutory rates........................... $30,246 $60,957 $49,821
State taxes........................................... 3,112 5,653 8,102
Other................................................. 178 776 909
------- ------- -------
$33,536 $67,386 $58,832
======= ======= =======
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
BUILDING LEASE WITH RELATED PARTY
The Company leases buildings from the Company's president for monthly
rentals of $10,879 under operating leases expiring in 1998.
Future minimum lease payments required under the building leases are as
follows: 1997 -- $130,550; 1998 -- $130,550. Total rent expense was $106,200,
$121,200 and $130,550 for the years ended October 31, 1994, 1995 and 1996,
respectively.
6. EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution 401(k) retirement plan (the
"Plan") which is subject to the provisions of ERISA. Under the Plan, which was
implemented in January 1994, employees qualify after one year of service. The
Company matches on a discretionary basis as determined by the Board of
Directors. Company contributions to the plan were $5,819, $19,231 and $4,237 for
each of the years ended October 31, 1994, 1995 and 1996, respectively.
7. SUBSEQUENT EVENT
On February 14, 1997 the Company entered into an asset purchase agreement
with RentX Industries, Inc. and sold its net assets for $4.5 million.
F-70
<PAGE> 144
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
CVR, Inc. (formerly Central Virginia Rental Company)
We have audited the accompanying balance sheets of CVR, Inc., formerly
Central Virginia Rental Company (the "Company") as of December 31, 1995 and
1996, and the related statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the management of CVR, Inc. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company at December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
May 28, 1997
F-71
<PAGE> 145
CVR, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Cash........................................................ $ 2,925 $ --
Accounts receivable, net of allowance for doubtful accounts
of $92,820 and $125,679 at December 31, 1995 and 1996,
respectively.............................................. 320,737 356,254
Prepaid expenses............................................ 350 5,834
Merchandise inventories..................................... 97,904 161,803
Rental equipment, net of accumulated depreciation of
$3,219,817 and $3,975,118 at December 31, 1995 and 1996,
respectively.............................................. 1,501,051 2,351,634
Furniture, fixtures and computer equipment, net of
accumulated depreciation of $216,334 and $246,631 at
December 31, 1995 and 1996, respectively.................. 134,644 166,765
Other assets................................................ 2,325 4,371
---------- ----------
Total assets...................................... $2,059,936 $3,046,661
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 271,619 $ 160,047
Payroll and other accrued expenses.......................... 32,957 73,545
Bank debt and other notes payable........................... 383,753 802,876
Capital lease obligations................................... 563,772 850,912
Deferred tax liability...................................... 117,650 224,043
---------- ----------
Total liabilities................................. 1,369,751 2,111,423
Stockholders' equity:
Common stock, $10 par value, 5,000 shares authorized,
1,200 shares issued and outstanding.................... 12,000 12,000
Additional paid-in capital................................ 30,289 30,289
Retained earnings......................................... 647,896 892,949
---------- ----------
Total stockholders' equity........................ 690,185 935,238
---------- ----------
Total liabilities and stockholders' equity........ $2,059,936 $3,046,661
========== ==========
</TABLE>
See accompanying notes.
F-72
<PAGE> 146
CVR, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental revenue....................................... $3,199,756 $3,830,181 $4,722,087
Merchandise and rental equipment sales............... 396,119 491,446 532,135
Labor, commissions and other......................... 335,019 377,831 402,592
---------- ---------- ----------
Total revenues............................... 3,930,894 4,699,458 5,656,814
Cost of revenues:
Rental equipment expense............................. 644,121 686,723 610,044
Rental equipment depreciation........................ 371,633 496,433 755,367
Cost of merchandise and rental equipment sales....... 240,403 385,288 410,874
Direct operating expense............................. 2,038,861 2,362,043 2,691,173
---------- ---------- ----------
Total cost of revenues....................... 3,295,018 3,930,487 4,467,458
---------- ---------- ----------
Store contribution..................................... 635,876 768,971 1,189,356
Selling, general and administrative expense............ 312,271 386,962 557,008
Depreciation and amortization, excluding rental
equipment depreciation............................... 27,350 30,077 30,231
---------- ---------- ----------
Operating income....................................... 296,255 351,932 602,117
Interest expense....................................... 68,306 136,218 171,975
---------- ---------- ----------
Income before income taxes............................. 227,949 215,714 430,142
Income tax expense..................................... 46,027 63,272 185,089
---------- ---------- ----------
Net income............................................. $ 181,922 $ 152,442 $ 245,053
========== ========== ==========
</TABLE>
See accompanying notes.
F-73
<PAGE> 147
CVR, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance on December 31, 1993.......... 1,200 $12,000 $30,289 $313,532 $355,821
Net income............................ -- -- -- 181,922 181,922
----- ------- ------- -------- --------
Balance on December 31, 1994.......... 1,200 12,000 30,289 495,454 537,743
Net income............................ -- -- -- 152,442 152,442
----- ------- ------- -------- --------
Balance on December 31, 1995.......... 1,200 12,000 30,289 647,896 690,185
Net income............................ -- -- -- 245,053 245,053
----- ------- ------- -------- --------
Balance on December 31, 1996.......... 1,200 $12,000 $30,289 $892,949 $935,238
===== ======= ======= ======== ========
</TABLE>
See accompanying notes.
F-74
<PAGE> 148
CVR, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 181,922 $ 152,442 $ 245,053
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 398,983 526,510 785,598
Deferred taxes.......................................... 38,860 39,352 106,393
Changes in operating assets and liabilities:
Accounts receivable.................................. (51,855) (55,218) (35,517)
Prepaid expenses and other assets.................... 12,779 3,376 (7,530)
Merchandise inventories.............................. (93,876) 26,795 (63,899)
Accounts payable..................................... (8,665) 191,855 (111,572)
Payroll and other accrued expenses................... 2,407 16,188 40,588
--------- --------- ----------
Net cash provided by operating activities................. 480,555 901,300 959,114
INVESTING ACTIVITIES
Net purchases of furniture, fixtures and computer
equipment............................................... (97,736) (17,674) (62,418)
Purchases of rental equipment............................. (230,837) (595,775) (792,545)
--------- --------- ----------
Net cash used by investing activities..................... (328,573) (613,449) (854,963)
FINANCING ACTIVITIES
Borrowings on debt........................................ 436,800 480,714 1,025,670
Payments on debt.......................................... (382,443) (419,789) (606,547)
Payments on capital lease obligations..................... (206,339) (345,851) (526,199)
--------- --------- ----------
Net cash used by financing activities..................... (151,982) (284,926) (107,076)
--------- --------- ----------
Net increase (decrease) in cash........................... -- 2,925 (2,925)
Cash at beginning of year................................. -- -- 2,925
--------- --------- ----------
Cash at end of year....................................... $ -- $ 2,925 $ --
========= ========= ==========
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
The Company incurred capital lease obligations of $718,621, $397,341 and
$813,339 in 1994, 1995, and 1996, respectively, to acquire rental equipment.
The Company paid income taxes of $4,739, $12,052 and $51,047 for the years
ended December 31, 1994, 1995 and 1996, respectively.
See accompanying notes.
F-75
<PAGE> 149
CVR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
CVR, Inc., formerly known as Central Virginia Rental Company (the
"Company"), is a Virginia corporation formed in February 1974. The Company is
primarily involved in the short-term rental of equipment, vehicles and special
event items in the state of Virginia. At December 31, 1996, the Company operated
through seven store locations in the state of Virginia.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheets are presented
on an unclassified basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Equipment rental revenue is recorded under the operating method. Equipment
rentals in the statements of income include revenue earned on equipment rentals,
fuel sales, and rental equipment delivery fees. Revenues from the sale of parts,
supplies, and equipment are recorded at the time of delivery or pickup by the
customer.
ACCOUNTS RECEIVABLE
A significant portion of the Company's business is on a credit basis. The
Company extends credit to its commercial customers based on evaluations of their
financial condition and generally no collateral is required. The Company
operates almost exclusively in the state of Virginia. The Company maintains
reserves it believes adequate for potential credit losses. The Company's
provision for doubtful accounts receivable was $15,649, $15,803 and $25,631 for
the years ended December 31, 1994, 1995 and 1996, respectively.
RENTAL EQUIPMENT, NET
Rental equipment is recorded at cost. Rental equipment is depreciated on a
straight-line basis over the estimated useful lives of the assets, which
typically range from three to five years, with no salvage value.
Ordinary maintenance and repair costs are charged to operations as
incurred. Proceeds from disposal and the related net book value of the equipment
are recognized in the period of disposal and reported as revenue from
merchandise and rental equipment sales and cost of merchandise and rental
equipment sales, respectively, in the statements of income.
FURNITURE, FIXTURES AND COMPUTER EQUIPMENT
Furniture, fixtures and computer equipment are recorded at cost.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets. The estimated useful lives for furniture, fixtures and
computer equipment range from seven to thirty-nine years.
F-76
<PAGE> 150
CVR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Ordinary maintenance and repair costs are charged to operations as
incurred.
MERCHANDISE INVENTORIES
Merchandise inventories consist principally of parts, tools, supplies and
small- to medium-sized equipment for sale. All merchandise inventories are
valued at the lower of cost (first-in, first-out) or market.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its operations on an ongoing basis. When indicators of
impairment are present, the Company analyzes the recoverability of those assets
by measuring estimated future undiscounted cash flows against the carrying value
of the assets.
ADVERTISING EXPENSE
Advertising costs are expensed as incurred. Advertising expense was
$27,532, $42,537 and $44,014 for the years ended December 31, 1994, 1995 and
1996, respectively.
2. BANK DEBT AND OTHER NOTES PAYABLE
Notes payable and long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
-------- --------
<S> <C> <C>
Note payable to bank, interest payable monthly at 8.25%, due
on demand................................................. $276,255 $ --
Note payable to bank, interest payable monthly at prime plus
.5% (9% at December 31, 1996), due on demand.............. -- 50,000
Note payable to financing company, principal and interest
due monthly at an interest rate of prime plus 2% (10.5% at
December 31, 1996), matures June 1997..................... 78,356 44,282
Note payable to individual, principal and interest due
monthly at an interest rate of 9.5%, matures May 1996..... 9,479 --
Note payable to bank, interest payable monthly at 8.5%,
monthly principal payments of $20,000, due on demand...... -- 673,481
Note payable to individual, interest payable monthly at an
interest rate of 9%, due on demand........................ -- 30,000
Note payable to financing company, principal and interest
due monthly at an interest rate of 8%, matures April
1997...................................................... 19,663 5,113
-------- --------
$383,753 $802,876
======== ========
</TABLE>
Certain long-term assets and cash of the Company are pledged as collateral.
Cash paid for interest was $68,306, $128,264 and $171,975 for the years
ended December 31, 1994, 1995 and 1996, respectively.
Maturities of debt are as follows at December 31, 1996:
<TABLE>
<S> <C>
1997...................................................... $788,115
1998...................................................... 14,761
--------
$802,876
========
</TABLE>
F-77
<PAGE> 151
CVR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Of the above amount, $634,776 was repaid in conjunction with the Company's
asset sale to RentX Industries, Inc. (see Note 7). The remaining assets and
related debt were retained by the Company.
3. CAPITAL LEASES
Assets held under capital leases as of December 31 consist of:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Rental equipment............................................ $1,115,962 $1,476,521
Less accumulated amortization............................... 343,743 362,590
---------- ----------
$ 772,219 $1,113,931
========== ==========
</TABLE>
Amortization of assets held under capital leases is included in
depreciation expense.
Future minimum payments under capital leases are as follows:
<TABLE>
<S> <C>
1997..................................................... $ 458,368
1998..................................................... 268,821
1999..................................................... 122,187
2000..................................................... 98,109
2001..................................................... 71,902
----------
1,019,387
Amounts representing interest............................ 168,475
----------
$ 850,912
==========
</TABLE>
4. EMPLOYEE RETIREMENT PLAN
Effective January 1996, the Company began a 401(k) employee retirement plan
(the "Plan"). To be eligible to participate in the Plan an employee must have
reached the age of 21 and completed one year of service with the Company. This
plan allows participating employees to contribute up to 20 percent of their base
pay, subject to limits determined annually by the Internal Revenue Service. The
Company will match 25% of the first 6% of an employee's contribution. The
Company has recognized $17,291 of expense related to the Plan for the year ended
December 31, 1996.
5. RELATED PARTY TRANSACTIONS
The Company leases all seven of its facilities from entities owned by
certain Company stockholders. The rental expense to related parties included in
the statements of income was $184,200, $228,630 and $287,310 for the years ended
December 31, 1994, 1995 and 1996, respectively (see Note 7).
6. INCOME TAXES
Deferred tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year in
which the differences are expected to reverse. Deferred income tax expenses or
credits are based on the changes in deferred tax assets or liabilities from
period to period.
F-78
<PAGE> 152
CVR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Tax versus financial reporting differences................ $158,175 $284,827
Deferred tax assets:
Allowance for doubtful accounts........................... 23,112 32,561
Other..................................................... 17,413 28,223
-------- --------
40,525 60,784
-------- --------
Net deferred tax liability.................................. $117,650 $224,043
======== ========
</TABLE>
Significant components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Income tax expense:
Federal............................................ $ 6,188 $20,497 $ 69,954
State.............................................. 979 3,423 8,742
Deferred........................................... 38,860 39,352 106,393
------- ------- --------
Total income tax expense............................. $46,027 $63,272 $185,089
======= ======= ========
</TABLE>
The reconciliation of income tax attributable to operations computed at the
U.S. federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Tax at U.S. statutory rates.......................... $42,968 $61,391 $171,368
State taxes.......................................... 979 3,423 8,742
Other................................................ 2,080 (1,542) 4,979
------- ------- --------
$46,027 $63,272 $185,089
======= ======= ========
</TABLE>
7. SUBSEQUENT EVENT
On March 14, 1997, substantially all of the Company's net assets related to
six of the Company's seven stores were acquired by RentX Industries, Inc.
("RentX") in an asset purchase agreement (the "Agreement"). Pursuant to the
Agreement, the Company's operating leases relating to various land and
facilities were terminated with no penalty to the Company. RentX then entered
into new operating lease agreements effective March 14, 1997 with entities owned
by certain of the Company's stockholders.
F-79
<PAGE> 153
REPORT OF INDEPENDENT AUDITORS
The Stockholders
Newmanco, Inc. (dba A-1 Rental Centers)
We have audited the accompanying balance sheets of Newmanco, Inc. (dba A-1
Rental Centers) (the "Company") as of September 30, 1995 and 1996, and the
related statements of operations, stockholders' equity, and cash flows for each
of the three years in the period ended September 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company at September 30,
1995 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
June 6, 1997
F-80
<PAGE> 154
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------- MARCH 31
1995 1996 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash..................................................... $ 16,972 $ 23,125 $ --
Accounts receivable, net of allowance for doubtful
accounts of $34,432 and $38,433 at September 30, 1995
and 1996, respectively and $34,432 at March 31, 1997... 235,656 215,956 192,249
Merchandise inventories.................................. 262,996 291,105 373,800
Rental equipment, net of accumulated depreciation of
$1,547,485 and $1,780,438 at September 30, 1995 and
1996, respectively and $1,960,382 at March 31, 1997.... 1,205,445 1,522,477 1,436,840
Property, plant and equipment, net of accumulated
depreciation of $340,000 and $375,489, at September 30,
1995 and 1996, respectively and $349,691 at
March 31, 1997......................................... 242,105 213,682 235,721
Due from stockholder..................................... 56,936 58,561 44,326
Other assets............................................. 49,510 55,771 81,367
---------- ---------- ----------
Total assets................................... $2,069,620 $2,380,677 $2,364,303
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................................... $ 140,202 $ 142,178 $ 276,473
Other payables........................................... 71,813 93,567 54,788
Capital lease obligation................................. 260,530 297,290 222,658
Notes payable............................................ 1,006,810 1,094,323 1,137,765
Deferred income taxes.................................... 168,248 213,196 213,196
---------- ---------- ----------
Total liabilities.............................. 1,647,603 1,840,554 1,904,880
Stockholders' equity:
Common stock, $1 par value, 100 shares authorized,
issued and outstanding.............................. 100 100 100
Additional paid-in capital............................. 3,746 3,746 3,746
Retained earnings...................................... 418,171 536,277 455,577
---------- ---------- ----------
Total stockholders' equity..................... 422,017 540,123 459,423
---------- ---------- ----------
Total liabilities and stockholders' equity..... $2,069,620 $2,380,677 $2,364,303
========== ========== ==========
</TABLE>
See accompanying notes.
F-81
<PAGE> 155
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 SIX MONTHS ENDED MARCH 31
------------------------------------ -------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental revenue................. $1,804,455 $2,343,852 $2,697,766 $1,203,743 $1,107,338
Merchandise sales.............. 482,185 560,006 602,687 261,107 283,632
Other revenues................. 40,404 76,169 65,357 33,627 30,180
---------- ---------- ---------- ---------- ----------
Total revenues......... 2,327,044 2,980,027 3,365,810 1,498,477 1,421,150
Cost of revenues:
Rental equipment expense....... 706,620 784,615 913,265 373,131 401,599
Cost of merchandise sales...... 208,733 372,880 325,635 141,810 149,322
Direct operating expense....... 851,285 1,015,873 1,245,334 552,775 630,487
---------- ---------- ---------- ---------- ----------
Total cost of
revenue.............. 1,766,638 2,173,368 2,484,234 1,067,716 1,181,408
Store contribution............... 560,406 806,659 881,576 430,761 239,742
Selling, general and
administrative expense......... 369,717 456,125 511,235 234,295 250,051
Depreciation and amortization,
excluding rental equipment
depreciation................... 26,982 36,456 42,251 18,558 23,087
---------- ---------- ---------- ---------- ----------
Operating income (loss).......... 163,707 314,078 328,090 177,908 (33,396)
Interest expense................. 72,201 114,335 138,534 64,236 47,304
---------- ---------- ---------- ---------- ----------
Income (loss) before income
taxes....................... 91,506 199,743 189,556 113,672 (80,700)
Income taxes..................... 26,727 72,866 71,450 41,490 --
---------- ---------- ---------- ---------- ----------
Net income (loss)................ $ 64,779 $ 126,877 $ 118,106 $ 72,182 $ (80,700)
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-82
<PAGE> 156
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-------------- ADDITIONAL TOTAL
PAR PAID-IN RETAINED STOCKHOLDERS'
SHARES VALUE CAPITAL EARNINGS EQUITY
------ ----- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance on September 30, 1993............... 100 $100 $3,746 $226,515 $230,361
Net income.................................. -- -- -- 64,779 64,779
--- ---- ------ -------- --------
Balance on September 30, 1994............... 100 100 3,746 291,294 295,140
Net income.................................. -- -- -- 126,877 126,877
--- ---- ------ -------- --------
Balance on September 30, 1995............... 100 100 3,746 418,171 422,017
Net income.................................. -- -- -- 118,106 118,106
--- ---- ------ -------- --------
Balance on September 30, 1996............... 100 100 3,746 536,277 540,123
Net loss (unaudited)........................ -- -- -- (80,700) (80,700)
--- ---- ------ -------- --------
Balance on March 31, 1997 (unaudited)....... 100 $100 $3,746 $455,577 $459,423
=== ==== ====== ======== ========
</TABLE>
See accompanying notes.
F-83
<PAGE> 157
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30 MARCH 31
------------------------------- ---------------------
1994 1995 1996 1996 1997
--------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................ $ 64,779 $126,877 $118,106 $ 72,182 $ (80,700)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation........................... 154,470 218,010 282,104 110,976 154,146
Changes in operating assets and
liabilities:
Accounts receivable................. (12,777) (115,450) 19,700 (209) 23,707
Inventories......................... (32,612) (45,349) (28,109) (22,262) (82,695)
Other assets and due from
stockholder....................... (24,834) 8,892 (7,886) (6,239) (11,361)
Accounts payable and other
payables.......................... 46,088 11,376 23,730 52,323 95,515
Deferred income taxes............... 16,371 45,999 44,948 26,139 --
--------- -------- -------- --------- ---------
Net cash provided by operating
activities............................. 211,485 250,355 452,593 232,910 98,612
INVESTING ACTIVITIES
Purchases of property and equipment...... (359,526) (295,876) (406,458) (308,686) (68,548)
Proceeds from sales of property and
equipment.............................. -- 10,197 -- --
--------- -------- -------- --------- ---------
Net cash used in investing activities.... (359,526) (285,679) (406,458) (308,686) (68,548)
FINANCING ACTIVITIES
Proceeds from borrowings................. 193,890 376,040 444,012 225,492 80,580
Payment on borrowing..................... (35,524) (271,159) (356,501) (124,362) (59,137)
Payment on capital lease obligation...... -- (68,887) (127,493) (42,326) (74,632)
--------- -------- -------- --------- ---------
Net cash provided by (used in) financing
activities............................. 158,366 35,994 (39,982) 58,804 (53,189)
--------- -------- -------- --------- ---------
Net increase (decrease) in cash.......... 10,325 670 6,153 (16,972) (23,125)
Cash at beginning of period.............. 5,977 16,302 16,972 16,972 23,125
--------- -------- -------- --------- ---------
Cash at end of period.................... $ 16,302 $ 16,972 $ 23,125 $ -- $ --
========= ======== ======== ========= =========
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid income taxes of $7,500, $5,262 and $24,000 for the years
ended September 30, 1994, 1995 and 1996, respectively.
Interest paid for 1994, 1995 and 1996 approximated interest expense.
See accompanying notes.
F-84
<PAGE> 158
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(THE INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
Newmanco, Inc. dba A-1 Rental Centers (the "Company"), is a corporation
formed in New Mexico. The Company is primarily involved in the short-term rental
of equipment, vehicles and special event items in the state of New Mexico. At
September 30, 1996, the Company operated five store locations in the state of
New Mexico.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheets are presented
on an unclassified basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Rental revenue is recorded under the operating method. Rental revenue in
the statements of income includes revenue earned on equipment rentals, fuel
sales, and rental equipment delivery fees. Revenues from the sale of merchandise
and equipment are recorded at the time of delivery or pickup by the customer.
CREDIT POLICY
A significant portion of the Company's business is on a credit basis. The
Company extends credit to its commercial customers based on evaluations of their
financial condition and generally no collateral is required. The Company
operates almost exclusively in the state of New Mexico. The Company maintains
reserves it believes adequate for potential credit losses.
RENTAL EQUIPMENT
Rental equipment purchased by the Company is recorded at cost. Rental
equipment is depreciated on a straight-line basis over the estimated useful
lives of the assets, which typically is five to ten years.
Ordinary maintenance and repair costs are charged to operations as
incurred. Proceeds from disposal and the related net book value of the equipment
are recognized in the period of disposal and reported as rental revenue and cost
of rental equipment sales in the statements of income, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment purchased by the Company is recorded at cost.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets.
F-85
<PAGE> 159
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The estimated useful lives for furniture, fixtures and computer equipment
range from 15-30 years for leasehold improvements and 5-10 years for office
furniture and equipment.
Ordinary maintenance and repair costs are charged to operations as
incurred.
MERCHANDISE INVENTORIES
Merchandise inventories consist principally of parts, commodity type
supplies and small- to medium-sized equipment for sale. All merchandise
inventories are valued at the lower of cost (first-in, first-out) or market.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its operations on an ongoing basis. When indicators of
impairment are present, the Company analyzes the recoverability of those assets
by measuring estimated future undiscounted cash flows against the carrying value
of the assets.
ADVERTISING EXPENSE
Advertising costs are expensed as incurred. Advertising expense was
$31,317, $40,673 and $43,457 for the years ended September 30, 1994, 1995 and
1996, respectively.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Standards No. 109, Accounting for Income
Taxes. Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in the years in which the differences are
expected to reverse. Recognition of deferred tax assets is limited to amounts
considered by management to be more likely than not of realization in future
periods.
INTERIM FINANCIAL STATEMENTS
The accompanying balance sheet at March 31, 1997 and the statements of
operations, stockholder's deficiency and cash flows for the six-month periods
ended March 31, 1996 and 1997 are unaudited and have been prepared on the same
basis as the audited financial statements included herein. In the opinion of
management, such unaudited financial statements include all adjustments
necessary to present fairly the information set forth therein, which consist
solely of normal recurring
F-86
<PAGE> 160
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
adjustments. The results of operations for such interim periods are not
necessarily indicative of results for the full year.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
1995 1996
-------- --------
<S> <C> <C>
Vehicles, machinery and equipment........................... $328,844 $153,185
Leasehold improvements...................................... 95,747 95,747
Furniture, fixtures and computer equipment.................. 157,514 340,239
-------- --------
Total....................................................... 582,105 589,171
Less: accumulated depreciation.............................. 340,000 375,489
-------- --------
$242,105 $213,682
======== ========
</TABLE>
3. NOTES PAYABLE AND LONG-TERM OBLIGATIONS
Notes payable and long-term obligations consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Notes payable to banks and financing companies, principal
and interest repayment under various terms at interest
rates ranging from 9%-11%, maturity dates ranging from
April 1995 to February 2000............................... $1,267,340 $1,391,613
Certain assets of the Company are pledged as collateral
On May 22, 1997 all of the outstanding debt of the Company
was paid. (See Note 6)
</TABLE>
F-87
<PAGE> 161
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES
Assets held under capital leases as of September 30 consist of:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Rental equipment............................................ $323,387 $487,642
Less accumulated amortization............................... (21,527) (77,251)
-------- --------
$301,860 $410,391
======== ========
</TABLE>
Amortization of assets held under capital leases is included in
depreciation expense.
Future minimum payments under capital leases and operating leases having an
initial or remaining term of more than one year consisted of the following at
September 30, 1996:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1997........................................................ $195,345 $147,600
1998........................................................ 102,136 147,600
1999........................................................ 24,350 146,600
-------- --------
Total minimum lease payments................................ $321,831 $441,800
========
Amounts representing interest............................... 24,541
--------
Present value of lease payments............................. $297,290
========
</TABLE>
All leases contain various renewal options and escalation clauses requiring
the Company to pay for taxes, insurance, and maintenance expenses. Rent expense
was $200,115 and $220,390 for the years ended September 30, 1995 and 1996,
respectively.
5. INCOME TAXES
Deferred tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year in
which the differences are expected to reverse. Deferred income tax expenses or
credits are based on the changes in deferred tax assets or liabilities from
period to period.
Deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
1995 1996
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Excess of tax over book depreciation...................... $181,699 $225,247
Deferred tax assets:
Allowance for doubtful accounts........................... 13,451 12,051
-------- --------
Net deferred tax liability.................................. $168,248 $213,196
======== ========
</TABLE>
F-88
<PAGE> 162
NEWMANCO, INC.
(DBA A-1 RENTAL CENTERS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Income tax expense:
Current........................................... $10,356 $26,867 $26,502
Deferred.......................................... 16,371 45,999 44,948
------- ------- -------
Total income tax expense.................. $26,727 $72,866 $71,450
======= ======= =======
</TABLE>
The reconciliation of income tax attributable to operations computed at the
U.S. federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Tax at U.S. statutory rates......................... $31,112 $67,913 $64,449
State taxes (net of federal benefit)................ 2,943 6,424 6,096
Other............................................... (7,328) (1,471) 905
------- ------- -------
$26,727 $72,866 $71,450
======= ======= =======
</TABLE>
6. SUBSEQUENT EVENT
Effective May 22, 1997, all of the Company's outstanding common stock was
purchased by RentX Industries, Inc.
F-89
<PAGE> 163
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Titus Rental Service Companies, Inc.
We have audited the accompanying balance sheets of Titus Rental Service
Companies, Inc. (dba Suburban Rent-It Company and Able Party Rental) (the
"Company") as of March 31, 1996 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended March 31, 1997. These financial statements are the
responsibility of the management of Titus Rental Service Companies, Inc. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company at March 31,
1996 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended March 31, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
July 30, 1997
Denver, Colorado
F-90
<PAGE> 164
TITUS RENTAL SERVICE COMPANIES, INC.
(DBA SUBURBAN RENT-IT COMPANY AND ABLE PARTY RENTAL)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Cash........................................................ $ 199,368 $ 109,215
Accounts receivable, net of allowance for doubtful accounts
of $52,657 and $61,937 at March 31, 1996 and 1997,
respectively.............................................. 103,557 77,436
Prepaid expenses............................................ 21,189 23,989
Merchandise inventories..................................... 173,794 131,544
Rental equipment, net of accumulated depreciation of
$1,289,238 and $1,438,508, at March 1, 1996 and March 1,
1997, respectively........................................ 1,797,762 2,237,485
Furniture, fixtures and computer equipment, net of
accumulated depreciation of $869,328 and $941,143, at
March 1, 1996 and March 1, 1997, respectively............. 600,341 547,727
Related party receivable.................................... 10,387 115,475
Other assets................................................ 2,352 --
---------- ----------
Total assets...................................... $2,908,750 $3,242,871
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 171,574 $ 151,688
Payroll and other accrued expenses.......................... 119,935 132,245
Bank debt and other notes payable........................... 145,655 240,000
Deferred tax liability...................................... 180,274 220,122
---------- ----------
Total liabilities................................. 617,438 744,055
Stockholders' equity:
Common stock, $1 par value, 50,000 shares authorized,
1,000 shares issued and outstanding.................... 1,000 1,000
Additional paid-in capital................................ 651,060 651,060
Retained earnings......................................... 1,639,252 1,846,756
---------- ----------
Total stockholders' equity........................ 2,291,312 2,498,816
---------- ----------
Total liabilities and stockholders' equity........ $2,908,750 $3,242,871
========== ==========
</TABLE>
See accompanying notes.
F-91
<PAGE> 165
TITUS RENTAL SERVICE COMPANIES, INC.
(DBA SUBURBAN RENT-IT COMPANY AND ABLE PARTY RENTAL)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental revenue......................................... $2,710,358 $2,763,957 $3,233,744
Merchandise sales...................................... 412,340 398,847 454,005
Sales of rental equipment.............................. 140,894 109,874 147,312
Labor, damage waivers, and other....................... 40,623 38,907 50,190
---------- ---------- ----------
Total revenues................................. 3,304,215 3,311,585 3,885,251
Cost of revenues:
Rental equipment depreciation.......................... 272,796 258,713 264,357
Cost of merchandise sales.............................. 326,346 298,855 312,344
Cost of rental equipment sales......................... 229,478 64,869 105,620
Direct operating expense............................... 1,865,205 1,884,452 2,084,713
---------- ---------- ----------
Total cost of revenues......................... 2,693,825 2,506,889 2,767,034
---------- ---------- ----------
Store contribution....................................... 610,390 804,696 1,118,217
Selling, general and administrative expense.............. 499,546 592,947 700,291
Depreciation and amortization, excluding rental equipment
depreciation........................................... 101,219 67,656 78,741
---------- ---------- ----------
Operating income......................................... 9,625 144,093 339,185
Interest expense......................................... 26,577 11,993 12,142
---------- ---------- ----------
Income (loss) before income taxes........................ (16,952) 132,100 327,043
Income tax expense (benefit)............................. (3,283) 40,455 119,539
---------- ---------- ----------
Net income (loss)........................................ $ (13,669) $ 91,645 $ 207,504
========== ========== ==========
</TABLE>
See accompanying notes.
F-92
<PAGE> 166
TITUS RENTAL SERVICE COMPANIES, INC.
(DBA SUBURBAN RENT-IT COMPANY AND ABLE PARTY RENTAL)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL TOTAL
PAR PAID-IN RETAINED STOCKHOLDERS'
SHARES VALUE CAPITAL EARNINGS EQUITY
------ ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance on March 31, 1994................. 1,000 $1,000 $651,060 $1,561,276 $2,213,336
Net income (loss)......................... -- -- -- (13,669) (13,669)
----- ------ -------- ---------- ----------
Balance on March 31, 1995................. 1,000 1,000 651,060 1,547,607 2,199,667
Net income................................ -- -- -- 91,645 91,645
----- ------ -------- ---------- ----------
Balance on March 31, 1996................. 1,000 1,000 651,060 1,639,252 2,291,312
Net income................................ -- -- -- 207,504 207,504
----- ------ -------- ---------- ----------
Balance on March 31, 1997................. 1,000 $1,000 $651,060 $1,846,756 $2,498,816
===== ====== ======== ========== ==========
</TABLE>
See accompanying notes.
F-93
<PAGE> 167
TITUS RENTAL SERVICE COMPANIES, INC.
(DBA SUBURBAN RENT-IT COMPANY AND ABLE PARTY RENTAL)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
-----------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....................................... $ (13,669) $ 91,645 $ 207,504
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization......................... 374,015 326,369 343,098
Loss (gain) on sale rental equipment.................. 88,584 (45,005) (41,692)
Deferred taxes........................................ (18,385) 26,005 39,848
Changes in operating assets and liabilities:
Accounts receivable................................ 33,570 (22,455) 26,121
Prepaid expenses................................... -- -- (2,800)
Merchandise inventories............................ 103,632 7,923 42,250
Related party receivable and other assets.......... (4,131) 2,134 (102,736)
Accounts payable................................... 163,007 (189,856) (77,039)
Payroll and other accrued expenses................. (32,863) 80,689 12,310
--------- --------- ---------
Net cash provided by operating activities............... 693,760 277,449 446,864
INVESTING ACTIVITIES
Purchases of rental equipment........................... (621,749) (285,029) (752,547)
Net purchases of furniture and fixtures and equipment... (13,665) (53,073) (26,127)
Proceeds from sale of rental equipment.................. 140,894 109,874 147,312
--------- --------- ---------
Net cash used by (used in) investing activities......... (494,520) (228,228) (631,362)
FINANCING ACTIVITIES
Borrowings on debt...................................... 197,041 109,395 300,000
Payments on debt........................................ (236,332) (221,663) (205,655)
--------- --------- ---------
Net cash provided by (used in) financing activities..... (39,291) (112,268) 94,345
--------- --------- ---------
Net increase (decrease) in cash......................... 159,949 (63,047) (90,153)
Cash at beginning of year............................... 102,466 262,415 199,368
--------- --------- ---------
Cash at end of year..................................... $ 262,415 $ 199,368 $ 109,215
========= ========= =========
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
The Company's accounts payable include $66,935, $98,055, and $57,153 of
fixed asset purchases as of March 31, 1995, 1996, and 1997, respectively.
Interest paid and income taxes paid approximated interest expense and current
income tax expense, respectively.
See accompanying notes.
F-94
<PAGE> 168
TITUS RENTAL SERVICE COMPANIES, INC.
(DBA SUBURBAN RENT-IT COMPANY AND ABLE PARTY RENTAL)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
Titus Rental Service Companies, Inc., (dba Suburban Rent It and Able Party
Rentals) is a Michigan corporation formed in June 1982. The Company is primarily
involved in the short-term rental of equipment, vehicles and special event items
and the sales and rental of party related items. At March 31, 1997, the Company
operated seven store locations in the state of Michigan.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheets are presented
on an unclassified basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Equipment rental revenue is recorded under the operating method. Rental
revenue in the statements of operations includes revenue earned on equipment
rentals, fuel sales, and rental equipment delivery fees. Revenues from the sale
of parts, supplies, and equipment are recorded at the time of delivery or pickup
by the customer.
CREDIT POLICY
A portion of the Company's business is on a credit basis. The Company
extends credit to its commercial customers based on evaluations of their
financial condition and generally no collateral is required. The Company
operates almost exclusively in the state of Michigan. The Company maintains
reserves it believes adequate for potential credit losses.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Rental equipment is depreciated on a
straight-line basis over the estimated useful lives of the assets, typically ten
years with an approximate salvage value of ten percent.
Ordinary maintenance and repair costs are charged to operations as
incurred. Proceeds from disposal and the related net book value of the equipment
are recognized in the period of disposal and reported as revenue from rental
equipment sales and cost of rental equipment sales in the statements of
operations, respectively.
FURNITURE, FIXTURES AND COMPUTER EQUIPMENT
Furniture, fixtures and computer equipment is recorded at cost.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets.
F-95
<PAGE> 169
TITUS RENTAL SERVICE COMPANIES, INC.
(DBA SUBURBAN RENT-IT COMPANY AND ABLE PARTY RENTAL)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The estimated useful lives for furniture, fixtures and computer equipment
range from five to ten years for office furniture and shop equipment to twenty
five years for leasehold improvements.
Ordinary maintenance and repair costs are charged to operations as
incurred.
MERCHANDISE INVENTORIES
Merchandise inventories consist principally of party supplies, parts,
tools, supplies and small- to medium-sized equipment for sale. All merchandise
inventories are valued at the lower of cost (first-in, first-out) or market.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its operations on an ongoing basis. When indicators of
impairment are present, the Company analyzes the recoverability of those assets
by measuring estimated future undiscounted cash flows against the carrying value
of the assets.
ADVERTISING EXPENSE
Advertising costs are expensed as incurred. Advertising expense was $3,820,
$10,910 and $6,510 for the years ended March 31, 1995, 1996 and 1997,
respectively.
2. NOTES PAYABLE AND LONG-TERM OBLIGATIONS
Notes payable and long-term obligations consist of the following:
<TABLE>
<CAPTION>
MARCH 31
--------------------
1996 1997
-------- --------
<S> <C> <C>
Note payable to bank, principal and interest due quarterly
at an interest rate of prime (8.5% at March 31, 1997),
matures March 2001........................................ $ -- $240,000
Note payable to bank, paid during 1997...................... 145,655 --
-------- --------
$145,655 $240,000
======== ========
</TABLE>
Cash paid for interest was $26,577, $12,545 and $20,118 for the years ended
March 31, 1995, 1996 and 1997, respectively.
Maturities of debt are as follows at March 31, 1997:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- --------
<S> <C>
1998.................................................... $ 60,000
1999.................................................... 60,000
2000.................................................... 60,000
2001.................................................... 60,000
--------
$240,000
========
</TABLE>
3. RELATED PARTY TRANSACTIONS
The Company leases all of its facilities from the Company's stockholders.
The rental expense to related parties included in the statements of income was
$205,800, $204,600 and $204,900 for the years ended March 31, 1995, 1996 and
1997, respectively.
F-96
<PAGE> 170
TITUS RENTAL SERVICE COMPANIES, INC.
(DBA SUBURBAN RENT-IT COMPANY AND ABLE PARTY RENTAL)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
Deferred tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year in
which the differences are expected to reverse. Deferred income tax expenses or
credits are based on the changes in deferred tax assets or liabilities from
period to period.
Deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
MARCH 31
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $(204,727) $(248,497)
--------- ---------
(204,727) (248,497)
Deferred tax assets:
Allowance for doubtful accounts........................... 10,531 14,122
Other..................................................... 13,922 14,253
--------- ---------
24,453 28,375
--------- ---------
Net deferred tax liability.................................. $(180,274) $(220,122)
========= =========
</TABLE>
Significant components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- ------- --------
<S> <C> <C> <C>
Income tax expense:
Current........................................... $ 15,102 $14,450 $ 79,691
Deferred.......................................... (18,385) 26,005 39,848
-------- ------- --------
Total income tax expense............................ $ (3,283) $40,455 $119,539
======== ======= ========
</TABLE>
The reconciliation of income tax attributable to operations computed at the
U.S. federal statutory tax rates to income tax expense, (benefit) is:
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Tax provision at U.S. statutory rates............... $(5,764) $ 44,914 $111,195
Effects of graduated income tax rates............... 3,220 (16,035) (398)
State income taxes.................................. 1,694 1,639 5,371
Other............................................... (2,435) 9,938 3,371
------- -------- --------
$(3,283) $ 40,455 $119,539
======= ======== ========
</TABLE>
5. SUBSEQUENT EVENT
Effective June 26, 1997, all of the Company's outstanding common stock was
purchased by RentX Industries, Inc.
F-97
<PAGE> 171
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Mer-Cal Enterprises, Inc. dba Duncan Rent-Alls
We have audited the accompanying balance sheets of Mer-Cal Enterprises,
Inc. (dba Duncan Rent-Alls) (the "Company") as of December 31, 1995 and 1996,
and the related statements of operations, stockholders' deficiency, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the management of Mer-Cal
Enterprises, Inc. (dba Duncan Rent-Alls). Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mer-Cal Enterprises, Inc.
(dba Duncan Rent-Alls) at December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
July 11, 1997
F-98
<PAGE> 172
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------- JUNE 30
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash.................................................... $ 20,133 $ 24,889 $ 28,523
Accounts receivable, net of allowance for doubtful
accounts of $19,958 and $27,234 at December 31, 1995
and 1996, respectively and $31,305 at June 30, 1997... 59,150 55,105 69,925
Due from Duncan Rent-Alls of Ardmore.................... 1,046 3,707 2,096
Merchandise inventories................................. 31,953 30,790 30,790
Rental equipment, net of accumulated depreciation of
$134,542 and $264,899 at December 31, 1995 and 1996,
respectively and $348,559 at June 30, 1997............ 426,129 531,725 565,652
Property and equipment, net of accumulated depreciation
of $34,404 and $61,764 at December 31, 1995 and 1996,
respectively and $76,088 at June 30, 1997............. 74,969 106,633 92,309
--------- --------- ---------
Total assets.................................. $ 613,380 $ 752,849 $ 789,295
========= ========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable........................................ $ 27,065 $ 22,942 $ 45,889
Accrued liabilities..................................... 10,385 20,177 13,878
Due to stockholder...................................... 7,700 7,700 7,700
Notes payable to stockholder............................ 67,789 67,789 67,789
Notes payable, other.................................... 593,460 677,317 668,393
--------- --------- ---------
Total liabilities............................. 706,399 795,925 803,649
Stockholders' deficiency:
Common stock, $1 par value; 10,000 shares authorized,
1,000 shares issued and outstanding................ 1,000 1,000 1,000
Accumulated deficit................................... (94,019) (44,076) (15,354)
--------- --------- ---------
Total stockholders' deficiency.......................... (93,019) (43,076) (14,354)
--------- --------- ---------
Total liabilities and stockholders' deficiency.......... $ 613,380 $ 752,849 $ 789,295
========= ========= =========
</TABLE>
See accompanying notes.
F-99
<PAGE> 173
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental revenue........................ $469,035 $540,477 $659,759 $322,103 $332,302
Merchandise and rental equipment
sales.............................. 130,871 172,532 223,736 111,619 83,521
Labor and other....................... 31,743 17,654 37,766 13,615 11,606
-------- -------- -------- -------- --------
Total revenues................ 631,649 730,663 921,261 447,337 427,429
Cost of revenues:
Rental equipment expense.............. 123,612 125,643 124,564 89,023 28,432
Rental equipment depreciation......... 68,299 96,561 130,357 65,179 83,660
Cost of merchandise and rental
equipment sales.................... 146,829 180,845 209,124 98,763 78,611
Direct operating expense.............. 116,973 147,891 183,987 86,220 92,430
-------- -------- -------- -------- --------
Total cost of revenues........ 455,713 550,940 648,032 339,185 283,133
-------- -------- -------- -------- --------
Store contribution...................... 175,936 179,723 273,229 108,152 144,296
Selling, general and administrative
expense............................... 122,020 154,583 140,773 66,798 71,024
Depreciation, excluding rental equipment
depreciation.......................... 14,444 20,518 27,360 13,680 14,324
-------- -------- -------- -------- --------
Operating income........................ 39,472 4,622 105,096 27,674 58,948
Interest expense, stockholders.......... 6,664 6,613 6,582 3,291 3,291
Interest expense, other................. 26,292 30,874 45,471 24,178 26,935
-------- -------- -------- -------- --------
Net income (loss)....................... $ 6,516 $(32,865) $ 53,043 $ 205 $ 28,722
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-100
<PAGE> 174
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFICIT DEFICIENCY
------ ------ ----------- -------------
<S> <C> <C> <C> <C>
Balance on January 1, 1994...................... 1,000 $1,000 $(59,005) $(58,005)
Distributions to stockholders................... -- -- (1,900) (1,900)
Net income...................................... -- -- 6,516 6,516
----- ------ -------- --------
Balance on December 31, 1994.................... 1,000 1,000 (54,389) (53,389)
Distributions to stockholders................... -- -- (6,765) (6,765)
Net loss........................................ -- -- (32,865) (32,865)
----- ------ -------- --------
Balance on December 31, 1995.................... 1,000 1,000 (94,019) (93,019)
Distributions to stockholders................... -- -- (3,100) (3,100)
Net income...................................... -- -- 53,043 53,043
----- ------ -------- --------
Balance on December 31, 1996.................... 1,000 1,000 (44,076) (43,076)
Net income (unaudited).......................... -- -- 28,722 28,722
----- ------ -------- --------
Balance at June 30, 1997 (unaudited)............ 1,000 $1,000 $(15,354) $(14,354)
===== ====== ======== ========
</TABLE>
See accompanying notes.
F-101
<PAGE> 175
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30
--------------------------------- -------------------------
1994 1995 1996 1996 1997
--------- --------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................. $ 6,516 $ (32,865) $ 53,043 $ 205 $ 28,722
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation..................... 82,743 117,079 157,717 78,859 97,984
Changes in operating assets and
liabilities:
Accounts receivable........... (20,628) (9,754) 4,045 (603) (14,820)
Due from Duncan Rent-Alls of
Ardmore..................... (1,005) (41) (2,661) (98) 1,611
Merchandise inventories....... (4,969) (15,131) 1,163 4,238 --
Accounts payable and accrued
liabilities................. (10,444) 20,352 5,669 13,041 16,648
Due from stockholder.......... 1,500 -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by operating
activities....................... 53,713 79,640 218,976 95,642 130,145
INVESTING ACTIVITIES
Purchase of rental equipment....... (46,004) (313,968) (235,953) (84,668) (117,587)
Purchase of property and
equipment........................ (33,234) -- (59,024) (50,009) --
--------- --------- --------- --------- ---------
Net cash used in investing
activities....................... (79,238) (313,968) (294,977) (134,677) (117,587)
FINANCING ACTIVITIES
Proceeds from notes payable,
other............................ 335,634 553,436 492,041 63,583 50,035
Payments on notes payable, other... (318,181) (304,842) (408,184) (32,910) (58,959)
Proceeds from notes payable to
stockholder...................... 11,857 -- -- -- --
Payments on notes payable to
stockholder...................... -- (583) -- -- --
Distributions to stockholders...... (1,900) (6,765) (3,100) (3,100) --
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities............. 27,410 241,246 80,757 27,573 (8,924)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash.... 1,885 6,918 4,756 (11,462) 3,634
Cash at beginning of period........ 11,330 13,215 20,133 20,133 24,889
--------- --------- --------- --------- ---------
Cash at end of period.............. $ 13,215 $ 20,133 $ 24,889 $ 8,671 $ 28,523
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-102
<PAGE> 176
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
Mer-Cal Enterprises, Inc. (dba Duncan Rent-Alls) (the "Company"), an
Oklahoma corporation, was formed on December 15, 1992. The Company is primarily
involved in the short-term rental of general purpose construction equipment, and
to a lesser extent, selling complementary parts and related merchandise. At
December 31, 1996, the Company operated one store located in Duncan, Oklahoma.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheets are presented
on an unclassified basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Equipment rental revenue is recorded under the operating method. Equipment
rentals in the statements of operations include revenue earned on equipment
rentals, fuel sales, and rental equipment delivery fees. Revenue from the sale
of parts, supplies, and equipment is recorded at the time of delivery or pickup
by the customer. Seasonality impacts the Company's revenues which tend to be
highest during the second and third quarters of the year and may cause operating
income to vary from quarter to quarter.
ACCOUNTS RECEIVABLE
The majority of the Company's business is on a credit basis. The Company
extends credit to its commercial customers based on evaluations of their
financial condition and generally no collateral is required. The Company
operates almost exclusively in the Duncan, Oklahoma, area. The Company maintains
reserves it believes adequate for potential credit losses. The Company's
provision for doubtful accounts receivable was $9,731, $16,194 and $10,382 for
the years ended December 31, 1994, 1995 and 1996.
RENTAL EQUIPMENT
Rental equipment is recorded at cost. Rental equipment is depreciated on a
straight-line basis over the estimated useful lives of the assets, which are
typically seven years, with no salvage value.
Ordinary maintenance and repair costs are charged to operations as
incurred. Proceeds from disposal and the related net book value of the equipment
are recognized in the period of disposal and reported as revenue from
merchandise and rental equipment sales and cost of merchandise and rental
equipment sales in the statements of operations, respectively.
F-103
<PAGE> 177
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment purchased by the Company is recorded at cost.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets. The estimated useful lives for property and equipment range
from five to ten years with no salvage value.
Ordinary maintenance and repair costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any gains
or losses are included in the statements of operations.
MERCHANDISE INVENTORIES
Merchandise inventories consist principally of parts, tools, supplies and
small- to medium-sized equipment for sale. All merchandise inventories are
valued at the lower of cost or market using the specific identification method.
INCOME TAXES
The Company has elected to be taxed under the Subchapter S provisions of
the Internal Revenue Code. Accordingly, the Company's income or loss is included
in the stockholders' individual income tax returns.
ADVERTISING COSTS
Advertising costs are expensed as incurred. The Company incurred $4,339,
$4,639 and $4,878 for the years ended December 31, 1994, 1995 and 1996.
INTERIM FINANCIAL STATEMENTS
The accompanying balance sheet at June 30, 1997 and the statements of
operations, stockholders' deficiency and cash flows for the three-month periods
ended June 30, 1996 and 1997 are unaudited and have been prepared on the same
basis as the audited financial statements included herein. In the opinion of
management, such unaudited financial statements include all adjustments
necessary to present fairly the information set forth therein, which consist
solely of normal recurring adjustments. The results of operations for such
interim periods are not necessarily indicative of results for the full year.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
-------- --------
<S> <C> <C>
Vehicles.................................................... $ 29,447 $ 84,159
Leasehold improvements...................................... 25,256 27,584
Furniture, fixtures and office equipment.................... 13,626 15,610
Land and building........................................... 41,044 41,044
-------- --------
Total............................................. 109,373 168,397
Less accumulated depreciation............................... 34,404 61,764
-------- --------
$ 74,969 $106,633
======== ========
</TABLE>
F-104
<PAGE> 178
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
-------- --------
<S> <C> <C>
Notes payable to stockholder:
Note payable to 51% stockholder of the Company, interest
due monthly at a rate of 9%, due on demand............. $ 29,239 $ 29,239
Note payable to 51% stockholder of the Company, interest
due monthly at a rate of 8.54%, due on demand.......... 38,550 38,550
-------- --------
$ 67,789 $ 67,789
======== ========
Notes payable, other:
Note payable to bank, principal and interest payable
monthly at bank's base float rate plus 1.25% (10.5% at
December 31, 1996), matures March 1997................. $ 14,507 $ 9,691
Note payable to bank, principal and interest payable
monthly at 8.5%, matures November 2001................. -- 14,843
Note payable to bank, principal and interest due monthly
at 9.45%, matures December 1997........................ 21,297 17,247
Note payable to financing company, principal and interest
payable monthly at 7.9%, matures January 2000.......... 44,988 32,153
Note payable to financing company, principal and interest
payable monthly at 6.5%, matures August 1998........... 5,338 3,376
Note payable to bank, principal and interest payable
monthly at bank's adjusted prime plus .5% (9.85% at
December 31, 1996), matures March 2000................. 52,785 43,071
Note payable to bank, principal and interest payable
monthly at 9.5%, matures May 2001...................... -- 35,174
Note payable to bank, principal and interest payable
monthly at 9.5%, matures November 1996................. 250,000 --
Note payable to bank, principal and interest payable
monthly at 9.5%, matures November 1997................. -- 300,000
Note payable to financing company, principal and interest
due monthly at 9.9%, matures October 1999.............. 29,856 22,221
Note payable to financing company, principal and interest
due monthly at 9.9%, matures October 1999.............. 31,605 23,643
Note payable to financing company, principal and interest
due monthly at 10.5%, matures April 2000............... -- 5,776
Note payable to financing company, principal and interest
due monthly at 10.5%, matures November 2000............ -- 5,361
Note payable to financing company, principal and interest
due monthly at 12.25%, matures August 2001............. -- 46,255
Note payable to financing company, principal and interest
due monthly at 10.9%, matures August 2000.............. 49,666 40,555
Note payable to financing company, principal and interest
due monthly at 10.9%, matures July 1999................ -- 12,345
</TABLE>
F-105
<PAGE> 179
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
-------- --------
<S> <C> <C>
Note payable to financing company, principal and interest
due monthly at 10.25%, matures February 2002........... $ -- $ 36,658
Note payable to financing company, principal and interest
due monthly at 10.9%, matures May 1996................. 1,968 --
Note payable to financing company, principal and interest
due monthly at 10.24%, matures December 1998........... 13,968 9,389
Note payable to financing company, principal and interest
due monthly at 10.76%, matures November 1995........... 3,270 --
Note payable to financing company, principal and interest
due monthly at 12.48%, matures July 1998............... 9,930 19,559
Note payable to bank, principal and interest due monthly
at 8.5%, matures April 1999............................ 11,786 --
Note payable to financing company, principal and interest
due monthly at 10.5%, matures April 1998............... 2,851 --
Note payable to financing company, principal and interest
due monthly at 7.99%, matures December 1999............ 23,877 --
Note payable to financing company, principal and interest
due monthly at 9.18%, matures March 1998............... 20,556 --
Note payable to financing company, principal and interest
due monthly at 13.21%, matures June 1996............... 5,212 --
-------- --------
$593,460 $677,317
======== ========
</TABLE>
Substantially all of the Company's assets are pledged as collateral under
these note payable agreements.
Cash paid for interest approximates interest expense for the years ended
December 31, 1994, 1995 and 1996.
Maturities of debt, including debt due to stockholder, are as follows at
December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
1997...................................................... $466,503
1998...................................................... 111,179
1999...................................................... 78,308
2000...................................................... 40,075
2001...................................................... 43,015
Thereafter................................................ 6,026
--------
$745,106
========
</TABLE>
4. RELATED PARTY TRANSACTIONS
The Company leases its primary facility from its stockholders on a
month-to-month basis. The rental expense to related parties included in the
statements of operations was $9,600, $12,000 and $18,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
The Company also periodically receives and advances funds to its
stockholders in addition to the notes payable described in Note 3 above. The
Company has also sold and rented equipment to an
F-106
<PAGE> 180
MER-CAL ENTERPRISES, INC.
(DBA DUNCAN RENT-ALLS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
affiliated entity, Duncan Rent-Alls of Ardmore, which is owned by some of the
stockholders of the Company.
5. SUBSEQUENT EVENTS
On July 30, 1997, substantially all of the Company's net assets were
acquired by RentX Industries, Inc. ("RentX") in an asset purchase agreement (the
"Agreement").
On May 14, 1997, the Company received proceeds pursuant to a note payable
agreement with a bank of $50,035. The note payable matures on July 14, 1997 and
accrues interest at a rate of 9.36%.
F-107
<PAGE> 181
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Redi Rentals, Inc.
We have audited the accompanying balance sheets of Redi Rentals, Inc. (the
"Company") as of May 31, 1996 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for the years ended May 31,
1995, 1996 and 1997. These financial statements are the responsibility of Redi
Rentals, Inc. management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Redi Rentals, Inc. at
May 31, 1996 and 1997, and the results of its operations and its cash flows for
years ended May 31, 1995, 1996 and 1997, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
August 8, 1997
F-108
<PAGE> 182
REDI RENTALS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MAY 31
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Cash........................................................ $ 105,406 $ 338,111
Accounts receivable, net of allowance for doubtful accounts
of $11,570 and $14,324 at May 31, 1996 and 1997,
respectively.............................................. 334,202 394,894
Merchandise inventories..................................... 188,152 148,562
Rental equipment, net of accumulated depreciation of
$607,016 and $797,854 at May 31, 1996 and 1997,
respectively.............................................. 1,030,999 918,538
Property and equipment, net of accumulated depreciation of
$142,629 and $190,791 at May 31, 1996 and 1997,
respectively.............................................. 332,976 259,479
Cash surrender value of life insurance...................... 80,128 90,929
Prepaid expenses............................................ 30,409 12,913
Other assets................................................ 6,762 9,262
---------- ----------
Total assets...................................... $2,109,034 $2,172,688
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 55,792 $ 85,949
Payroll and other accrued expenses.......................... 100,213 107,504
Notes payable............................................... 212,570 187,886
Notes payable to related parties............................ 129,577 92,508
Deferred tax liability...................................... 261,226 282,803
---------- ----------
Total liabilities................................. 759,378 756,650
Commitments and contingencies
Stockholders' equity:
Common Stock, 2,000 no par value shares authorized, 1,200
shares issued and outstanding.......................... 11,999 11,999
Retained earnings......................................... 1,337,657 1,404,039
---------- ----------
Total stockholders' equity........................ 1,349,656 1,416,038
---------- ----------
Total liabilities and stockholders' equity........ $2,109,034 $2,172,688
========== ==========
</TABLE>
See accompanying notes.
F-109
<PAGE> 183
REDI RENTALS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
--------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental revenue...................................... $2,983,841 $3,315,876 $3,541,651
Sale of merchandise and rental equipment............ 508,627 451,991 532,430
Other income........................................ 10,729 16,237 15,978
---------- ---------- ----------
Total revenues.............................. 3,503,197 3,784,104 4,090,059
Cost of revenues:
Rental equipment expense............................ 202,507 233,899 243,246
Rental equipment depreciation....................... 269,815 283,158 348,021
Cost of merchandise and rental equipment sales...... 363,728 331,462 417,937
Direct operating expense............................ 1,850,649 2,075,342 2,186,175
---------- ---------- ----------
Total cost of revenues...................... 2,686,699 2,923,861 3,195,379
---------- ---------- ----------
Store contribution.................................... 816,498 860,243 894,680
Selling, general and administrative expense......... 534,228 655,107 691,326
Depreciation, excluding rental equipment
depreciation..................................... 79,660 72,754 75,995
---------- ---------- ----------
Operating income...................................... 202,610 132,382 127,359
Interest expense, related parties..................... -- 8,142 10,544
Interest expense, other............................... 21,684 16,740 10,678
---------- ---------- ----------
Income before income tax.............................. 180,926 107,500 106,137
Provision for income taxes............................ 80,916 38,280 39,755
---------- ---------- ----------
Net income............................................ $ 100,010 $ 69,220 $ 66,382
========== ========== ==========
</TABLE>
See accompanying notes.
F-110
<PAGE> 184
REDI RENTALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at May 31, 1994......................... 1,200 $11,999 $1,168,427 $1,180,426
Net Income...................................... -- -- 100,010 100,010
----- ------- ---------- ----------
Balance at May 31, 1995......................... 1,200 11,999 1,268,437 1,280,436
Net Income...................................... -- -- 69,220 69,220
----- ------- ---------- ----------
Balance at May 31, 1996......................... 1,200 11,999 1,337,657 1,349,656
Net Income...................................... -- -- 66,382 66,382
----- ------- ---------- ----------
Balance at May 31, 1997......................... 1,200 $11,999 $1,404,039 $1,416,038
===== ======= ========== ==========
</TABLE>
See accompanying notes.
F-111
<PAGE> 185
REDI RENTALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
-----------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 100,010 $ 69,220 $ 66,382
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation.......................................... 349,475 355,912 424,016
Loss on sale/disposal of rental equipment............. 60,631 -- 15,071
Deferred taxes........................................ 60,838 23,063 21,577
Changes in operating assets and liabilities:
Accounts receivable................................ (104,502) 18,926 (60,692)
Prepaid expenses................................... (2,720) (25,189) 17,496
Cash surrender value of life insurance............. (8,759) (11,532) (10,801)
Other assets....................................... (1,750) (3,050) (2,500)
Merchandise inventories............................ (43,693) (19,403) 39,590
Accounts payable................................... (95,771) (2,820) 30,157
Payroll and other accrued expenses................. (6,124) 31,064 7,291
--------- --------- ---------
Net cash provided by operating activities............... 307,635 436,191 547,587
INVESTING ACTIVITIES
Purchases of rental equipment........................... (326,342) (524,515) (250,631)
Purchases of property and equipment..................... (218,228) (55,884) (2,498)
--------- --------- ---------
Net cash used in investing activities................... (544,570) (580,399) (253,129)
FINANCING ACTIVITIES
Borrowings on bank debt and notes payable............... 180,246 275,797 274,374
Payments on bank debt and notes payable................. (87,332) (224,991) (336,127)
--------- --------- ---------
Net cash provided by (used in) financing activities..... 92,914 50,806 (61,753)
--------- --------- ---------
Net (decrease) increase in cash......................... (144,021) (93,402) 232,705
Cash at beginning of period............................. 342,829 198,808 105,406
--------- --------- ---------
Cash at end of period................................... $ 198,808 $ 105,406 $ 338,111
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid........................................... $ 21,684 $ 24,882 $ 21,222
Income taxes paid....................................... 18,000 18,000 12,000
</TABLE>
See accompanying notes.
F-112
<PAGE> 186
REDI RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
Redi Rentals, Inc. (the "Company"), a C corporation, was formed in 1974.
The Company is primarily involved in the short-term rental of general purpose
construction equipment, and to a lesser extent, the short-term rental of special
event equipment and the sale of complementary parts, merchandise, and new and
used equipment to commercial and residential construction, industrial and
homeowner customers. The Company operates one equipment rental facility located
in Tennessee.
The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying balance sheets are presented
on an unclassified basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Equipment rental revenue is recorded under the operating method. Rental
income in the statements of operations includes revenue earned on equipment
rentals. The sale of parts, supplies, and equipment are recorded at the time of
delivery or pick-up by the customer.
CREDIT POLICY
The Company extends credit to its commercial customers based on evaluations
of their financial condition and generally no collateral is required. Invoices
are generated when a piece of rental equipment is returned by the customer or in
any event after 30 days. The Company maintains reserves it believes adequate for
potential credit losses.
RENTAL EQUIPMENT
Rental equipment purchased by the Company is recorded at cost. Rental
equipment is depreciated on a straight-line basis over estimated lives of three
to seven years to a salvage value of zero.
Ordinary maintenance and repair costs are charged to operations as
incurred. When rental equipment is disposed of, the related cost and accumulated
depreciation are removed from the respective accounts. Proceeds from the
disposal and the related net book value of the equipment are recognized in the
period of disposal and reported as revenue from rental equipment sales and cost
of rental equipment sales in the statement of operations.
PROPERTY AND EQUIPMENT
Property and equipment purchased by the Company is recorded at cost.
Depreciation is computed on a straight-line basis over the estimated useful
lives of three to ten years to a salvage value of zero.
F-113
<PAGE> 187
REDI RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The estimated useful lives for property and equipment range from 3 to 10
years for vehicles, delivery and yard equipment, fixtures and leasehold
improvements.
Ordinary maintenance and repair costs are charged to operations as
incurred. When property and equipment is disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any gains
or losses are included in results of operations.
MERCHANDISE INVENTORIES
The Company maintains an inventory of small, purchased equipment and
costumes available for sale or rental to its customers. All inventories are
valued at the lower of cost or market.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Standards No. 109, Accounting for Income
Taxes. Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in the years in which the differences are
expected to reverse. Recognition of deferred tax assets is limited to amounts
considered by management to be more likely than not of realization in future
periods.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("Statement No. 121"), which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Statement No. 121
also addresses the accounting for long-lived assets that are expected to be
disposed of. The Company adopted Statement No. 121 for the year ended May 31,
1996. There were no impairment losses recorded as a result of the adoption of
Statement No. 121.
CONCENTRATIONS OF CREDIT RISK
The Company's primary financial instrument that is potentially subject to
significant concentrations of credit risk is trade accounts receivable. The
concentration of credit risk is subject to the economic conditions and
construction activity in its geographic area of eastern Tennessee.
F-114
<PAGE> 188
REDI RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. NOTES PAYABLE
Notes payable consist of the following at May 31:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Note payable, secured by specific rental equipment, interest
payable at 8.25%, due May 1999............................ $ 40,067 $ 27,767
Note payable, secured by specific rental equipment, interest
payable at 8.25%, due December 1999....................... -- 44,273
Note payable, secured by specific rental equipment, interest
payable at 6.9%, due May 1998............................. 16,832 8,327
Note payable, secured by specific rental equipment, interest
payable at 6.9%, due May 1997............................. 5,213 --
Note payable, secured by specific rental equipment, interest
payable at 6.9%, due June 1998............................ 18,233 9,807
Note payable, secured by specific rental equipment, interest
payable at 6.9%, due September 1997....................... 6,810 --
Note payable, secured by specific rental equipment, interest
payable at 6.9%, due September 1997....................... 6,886 1,656
Note payable, secured by specific rental equipment, interest
payable at 7.9%, due April 1997........................... 6,532 --
Note payable, secured by specific rental equipment, interest
payable at 7.9%, due April 1997........................... 6,532 --
Note payable, secured by specific rental equipment, interest
payable at 7.9%, due April 1997........................... 5,834 --
Note payable, secured by specific rental equipment, interest
payable at 7.9%, due November 1999........................ 28,286 20,780
Note payable, secured by specific rental equipment, interest
payable at 7.9%, due March 2000........................... 31,763 24,191
Note payable, secured by specific rental equipment, interest
payable at 4.9%, due June 1999............................ 21,200 14,475
Note payable, secured by specific rental equipment, interest
payable at 5.9%, due April 2000........................... -- 17,126
Note payable, taken on an insurance policy, interest payable
at 6.0%................................................... 18,382 19,484
-------- --------
$212,570 $187,886
======== ========
</TABLE>
Maturities of notes payable are as follows at May 31, 1997:
<TABLE>
<S> <C>
1998.................................................... $ 96,457
1999.................................................... 62,146
2000.................................................... 29,283
--------
$187,886
========
</TABLE>
3. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution 401(k) retirement plan (the
Plan) which is subject to the provisions of ERISA. The plan was implemented in
June 1995. The Company recognized expense of $6,020 and $8,937 for the years
ended May 31, 1996 and 1997 respectively.
F-115
<PAGE> 189
REDI RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
The Company is party to legal proceedings and potential claims arising in
the ordinary course of its business. In the opinion of management, the Company
has adequate legal defense, reserves or insurance coverage with respect to these
matters so that the ultimate resolution will not have a material adverse effect
on the Company's financial position, results of operations or cash flows.
5. INCOME TAXES
Deferred tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year in
which the differences are expected to reverse. Deferred income tax expenses or
credits are based on the changes in deferred tax assets or liabilities from
period to period.
Deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
MAY 31
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $(127,545) $(149,675)
Accounts receivable....................................... (138,309) (163,687)
--------- ---------
(265,854) (313,362)
Deferred tax assets:
Allowance for doubtful accounts........................... 4,628 5,730
Accounts payable.......................................... -- 24,829
--------- ---------
4,628 30,559
--------- ---------
Net deferred tax liability.................................. $(261,226) $(282,803)
========= =========
</TABLE>
Significant components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
-----------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Income tax expense:
Current............................................ $20,078 $15,217 $18,178
Deferred........................................... 60,838 23,063 21,577
------- ------- -------
Total income tax expense............................. $80,916 $38,280 $39,755
======= ======= =======
</TABLE>
The reconciliation of income tax attributable to operations computed at the
U.S. federal statutory tax rates to income tax expense, (benefit) is:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
-------------------------------
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Tax provision at U.S. statutory rates.............. $58,252 $ 33,551 $ 32,881
Effects of graduated income tax rates.............. (8,184) (11,750) (11,750)
State income taxes................................. 13,924 7,869 7,951
Other.............................................. 16,924 8,610 10,673
------- -------- --------
$80,916 $ 38,280 $ 39,755
======= ======== ========
</TABLE>
F-116
<PAGE> 190
REDI RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. RELATED PARTY TRANSACTIONS
DEBT OBLIGATIONS
The majority stockholder of the Company loaned $148,348 to the Company in
August 1995. The proceeds of the loan were used to relieve the balance owed on
the Company's letter of credit with a bank. Debt obligations owed to related
parties consist of the following at May 31:
<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Note payable, unsecured, interest payable at 7.75%,
due on demand............................................. $129,577 $92,508
</TABLE>
The Company incurred and paid interest on related party notes of $0, $8,142
and $10,544 for the years ended May 31, 1995, 1996 and 1997, respectively.
LEASE COMMITMENTS
The Company leases its facility from the majority stockholder of the
Company. The lease expires in 2013. The rental expense to related parties
included in the statements of operations was $223,531, $229,036 and $235,795 for
the years ended May 31, 1995, 1996 and 1997, respectively.
Future yearly lease commitments are derived based on the greater of 7% of
the prior year's gross sales in the lease year, $146,400 adjusted by the change
in the consumer price index since June 1992, or prior years' basis rent. For
fiscal year 1998, the Company has rental commitments totaling approximately
$234,000. The rental commitments for fiscal years 1999 through 2013 cannot yet
be determined.
7. ADVERTISING COSTS
The Company expenses advertising costs as they are incurred. The
advertising expense included in the statements of income was $68,433, $89,331
and $77,913 for the years ended May 31, 1995, 1996 and 1997, respectively.
8. SUBSEQUENT EVENT
On July 15, 1997, the stockholders of the Company entered into a letter of
intent to sell all of the Company's outstanding stock to RentX Industries, Inc.
F-117
<PAGE> 191
INSIDE BACK COVER:
Photo of outside of store showing new Rent X signage and map of stores in United
States.
<PAGE> 192
BACK COVER:
Rent X logo.
<PAGE> 193
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than the
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All the amounts shown
are estimates, except for the Commission Registration Fee and NASD Filing Fee.
<TABLE>
<S> <C>
Commission Registration Fee................................. $ 11,616
NASD Filing Fee............................................. 4,333
Nasdaq National Market Listing Fees......................... 24,500
Accounting Fees and Expenses................................ 1,150,000
Legal Fees and Expenses (other than Blue Sky)............... 175,000
Blue Sky Fees and Expenses.................................. 5,000
Printing and Engraving Expenses............................. 300,000
Transfer Agent Fees and Expenses............................ 5,000
Directors and Officers Insurance Premium for Offering....... 100,000
Miscellaneous Expenses...................................... 24,551
----------
Total............................................. $1,800,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") gives Delaware corporations broad powers to
indemnify their present and former directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with threatened, pending or
completed actions, suits or proceedings to which they are parties or are
threatened to be made parties by reason of being or having been such directors
or officers, subject to specified conditions and exclusions, gives a director or
officer who successfully defends an action the right to be so indemnified; and
permits a corporation to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other rights to which those indemnified
may be entitled under any by-law, agreement, vote of stockholders or otherwise.
As permitted by Section 145 of the Delaware Corporation Law, Article 8 of
the Certificate of Incorporation and Article VI of the Bylaws of the Company
provide for the indemnification by the Company of its directors, officers,
employees and agents against liabilities and expenses incurred in connection
with actions, suits or proceeds brought against them by a third party or in the
right of the corporation, by reason of the fact that they were or are such
directors, officers, employees or agents.
Article 7 of the Company's Certificate of Incorporation, which is
incorporated by reference in this Registration Statement, provides that to the
fullest extent permitted by the Delaware Corporation Law as the same exists or
may hereafter be amended, a director of the Company shall not be liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director. This provision in the Certificate of Incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Registrant for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
II-1
<PAGE> 194
The Company has entered into, or intends to enter into, agreements to
indemnify its directors and executive officers in addition to the
indemnification provided for in the Certificate of Incorporation and Bylaws.
These agreements, among other things, will indemnify the Company's directors and
executive officers for certain expenses (including attorneys' fees), and all
losses, claims, liabilities, judgments, fines and settlement amounts incurred by
such person arising out of or in connection with such person's service as a
director or officer of the Company to the fullest extent permitted by applicable
law.
Policies of insurance may be obtained and maintained by the Company under
which its directors and officers will be insured, within the limits and subject
to the limitations of the policies, against certain expenses in connection with
the defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
Reference is also made to Section 8 of the Underwriting Agreement contained
in Exhibit 1.1 hereto, indemnifying officers and directors of the Registrant
against certain liabilities, and Section 7 of the Registration Rights Agreement
contained in Exhibit 10.5 hereto, indemnifying certain of the Registrant's
stockholders, including controlling stockholders, and the officers and
directors, against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following table and text specifies securities sold by the Registrant
since inception which were not registered under the Securities Act of 1933, the
date of each sale, the title and amount of securities sold, and the nature and
aggregate amount of consideration received by the issuer in connection with each
sale.
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF NUMBER OF SHARES AS
DATE SECURITIES CONSIDERATION SHARES CONVERTED PURCHASER
---- ---------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
March 7, 1996 Class A $ 500 1,000(1) 1,000 BACE Investments, LLC
Common
May 15, 1996 Series B $ 200,000 200 1,810,538 BACE Investments, LLC
Preferred
May 15, 1996 Series A $2,510,000 2,510 502,000 Mesirow Capital Partners VI
Preferred
May 15, 1996 Series A $2,510,000 2,510 502,000 The Edgewater Private Equity Fund II,
Preferred L.P.
May 29, 1996 Series A $1,277,000 1,277 255,400 Trustees of Grinnell College
Preferred
May 29, 1996 Series A $ 200,000 200 40,000 Larry W. Davidson and Maureen C.
Preferred Davidson
May 29, 1996 Series A $ 300,000 300 60,000 George A. Evans and Marilyn J. Evans
Preferred
May 29, 1996 Series A $ 60,000 60 1,200 Gary J. Kulesza
Preferred
May 29, 1996 Series A $ 50,000 50 1,000 Charles D. Greenidge
Preferred
August 2, 1996 Series A $ 340,000 340 68,000 Trustees of Grinnell College
Preferred
August 2, 1996 Series A $1,000,000 1,000 200,000 Inroads Capital Partners, L.P.
Preferred
November 1, 1996 Series A $ 675,000 675 135,000 Trustees of Grinnell College
Preferred
</TABLE>
II-2
<PAGE> 195
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF NUMBER OF SHARES AS
DATE SECURITIES CONSIDERATION SHARES CONVERTED PURCHASER
---- ---------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
November 1, 1996 Series A $ 465,000 465 93,000 Inroads Capital Partners, L.P.
Preferred
December 20, 1996 Series A $ 206,000 206 41,200 Inroads Capital Partners, L.P.
Preferred
January 6, 1997 Series A $ 271,000 271 54,200 Trustees of Grinnell College
Preferred
January 31, 1997 Series A $ 43,000 43 8,600 The Edgewater Private Equity Fund II,
Preferred L.P.
January 31, 1997 Series A $ 43,000 43 8,600 Mesirow Capital Partners VI
Preferred
February 14, 1997 Series A $ 451,000 451 90,200 Mesirow Capital Partners VI
Preferred
February 14, 1997 Series A $ 451,000 451 90,200 The Edgewater Private Equity Fund II,
Preferred L.P.
February 14, 1997 Series A $ 358,000 358 71,600 Trustees of Grinnell College
Preferred
February 14, 1997 Series A $ 332,000 332 66,400 Inroads Capital Partners, L.P.
Preferred
February 14, 1997 Series A $ 250,000 250 50,000 Arnold A. Bernstein
Preferred
March 14, 1997 Series A $ 200,000 200 40,000 Lawrence R. Redwine
Preferred
March 14, 1997 Series A $ 439,000 439 87,800 Trustees of Grinnell College
Preferred
March 14, 1997 Series A $ 355,000 355 71,000 The Edgewater Private Equity Fund II,
Preferred L.P.
March 14, 1997 Series A $ 355,000 355 71,000 Mesirow Capital Partners VI
Preferred
March 14, 1997 Series A $ 315,000 315 63,000 Inroads Capital Partners, L.P.
Preferred
March 14, 1997 Series A $ 170,000 170 34,000 John H. Hays
Preferred
April 21, 1997 Series A $ 208,000 208 41,600 Inroads Capital Partners, L.P.
Preferred
April 21, 1997 Series A $ 301,000 301 60,200 Mesirow Capital Partners VI
Preferred
April 21, 1997 Series A $ 301,000 301 60,200 The Edgewater Private Equity Fund II,
Preferred L.P
April 21, 1997 Series A $ 300,000 300 60,000 Trustees of Grinnell College
Preferred
May 19, 1997 Series A $ 40,000 40 8,000 Gary J. Kulesza
Preferred
May 19, 1997 Series A $ 200,000 200 40,000 Norman C. Kiser
Preferred
May 19, 1997 Series A $ 100,000 100 20,000 Richard H. Baldwin
Preferred
May 19, 1997 Series A $ 200,000 200 40,000 Jeffrey A. Eide
Preferred
May 19, 1997 Series A $ 125,000 125 25,000 Thomas D. Nugent
Preferred
</TABLE>
II-3
<PAGE> 196
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF NUMBER OF SHARES AS
DATE SECURITIES CONSIDERATION SHARES CONVERTED PURCHASER
---- ---------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
May 19, 1997 Series A $ 100,000 100 20,000 Charles E. Baker
Preferred
May 22, 1997 Series A $ 142,000 142 28,400 Mesirow Capital Partners
Preferred
May 22, 1997 Series A $ 142,000 142 28,400 The Edgewater Private Equity Fund II,
Preferred L.P.
May 22, 1997 Series A $ 142,000 142 28,400 Trustees of Grinnell College
Preferred
May 22, 1997 Series A $ 99,000 99 19,800 Inroads Capital Partners, L.P.
Preferred
June 9, 1997 Series A $ 200,000 200 40,000 Hershel A. Manning
Preferred
June 26, 1997 Series A $ 263,000 263 52,600 Mesirow Capital Partners VI
Preferred
June 26, 1997 Series A $ 263,000 263 52,600 The Edgewater Private Equity Fund II,
Preferred L.P.
June 26, 1997 Series A $ 263,000 263 52,600 Trustees of Grinnell College
Preferred
June 26, 1997 Series A $ 180,000 180 36,000 Inroads Capital Partners, L.P.
Preferred
June 26, 1997 Series C $ 813,000 813 127,771 Mesirow Capital Partners VI
Preferred
June 26, 1997 Series C $ 813,000 813 127,771 The Edgewater Private Equity Fund II,
Preferred L.P.
June 26, 1997 Series C $ 813,000 813 127,771 Trustees of Grinnell College
Preferred
June 26, 1997 Series C $ 561,000 561 88,167 Inroads Capital Partners, L.P.
Preferred
</TABLE>
- ---------------
(1) Adjusted for subsequent stock splits.
The following table specifies stock options with respect to Class B Common
Stock granted by the Registrant to employees as part of the consideration for
their agreement to become employees of the Registrant, the date of each grant,
the number of shares of Class B Common Stock subject to each grant and the name
of each optionee.
<TABLE>
<CAPTION>
EXERCISE
NUMBER OF PRICE PER
DATE SHARES SHARE OPTIONEE
---- --------- --------- --------
<S> <C> <C> <C>
November 11, 1996................................ 38,462 $0.15 Arnold A. Bernstein
November 11, 1996................................ 64,984 $8.00 Arnold A. Bernstein
April 1, 1996.................................... 19,231 $0.10 Gary J. Kulesza
April 1, 1996.................................... 32,532 $8.00 Gary J. Kulesza
May 19, 1997..................................... 40,000 $7.00 Thomas D. Nugent
January 31, 1997................................. 4,808 $1.00 Charles E. Baker
April 14, 1997................................... 2,500 $1.00 Stephen T. Carlson
August 4, 1997................................... 1,450 $8.00 James Conley
September 2, 1997................................ 1,500 $8.00 Darcy Erickson
</TABLE>
II-4
<PAGE> 197
Each sale of securities described above was made in reliance on the
exemptions from registration contained in Section 4(2) of the Securities Act of
1933 for transactions not involving any public offering, except that
transactions involving the Stock Option Plans, were carried out in reliance upon
Rule 701 of the Securities Act of 1933. The recipients in each case represented
their intention to acquire the securities for investment only and not with a
view to the distribution thereof.
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Amended and Restated Certificate of Incorporation of the
Company
3.2 -- Amended and Restated Bylaws of the Company
5.1 -- Opinion of Sherman & Howard L.L.C. as to the validity of
the securities being registered hereby*
10.1 -- Credit Agreement dated as of May 15, 1996 among RentX
Industries, Inc., Harris Trust and Savings Bank and the
Lenders Party Thereto, as amended by a First Amendment
thereto dated October 28, 1996, a Second Amendment
thereto dated April 16, 1997 and a Third Amendment
thereto dated August 25, 1997
10.2 -- Consulting Agreement effective as of May 1, 1997, between
BACE Industries, LLC and RentX Industries, Inc., as
amended by First Amendment to Consulting Agreement dated
August 1, 1997
10.3 -- Investment Agreement dated as of May 15, 1996, among
RentX Industries, Inc., Mesirow Capital Partners VI, The
Edgewater Private Equity Fund II, L.P., and BACE
Investments, LLC, as amended by Amendment No. 1 effective
as of August 2, 1996, by Amendment No. 2 effective as of
December 19, 1996, Amendment No. 3, effective as of March
11, 1997, Amendment No. 4 effective as of May 19, 1997,
Amendment No. 5 effective as of June 26, 1997, and
Amendment No. 6 effective as of September 19, 1997
10.4 -- Stockholders Agreement dated as of May 15, 1996, among
RentX Industries, Inc., Mesirow Capital Partners VI, The
Edgewater Private Equity Fund II, L.P., BACE Investments,
LLC, Richard M. Tyler and Craig J. Zoellner, as amended
by Amendment No. 1 thereto dated as of May 15, 1996, by
Amendment No. 2 thereto effective as of June 9, 1997, by
Amendment No. 3 thereto effective as of June 26, 1997,
and by Amendment No. 4 thereto effective as of September
19, 1997
10.5 -- Registration Rights Agreement dated as of May 15, 1996,
among RentX Industries, Inc., Mesirow Capital Partners
VI, The Edgewater Private Equity Fund II, L.P., and BACE
Investments, LLC, as amended by Amendment No. 1 thereto
dated June 26, 1997
10.6 -- Asset Purchase Agreement dated as of May 15, 1996 between
RentX Industries, Inc., and Zodiac Rentals, Inc., Zodiac
Rentals III, Inc., George A. Evans, Marilyn J. Evans,
Maureen C. Davidson and Larry W. Davidson
10.7 -- Stock Purchase Agreement dated as of May 29, 1996 between
RentX Industries, Inc., and Milton L. Neumann and Alice
E. Neumann, and Milt and Alice Neumann, Cheryl L.
Kettrick and Steven E. Neumann
10.8 -- Asset Purchase Agreement dated as of August 2, 1996
between RentX Industries, Inc., and Rifle Rentals, Inc.,
Rental Country U.S.A., Inc., G.R.M. Company, Inc., Rocky
Mountain Rentals, Inc., Glen R. Miller and Elizabeth
Miller
10.9 -- Asset Purchase Agreement dated as of November 1, 1996
between RentX Industries, Inc., and U-Rent, Inc.,
Lawrence R. Redwine and John P. Redwine
10.10 -- Asset Purchase Agreement dated as of December 17, 1996
between RentX Industries, Inc., and U-Do-It Rental
Centers, Inc., Charles E. Campbell, CAAR Partnership,
Scott W. Arnone and Lori K. Arnone
</TABLE>
II-5
<PAGE> 198
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
10.11 -- Asset Purchase Agreement dated as of January 31, 1997
between RentX Industries, Inc., and Rifle Rentals, Inc.,
Rental Country U.S.A., Inc., G.R.M. Company, Inc., Rocky
Mountain Rentals, Inc., Glen R. Miller and Elizabeth
Miller, as amended
10.12 -- Asset Purchase Agreement dated as of February 14, 1997
between RentX Industries, Inc., and Hays Rental & Sales
of El Dorado, Inc., Hays Rental & Sales of Hot Springs,
Inc., Magnolia, Inc., Camden, Inc., and Arkadelphia,
Inc., Hays Leasing, Inc. and John H. Hays
10.13 -- Asset Purchase Agreement dated as of March 14, 1997
between RentX Industries, Inc., and CVR, Inc., Norman C.
Kiser, Richard H. Baldwin, Daniel C. Showalter and Tracy
C. Smith
10.14 -- Purchase Agreement dated as of April 14, 1997 between
RentX Industries, Inc., and Irwin R. Scott, Carol J.
Scott and Jeffrey Eide
10.15 -- Purchase Agreement dated as of May 19, 1997 between RentX
Industries, Inc., and Hershel A. Manning and Carolyn W.
Manning
10.16 -- Purchase Agreement dated as of June 26, 1997 between
RentX Industries, Inc. and William Titus, Jeffrey W.
Titus and Christopher Titus
10.17 -- Purchase Agreement between RentX Industries, Inc. and A-Z
Rents It of Fort Collins, Inc., Ronald K. Wray and Janet
L. Wray
10.18 -- Purchase Agreement between RentX Industries, Inc., A-1
Rent All, Inc. Charitable Remainder Unitrust, A-1 Rent
All, Inc., A. Reed Franklin, Patricia Franklin, The
Franklin Children Trust No. One and The Cynthia Frazier
Trust No. One
10.19 -- Purchase Agreement between RentX Industries, Inc., A-1
Rent All of Marshall, Inc., Patricia Franklin, A. Reed
Franklin and Richard Jackson
10.20 -- Purchase Agreement between RentX Industries, Inc.,
Mer-Cal Enterprises, Inc., d/b/a Duncan Rents All, Inc.,
Dean Callas and W. R. Merrill
10.21 -- Nonqualified Stock Option Plan -- January, 1997
10.22 -- Nonqualified Stock Option Plan -- May, 1997
10.23 -- Nonqualified Stock Option Plan -- June, 1997
10.24 -- Stock Option Plan for Employees
10.25 -- Stock Option Plan for Non-Employee Directors
10.26 -- Restated Nonqualified Stock Option Agreement [Management]
effective as of November 11, 1996 between RentX
Industries, Inc., and Arnold A. Bernstein
10.27 -- Restated Nonqualified Stock Option Agreement
[Management-Vested] effective as of November 11, 1996
between RentX Industries, Inc., and Arnold A. Bernstein
10.28 -- Restated Nonqualified Stock Option Agreement [Management]
effective as of April 1, 1996 between RentX Industries,
Inc., and Gary J. Kulesza
10.29 -- Restated Nonqualified Stock Option Agreement
[Management-Vested] effective as of April 1, 1996 between
RentX Industries, Inc., and Gary J. Kulesza
10.30 -- Employment Agreement dated April 3, 1997 between RentX
Industries, Inc., and Stephen T. Carlson
10.31 -- Employment Agreement dated November 13, 1996 between
RentX Industries, Inc., and Arnold A Bernstein, as
amended February 17, 1997
10.32 -- Employment Agreement dated April 1, 1996 between RentX
Industries, Inc., and Gary J. Kulesza, as amended
February 25, 1997
10.33 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 9215 Federal, Westminster, Colorado
10.34 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 1230 N. Park, Castle Rock, Colorado
</TABLE>
II-6
<PAGE> 199
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
10.35 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 15350 E. Evans, Denver, Colorado
10.36 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 5860 E. Evans, Denver, Colorado
10.37 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 2131 S. Jasmine, Denver, Colorado
10.38 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 2250 S. Fraser, Aurora, Colorado
10.39 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 600 Fraser Street, Aurora, Colorado
10.40 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 10685 S. Parker Road, Aurora, Colorado
10.41 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 5862 E. Evans, Denver, Colorado
10.42 -- Lease -- Plaza 6000 Partners, a California limited
partnership (as landlord) and RentX Industries, Inc., a
Delaware corporation (as tenant), as amended by First,
Second and Third Amendments
10.43 -- Form of Indemnification Agreement to be entered into
between RentX Industries, Inc. and its Executive Officers
and Directors
11.1 -- Statement re: computation of per share earnings
21.1 -- Subsidiaries
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Pester & Company Certified Public Accountants,
P.C.
23.3 -- Consent of LeMaster & Daniels PLLC
23.4 -- Consent of Williams & Parsons, PA
23.5 -- Consent of Sherman & Howard L.L.C. (included in Exhibit
5.1)
24.1 -- Powers of Attorney (included in Signature Page)
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
(b) Financial Statement Schedules
Other schedules are not included because the required information is not
present or is included in the consolidated financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 14 hereof, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by director, officer or controlling person of the
II-7
<PAGE> 200
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-8
<PAGE> 201
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver, State of
Colorado, on September 24, 1997.
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A. BERNSTEIN
----------------------------------
Arnold A. Bernstein
President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of RentX Industries, Inc., do
hereby constitute and appoint Arnold A. Bernstein and Thomas D. Nugent, and each
of them, our true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, for each of us and in our name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and any additional
registration statements under Rule 462(b) of the Securities and Exchange
Commission promulgated under the Securities Act of 1933 relating to the same
offering, and any and all amendments (including post-effective amendments)
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith and about the premises, as fully to all intents and
purposes as each of us might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ARNOLD A. BERNSTEIN President, Chief Executive September 24, 1997
- ----------------------------------------------------- Officer, and Director
Arnold A. Bernstein
/s/ THOMAS D. NUGENT Chief Financial Officer September 24, 1997
- -----------------------------------------------------
Thomas D. Nugent
/s/ STEPHEN T. CARLSON Vice President-Controller September 24, 1997
- ----------------------------------------------------- (Principal Accounting
Stephen T. Carlson Officer)
/s/ RICHARD M. TYLER Director September 24, 1997
- -----------------------------------------------------
Richard M. Tyler
/s/ CRAIG J. ZOELLNER Director September 24, 1997
- -----------------------------------------------------
Craig J. Zoellner
/s/ THOMAS E. GALUHN Director September 24, 1997
- -----------------------------------------------------
Thomas E. Galuhn
/s/ JAMES A. GORDON Director September 24, 1997
- -----------------------------------------------------
James A. Gordon
</TABLE>
II-9
<PAGE> 202
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLIAM P. SUTTER, JR. Director September 24, 1997
- -----------------------------------------------------
William P. Sutter, Jr.
/s/ MARGARET G. FISHER Director September 24, 1997
- -----------------------------------------------------
Margaret G. Fisher
</TABLE>
II-10
<PAGE> 203
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Amended and Restated Certificate of Incorporation of the
Company
3.2 -- Amended and Restated Bylaws of the Company
5.1 -- Opinion of Sherman & Howard L.L.C. as to the validity of
the securities being registered hereby*
10.1 -- Credit Agreement dated as of May 15, 1996 among RentX
Industries, Inc., Harris Trust and Savings Bank and the
Lenders Party Thereto, as amended by a First Amendment
thereto dated October 28, 1996, a Second Amendment
thereto dated April 16, 1997 and a Third Amendment
thereto dated August 25, 1997
10.2 -- Consulting Agreement effective as of May 1, 1997, between
BACE Industries, LLC and RentX Industries, Inc., as
amended by First Amendment to Consulting Agreement dated
August 1, 1997
10.3 -- Investment Agreement dated as of May 15, 1996, among
RentX Industries, Inc., Mesirow Capital Partners VI, The
Edgewater Private Equity Fund II, L.P., and BACE
Investments, LLC, as amended by Amendment No. 1 effective
as of August 2, 1996, by Amendment No. 2 effective as of
December 19, 1996, Amendment No. 3, effective as of March
11, 1997, Amendment No. 4 effective as of May 19, 1997,
Amendment No. 5 effective as of June 26, 1997, and
Amendment No. 6 effective as of September 19, 1997
10.4 -- Stockholders Agreement dated as of May 15, 1996, among
RentX Industries, Inc., Mesirow Capital Partners VI, The
Edgewater Private Equity Fund II, L.P., BACE Investments,
LLC, Richard M. Tyler and Craig J. Zoellner, as amended
by Amendment No. 1 thereto dated as of May 15, 1996, by
Amendment No. 2 thereto effective as of June 9, 1997, by
Amendment No. 3 thereto effective as of June 26, 1997,
and by Amendment No. 4 thereto effective as of September
19, 1997
10.5 -- Registration Rights Agreement dated as of May 15, 1996,
among RentX Industries, Inc., Mesirow Capital Partners
VI, The Edgewater Private Equity Fund II, L.P., and BACE
Investments, LLC, as amended by Amendment No. 1 thereto
dated June 26, 1997
10.6 -- Asset Purchase Agreement dated as of May 15, 1996 between
RentX Industries, Inc., and Zodiac Rentals, Inc., Zodiac
Rentals III, Inc., George A. Evans, Marilyn J. Evans,
Maureen C. Davidson and Larry W. Davidson
10.7 -- Stock Purchase Agreement dated as of May 29, 1996 between
RentX Industries, Inc., and Milton L. Neumann and Alice
E. Neumann, and Milt and Alice Neumann, Cheryl L.
Kettrick and Steven E. Neumann
10.8 -- Asset Purchase Agreement dated as of August 2, 1996
between RentX Industries, Inc., and Rifle Rentals, Inc.,
Rental Country U.S.A., Inc., G.R.M. Company, Inc., Rocky
Mountain Rentals, Inc., Glen R. Miller and Elizabeth
Miller
10.9 -- Asset Purchase Agreement dated as of November 1, 1996
between RentX Industries, Inc., and U-Rent, Inc.,
Lawrence R. Redwine and John P. Redwine
10.10 -- Asset Purchase Agreement dated as of December 17, 1996
between RentX Industries, Inc., and U-Do-It Rental
Centers, Inc., Charles E. Campbell, CAAR Partnership,
Scott W. Arnone and Lori K. Arnone
10.11 -- Asset Purchase Agreement dated as of January 31, 1997
between RentX Industries, Inc., and Rifle Rentals, Inc.,
Rental Country U.S.A., Inc., G.R.M. Company, Inc., Rocky
Mountain Rentals, Inc., Glen R. Miller and Elizabeth
Miller, as amended
10.12 -- Asset Purchase Agreement dated as of February 14, 1997
between RentX Industries, Inc., and Hays Rental & Sales
of El Dorado, Inc., Hays Rental & Sales of Hot Springs,
Inc., Magnolia, Inc., Camden, Inc., and Arkadelphia,
Inc., Hays Leasing, Inc. and John H. Hays
</TABLE>
<PAGE> 204
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
10.13 -- Asset Purchase Agreement dated as of March 14, 1997
between RentX Industries, Inc., and CVR, Inc., Norman C.
Kiser, Richard H. Baldwin, Daniel C. Showalter and Tracy
C. Smith
10.14 -- Purchase Agreement dated as of April 14, 1997 between
RentX Industries, Inc., and Irwin R. Scott, Carol J.
Scott and Jeffrey Eide
10.15 -- Purchase Agreement dated as of May 19, 1997 between RentX
Industries, Inc., and Hershel A. Manning and Carolyn W.
Manning
10.16 -- Purchase Agreement dated as of June 26, 1997 between
RentX Industries, Inc. and William Titus, Jeffrey W.
Titus and Christopher Titus
10.17 -- Purchase Agreement between RentX Industries, Inc. and A-Z
Rents It of Fort Collins, Inc., Ronald K. Wray and Janet
L. Wray
10.18 -- Purchase Agreement between RentX Industries, Inc., A-1
Rent All, Inc. Charitable Remainder Unitrust, A-1 Rent
All, Inc., A. Reed Franklin, Patricia Franklin, The
Franklin Children Trust No. One and The Cynthia Frazier
Trust No. One
10.19 -- Purchase Agreement between RentX Industries, Inc., A-1
Rent All of Marshall, Inc., Patricia Franklin, A. Reed
Franklin and Richard Jackson
10.20 -- Purchase Agreement between RentX Industries, Inc.,
Mer-Cal Enterprises, Inc., d/b/a Duncan Rents All, Inc.,
Dean Callas and W. R. Merrill
10.21 -- Nonqualified Stock Option Plan -- January, 1997
10.22 -- Nonqualified Stock Option Plan -- May, 1997
10.23 -- Nonqualified Stock Option Plan -- June, 1997
10.24 -- Stock Option Plan for Employees
10.25 -- Stock Option Plan for Non-Employee Directors
10.26 -- Restated Nonqualified Stock Option Agreement [Management]
effective as of November 11, 1996 between RentX
Industries, Inc., and Arnold A. Bernstein
10.27 -- Restated Nonqualified Stock Option Agreement
[Management-Vested] effective as of November 11, 1996
between RentX Industries, Inc., and Arnold A. Bernstein
10.28 -- Restated Nonqualified Stock Option Agreement [Management]
effective as of April 1, 1996 between RentX Industries,
Inc., and Gary J. Kulesza
10.29 -- Restated Nonqualified Stock Option Agreement
[Management-Vested] effective as of April 1, 1996 between
RentX Industries, Inc., and Gary J. Kulesza
10.30 -- Employment Agreement dated April 3, 1997 between RentX
Industries, Inc., and Stephen T. Carlson
10.31 -- Employment Agreement dated November 13, 1996 between
RentX Industries, Inc., and Arnold A Bernstein, as
amended February 17, 1997
10.32 -- Employment Agreement dated April 1, 1996 between RentX
Industries, Inc., and Gary J. Kulesza, as amended
February 25, 1997
10.33 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 9215 Federal, Westminster, Colorado
10.34 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 1230 N. Park, Castle Rock, Colorado
10.35 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 15350 E. Evans, Denver, Colorado
10.36 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 5860 E. Evans, Denver, Colorado
</TABLE>
<PAGE> 205
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
10.37 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 2131 S. Jasmine, Denver, Colorado
10.38 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 2250 S. Fraser, Aurora, Colorado
10.39 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 600 Fraser Street, Aurora, Colorado
10.40 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 10685 S. Parker Road, Aurora, Colorado
10.41 -- Lease Agreement between RentX Industries, Inc. and George
Evans and Larry Davidson, dated May 15, 1997, for the
property at 5862 E. Evans, Denver, Colorado
10.42 -- Lease -- Plaza 6000 Partners, a California limited
partnership (as landlord) and RentX Industries, Inc., a
Delaware corporation (as tenant), as amended by First,
Second and Third Amendments
10.43 -- Form of Indemnification Agreement to be entered into
between RentX Industries, Inc. and its Executive Officers
and Directors
11.1 -- Statement re: computation of per share earnings
21.1 -- Subsidiaries
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Pester & Company Certified Public Accountants,
P.C.
23.3 -- Consent of LeMaster & Daniels PLLC
23.4 -- Consent of Williams & Parsons, PA
23.5 -- Consent of Sherman & Howard L.L.C. (included in Exhibit
5.1)
24.1 -- Powers of Attorney (included in Signature Page)
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RENTX INDUSTRIES, INC.
RentX Industries, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. The name of the corporation is RentX Industries, Inc. The
corporation was originally incorporated under the same name. The original
Certificate of Incorporation of the corporation was filed on March 7, 1996, and
has previously been amended by Certificates of Amendment filed on May 15, 1996,
December 18, 1996, January 30, 1997, May 16, 1997 and June 25, 1997.
2. This Amended and Restated Certificate of Incorporation restates
and integrates and further amends the corporation's Certificate of
Incorporation and has been duly adopted in accordance with Sections 242 and 245
of the Delaware General Corporation Law.
3. The text of the Amended and Restated Certificate of Incorporation
reads in its entirety as follows:
ARTICLE 1
NAME
The name of the corporation is RentX Industries, Inc.
ARTICLE 2
REGISTERED OFFICER AND AGENT
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805, county of New
Castle. The name of the registered agent is Corporation Service Company.
ARTICLE 3
PURPOSES AND POWERS
The purposes for which the corporation is organized are to engage
in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law and to possess and employ all
powers and privileges now or hereafter granted or available under the laws
of the State of Delaware to such corporations.
<PAGE> 2
ARTICLE 4
CAPITALIZATION
4.1 Authorized Shares; Reclassification. The total number of
shares that the corporation shall have authority to issue is 6,239,029
shares, comprised of (i) 6,218,634 shares of Common Stock, each with a par
value of $.01, of which 5,970,326 shares shall be voting Class A Common
Stock and 248,308 shares shall be nonvoting Class B Common Stock (the
Class A Common Stock and the Class B Common Stock being collectively
referred to herein as the "Common Stock"), and (ii) 20,395 shares of
Preferred Stock, each with a par value of $1.00 and a stated value of
$1,000, of which 17,195 shares shall be Series A Preferred Stock, 200
shares shall be Series B Preferred Stock and 3,000 shares shall be Series
C Preferred Stock (the Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock being collectively referred to as the
"Preferred Stock").
4.2 Preferred Stock. The Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall have the respective
voting powers, preferences and relative, participating, optional and other
special rights, and qualifications, limitations and restrictions thereof
set forth below (it being understood that except as provided in this
Certificate of Incorporation, the rights of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be identical
on a share-for-share basis):
4.2.1 Dividends. (a) The holders of Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds at the time legally available therefor, dividends
at the annual rate of $50.00 per annum per share ($70.00 per annum per
share during the continuance of any Event of Default, i.e., a 5% annual
rate on its $1,000 stated value but increased to 7% during the continuance
of an Event of Default), which shall be fully cumulative, shall accrue
from the date of initial issuance of each share of Preferred Stock (on a
daily basis whether or not sufficient funds would be legally available at
that time for the payment of such dividends) and shall be payable in cash
quarterly in arrears on the first day of February, May, August and
November in respect of the 3-month
- 2 -
<PAGE> 3
period (or portion thereof during which such Preferred Stock was
outstanding) ended on the last day of the preceding January, April, July
and October, respectively (except that if any such payment date is a
Saturday, Sunday or legal holiday, then such dividend shall be payable on
the next day that is not a Saturday, Sunday or legal holiday). Each such
dividend shall be paid to the holders of record of the Preferred Stock as
they appear upon the stock transfer books of the corporation at the close
of business on the last day of the three- month period (or portion
thereof) in respect of which the dividend is payable. For purposes
hereof, the term "legal holiday" shall mean any day on which banking
institutions are authorized to close in Denver, Colorado and the term
"business day" shall mean any day other than a Saturday, Sunday or legal
holiday. Holders of shares of Preferred Stock that are redeemed or
converted will be entitled to receive the dividend accrued through the
date of redemption or conversion (whether or not such dividend accrued
shall have been previously declared), payable by the corporation not later
than five days after the date of such conversion or redemption or, if
later, the date contemplated in the last sentence of Section 4.2.1(b).
Dividends on account of arrears for any past dividend period may be
declared and paid at any time, without reference to any regular dividend
payment date. The amount of dividends payable per share of Preferred
Stock for each full three-month dividend period shall be computed by
dividing the annual dividend amount by four. The amount of dividends
payable for the initial dividend period and any other period shorter than
a full quarterly period shall be computed on the basis of a 360-day year
of twelve 30-day months based on the 5% annual rate applied to the $1,000
stated value per share (or 7% annual rate for any period during the
continuance of an Event of Default).
(b) The corporation may elect to defer payment of
dividends (ratably among the shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock) if and to the extent the
payment of such dividends would violate restrictions in any loan agreement
or indenture of the corporation or a subsidiary thereof pursuant to which
any of them then has indebtedness outstanding (such restrictions being
referred to as "Dividend Restrictions") or violate the General Corporation
Law of the State of Delaware (the "GCL"), and such dividends so deferred
will accumulate additional dividends as provided in Section 4.2.1(c).
Except as provided in the following sentence, such additional dividends
will be payable quarterly at the same times as dividends referred to in
Section 4.2.1(a). The corporation shall pay all such deferred dividends
and additional
- 3 -
<PAGE> 4
amounts accrued thereon, out of funds then legally available therefor, as
soon as, and to the extent that, such payment does not violate the
Dividend Restrictions or the GCL, but in any event not later than the
occurrence of a Fundamental Change,
(c) Dividends whose payment is not made on a timely
basis as specified above (including, without limitation, all amounts
referred to in Section 4.2.1(b)) shall accumulate, together with an amount
computed at the rate of 5% per annum thereon (or 7% per annum during the
continuance of any Event of Default) from the date such dividends were
payable until paid in full, compounded quarterly, which additional accrued
amounts shall be paid as additional dividends hereunder. In the event
that the funds legally available for dividends are not sufficient to pay
the dividends accrued on the Preferred Stock, the funds available shall be
paid to the holders of Preferred Stock ratably in proportion to the
respective unpaid dividends accrued on the Preferred Stock.
(d) After the payment in respect of each quarterly
dividend period of all cumulative dividends on the Preferred Stock
(including, without limitation, all amounts referred to in Section
4.2.1(b) or (c)) the Board of Directors of the corporation, in its
discretion, may pay additional dividends to the holders of the Class A
Common Stock and to the holders of the Preferred Stock ratably, calculated
as if the holders of the Preferred Stock had converted such shares into
shares of Class A Common Stock as provided herein on the record date with
respect to such dividend.
(e) The term "Event of Default" shall have the
meaning specified therefor in the Investment Agreement dated as of May 15,
1996, among Mesirow Capital Partners VI, The Edgewater Private Equity Fund
II, L.P., BACE Investments, LLC and the corporation and any other parties
thereto, as it may be amended from time to time.
4.2.2 Voting Rights. Except as otherwise provided by law or
expressly in this Certificate of Incorporation, the Preferred Stock will
be entitled to vote with the Class A Common Stock, voting together as a
single class, on all matters to be voted on by the corporation's
stockholders, with the shares of Preferred Stock entitled to a number of
votes equal to the respective number of shares of Class A Common Stock
that would have been issuable if such shares of Preferred Stock had been
converted on the record date for the
- 4 -
<PAGE> 5
meeting at which the vote is taken or for the submission of the matter in
question to the stockholders for action by written consent, as the case
may be; provided, that no amendment to this Article 4 may be made without
the affirmative vote or consent of the holders of a majority of the shares
of each series of Preferred Stock then outstanding.
4.2.3 Liquidation Preference. (a) In the event of a
liquidation, dissolution or winding up of the corporation, whether
voluntary or involuntary, the holders of shares of Preferred Stock shall
be entitled to receive out of the assets of the corporation available for
distribution to stockholders an amount equal to the dividends accrued and
unpaid on such shares on the date of final distribution to such holders,
whether or not declared, including any accruals thereon provided in
Section 4.2.1(b) or (c), plus a sum equal to $1,000 per share, before any
payment shall be made or any assets distributed to the holders of shares
of Common Stock. If the assets available for distribution to the
stockholders are insufficient to pay the entire amounts to which the
holders of Preferred Stock are entitled, the entire assets of the
corporation available for distribution to stockholders shall be
distributed ratably among the holders of the Preferred Stock in proportion
to the respective preferential amounts to which each is entitled.
(b) After payment in full of the liquidation
preferences of the shares of the Preferred Stock, any remaining assets of
the corporation available for distribution to the stockholders shall be
distributed to the holders of the Common Stock ratably. The consolidation
or merger of the corporation with one or more corporations shall not be
deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the corporation.
4.2.4 Redemption. (a) During the continuance of an Event of
Default, unless the holder or holders of a majority of the shares of
Preferred Stock (other than Series B Preferred Stock) shall have waived
such Event of Default in writing, each holder of outstanding shares of
Preferred Stock may, at such holder's option on any business day set by
such holder, subject to the limitations, if any, imposed by applicable
law, require the corporation to redeem all or any part of such holder's
Preferred Stock for an amount in cash per share equal to the sum of (i)
$1,000 plus (ii) all per share dividends accrued and unpaid thereon,
whether or not declared, including any accruals thereon provided in
Section 4.2.1(b) or (c) to but excluding the
- 5 -
<PAGE> 6
Redemption Date (as defined below), such sum, as from time to time
adjusted as provided below, being hereinafter referred to as the
"Redemption Price." Notwithstanding the foregoing, no holder of Preferred
Stock may require such a redemption unless the holders of a majority of
the shares of Preferred Stock (other than Series B Preferred Stock) have
given, or concurrently give, notice of such demand for redemption.
(b) Not more than sixty nor less than fifteen days
prior to the date fixed for redemption (the "Redemption Date"), notice of
the redemption shall be given by the holder of the shares to be redeemed
to the corporation, by registered or certified mail, postage prepaid,
addressed to the corporation at its principal executive offices. Such
notice of redemption from a holder shall specify the Redemption Date and
the number of shares of Preferred Stock to be redeemed. On or after the
Redemption Date the holder requiring such redemption by the corporation
shall surrender the certificate evidencing its shares at the principal
executive offices of the corporation, and shall thereupon be entitled to
receive payment of the Redemption Price.
(c) Notice having been given as provided in Section
4.2.4(b) above, if, on the Redemption Date, funds necessary for the
redemption shall be available therefor and shall have been set aside by
the corporation to pay the Redemption Price, then, notwithstanding that
the certificates evidencing any shares so called for redemption shall not
have been surrendered, dividends with respect to the shares so called
shall cease to accrue on and after the Redemption Date, such shares shall
no longer be deemed outstanding, the holders thereof shall cease to be
stockholders of the corporation and all rights whatsoever with respect to
the shares so called for redemption (except the right of the holders to
receive the Redemption Price without interest upon surrender of their
certificates therefor) shall terminate. Shares of Preferred Stock
redeemed or otherwise acquired by the corporation (including, without
limitation, upon conversion) shall be canceled and not reissued or resold.
4.2.5 Conversion. (a) As used in this Section 4.2.5, the
following terms have the indicated meanings.
"Conversion Date" with respect to any share of Preferred Stock
means the date on which the certificate representing such share is
received by the corporation for conversion.
- 6 -
<PAGE> 7
"Fifth Anniversary" means the fifth anniversary of the original
issuance of the first share of Series A Preferred Stock issued by the
corporation.
"Fully Diluted Shares" shall mean at any time the sum of (i) the
number of outstanding shares of Class A Common Stock (excluding any shares
of Class A Common Stock issued in respect of Class B Common Stock under
Section 4.3.4 or upon conversion of Series C Preferred Stock), (ii) the
number of shares of Class A Common Stock issuable upon conversion of
outstanding Series A Preferred Stock, and (iii) the number of shares of
Class A Common Stock issuable upon conversion of the Series B Preferred
Stock (whether attributable to the Base Series B Conversion Rate or the
Additional Conversion Rate); provided, that shares issued in connection
with a Fundamental Change (other than with respect to previously
outstanding shares of the corporation), such as shares to be issued by the
corporation for sale to the public in a Qualified Public Offering, shall
not be included in the computation of Fully Diluted Shares.
"Fundamental Change" means any (i) transaction or event in
connection with which the Class A Common Stock of the corporation shall be
converted into or constitute solely the right to receive cash, securities
(other than solely equity securities of the corporation), property or
other assets (whether by means of an exchange offer, consolidation,
merger, combination, reclassification, recapitalization or otherwise),
(ii) conveyance, sale, lease, assignment, transfer or other disposition of
all or substantially all of the corporation's property, business or
assets, (iii) the sale by the corporation or one or more of its
stockholders in a single transaction or series of related transactions of
Class A Common Stock or Preferred Stock representing at least 50% of the
Fully Diluted Shares after such sale, or (iv) a Qualified Public Offering;
provided, however, that a Fundamental Change shall not be deemed to have
occurred with respect to any consolidation or merger of the corporation
(without consent of the holders of a majority of the outstanding shares of
Series A Preferred Stock) in which (A) the holders of Series B Preferred
Stock or Class A Common Stock immediately prior to such transaction own,
directly or indirectly, (x) 50% or more of the common stock of the
surviving corporation (or of the ultimate parent of such surviving
corporation) outstanding immediately after such consolidation or merger
and (y) securities representing 50% or more of the combined voting power
of the surviving corporation's Voting Stock (as defined below) (or of the
Voting Stock of the ultimate
- 7 -
<PAGE> 8
parent of such surviving corporation) outstanding at such time, and (B)
the holders of each of the Series A Preferred Stock and Series C Preferred
Stock immediately prior to such transaction receive securities
substantially identical to the Series A Preferred Stock and Series C
Preferred Stock, respectively, which are convertible into a number of
shares of the common stock of the surviving corporation (or of the
ultimate parent of such surviving corporation) which bears at least as
great a proportion to the shares of such common stock received by the
holders of Class A Common Stock in the transaction as the number of shares
of Class A Common Stock issuable upon conversion of the Series A Preferred
Stock and Series C Preferred Stock, respectively, immediately prior to the
transaction bears to the number of shares of Class A Common Stock
outstanding prior to such transaction. The phrase "Voting Stock" means,
with respect to any person, all capital stock of such person having
general voting power under ordinary circumstances to elect the board of
directors, managers or trustees of such person (irrespective of whether or
not at the time capital stock of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
"Series B Director" means a member of the Board of Directors of
the corporation who directly or indirectly owns shares of Series B
Preferred Stock or shares of Class A Common Stock previously issued upon
conversion of Series B Preferred Stock or who has an Affiliate, as defined
in Section 4.2.5(f)(iii), that directly or indirectly owns shares of
Series B Preferred Stock or such shares of Class A Common Stock.
"Qualified Public Offering" has the meaning specified in the
Stockholders Agreement dated as of May 15, 1996, among Mesirow Capital
Partners VI, The Edgewater Private Equity Fund II, L.P., BACE Investments,
LLC, the corporation and any other parties thereto, as it may be amended
from time to time.
(b) Conversion of Series A Preferred Stock. (i) Each
holder of Series A Preferred Stock shall have the right at any time to
convert, without the payment of any additional consideration, all or any
portion of its shares of Series A Preferred Stock into the number of fully
paid and nonassessable shares of Class A Common Stock determined by
multiplying the number of shares of Series A Preferred Stock being so
converted by the Series A Conversion Rate subject to adjustments as
provided in this Section 4.2.5. The Series A Conversion Rate shall be 200
multiplied by a fraction (the
- 8 -
<PAGE> 9
"Adjustment Fraction"), the numerator of which is $5 and the denominator
of which is the Trigger Price in effect immediately prior to such
conversion. The initial Trigger Price shall be $5. Each conversion of
shares of Series A Preferred Stock into shares of Class A Common Stock
shall be effected by the delivery of notice of such conversion by such
holder and the surrender of the certificate or certificates representing
the shares of Series A Preferred Stock to be converted to the corporation
(or such other office or agency designated by the corporation), without
the payment of any additional consideration. All converted shares of
Series A Preferred Stock shall be permanently retired and shall not be
reissued.
(ii) Adjustment of Trigger Price. The
Trigger Price shall be subject to adjustment from time to time as
hereinafter provided.
(A) Adjustment of Trigger Price upon
Issuance of Common Stock. If and whenever after the date hereof the
corporation shall issue or sell (or be deemed to issue or sell as provided
hereunder) any shares of its Common Stock for a consideration per share
less than the Trigger Price in effect immediately prior to the time of
such issue or sale, then, forthwith upon such issue or sale, the Trigger
Price shall be reduced to the price, calculated to the nearest $.001,
determined by dividing (i) the sum of (a) the number of Fully Diluted
Shares outstanding immediately prior to such issue or sale multiplied by
the then existing Trigger Price and (b) the consideration, if any,
received by the corporation upon such issue or sale, by (ii) the total
number of Fully Diluted Shares outstanding immediately after such issue or
sale. Notwithstanding any other provision hereof, no adjustment of the
Trigger Price shall be made upon the issuance or sale (or deemed issuance
or sale) by the corporation of any shares of Common Stock issued or
issuable (x) pursuant to the conversion of Preferred Stock or the
reclassification of Class B Common Stock or (y) pursuant to the exercise
of any Option (as defined below) to acquire Common Stock granted to any
employee of the corporation on or before June 25, 1997.
(B) Issuance of Rights or Options.
In case at any time the corporation shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options or warrants for the purchase
of (such rights or options being herein called "Options"),
- 9 -
<PAGE> 10
Common Stock or any stock or securities convertible into or exchangeable
for Common Stock (such convertible or exchangeable stock or securities
being herein called "Convertible Securities") whether or not such Options
or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such options or upon conversion or exchange
of such Convertible Securities (determined as provided in the following
sentence) shall be less than the Trigger Price in effect immediately prior
to the time of the granting of such Options, then the total maximum number
of shares of Common Stock issuable upon the exercise of all such Options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of
granting of such options and thereafter shall be deemed to be outstanding.
The price per share for which Common Stock is issuable, as referred to in
the preceding sentence, shall be determined by dividing (a) the sum of (1)
the total amount, if any, received or receivable by the corporation as
consideration for the granting of such Options, plus (2) the minimum
aggregate amount of additional consideration payable to the corporation
upon the exercise of all such Options, plus (3) in the case of all such
Options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale
of all such Convertible Securities (to the extent not counted in clause
(2)) and upon the conversion or exchange of all such Convertible
Securities into Common Stock, by (b) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options; the consideration received or receivable by
the corporation shall in each Case be determined in accordance with
paragraph (E) hereof. Except as otherwise provided in paragraph (D)
hereof, no adjustment of the Trigger Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon exercise
of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(C) Issuance of Convertible
Securities. In case the corporation shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per
- 10 -
<PAGE> 11
share for which Common Stock is issuable upon such conversion or exchange
(determined as provided in the following sentence) shall be less than the
Trigger Price in effect immediately prior to the time of such issue or
sale, then the total maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date of the
issue or sale of such Convertible Securities and thereafter shall be
deemed to be outstanding, provided that (x) except as otherwise provided
in paragraph (D) below, no adjustment of the Trigger Price shall be made
upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities, and (y) if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of the Trigger Price have been or are to be made pursuant to
paragraph (B), no further adjustment of the Trigger Price shall be made by
reason of such issue or sale. The price per share for which Common Stock
is issuable, as referred to in the preceding sentence, shall be determined
by dividing (a) the sum of (1) the total amount received or receivable by
the corporation as consideration for the issue or sale of such Convertible
Securities, plus (2) the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange of such
Convertible Securities into Common Stock, by (b) the total maximum number
of shares of Common Stock issuable upon the conversion or exchange of such
Convertible Securities; the consideration received or receivable by the
corporation shall in each case be determined in accordance with paragraph
(E).
(D) Change in Option Price or
Conversion Rate. Upon the happening of the following events, namely, if
the purchase price provided for in any outstanding Option referred to in
paragraph (B), the additional Consideration, if any, payable upon the
conversion or exchange of any outstanding Convertible Securities referred
to in paragraph (B) or (C), or the rate at which any such Convertible
Securities are convertible into or exchangeable for Common Stock shall
change at any time (except for an adjustment of the Series A Conversion
Rate or Series B Conversion Rate as provided in this Section 4.2.5), the
Trigger Price in effect at the time of such event shall forthwith be
readjusted to the Trigger Price which would have been in effect at such
time had such Options or Convertible Securities provided for such changed
purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. On the expiration
or termination of any Option referred to in paragraph (B) prior to the
- 11 -
<PAGE> 12
exercise thereof or the expiration or termination of any right to convert
or exchange any Convertible Securities referred to in paragraph (B) or (C)
prior to the exercise of such rights, the Trigger Price then in effect
hereunder shall forthwith be increased (but in no case shall such Trigger
Price be increased to a price greater than the initial Trigger Price
hereunder) to the Trigger Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration
or termination never been issued, and the Common Stock issuable thereunder
shall no longer be deemed to be outstanding for the purposes of any
calculation under paragraph (B) or (C).
(E) Consideration for Securities.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold by the corporation for cash, the consideration
received therefor shall be deemed to be the amount received by the
corporation therefor. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the corporation
(subject to the provisions of Section 4.2.5(i)). In case any Common Stock,
Option or Convertible Securities shall be issued in connection with any
merger or consolidation in which the corporation is the surviving
corporation (other than any consolidation or merger in which the
previously outstanding shares of Common Stock of the corporation shall be
changed into or exchanged for the, stock or other securities of another
corporation) the amount of consideration therefor shall be deemed to be
the fair value as determined in good faith by the Board of Directors of
the corporation (subject to the provisions of Section 4.2.5(i)) of such
portion of the assets and business of the nonsurviving corporation as such
Board may determine to be attributable to such shares of Common Stock,
Options or Convertible Securities, as the case may be. In the event of
any consolidation or merger of the corporation in which the corporation is
not the surviving corporation or in which the previously outstanding
shares of Common Stock of the corporation shall be changed into or
exchanged for the stock or other securities of another corporation, or in
the event of any sale of all or substantially all of the assets of the
corporation for stock or other securities of any corporation, the
corporation shall be deemed to have issued a number of shares of its
Common Stock equal to the
- 12 -
<PAGE> 13
number of shares of Common Stock used for computing the actual exchange
ratio on which the transaction was predicated and for a consideration
equal to the fair market value on the date of transaction of all such
stock or securities of the other corporation received by the holders of
the capital stock of the corporation or by the corporation and if such
calculation results in adjustment of the Trigger Price, the determination
of the number of shares of Common Stock issuable upon conversion
immediately prior to such merger, consolidation or sale, for purposes of
paragraph (H) shall be made after giving effect to such adjustment of the
Trigger Price.
(F) Treasury Shares. The number of
shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the corporation, and the
disposition or reissuance of any such shares shall be considered an issue
or sale of Common Stock for the purposes of this Section 4.2.5.
(G) Subdivision or Combination of
Stock. In case the corporation shall at any time subdivide its
outstanding shares of Class A Common Stock into a greater number of
shares, the Trigger Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding
shares of Class A Common Stock of the corporation shall be combined into a
smaller number of shares, the Trigger Price in effect immediately prior to
such combination shall be proportionately increased.
(H) Reorganization,
Reclassification, Consolidation, Merger or Sale. If any capital
reorganization or reclassification of the capital stock of the
corporation, or any consolidation or merger of the corporation with
another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of
Class A Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Class A Common Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger
or sale, lawful and adequate provisions shall be made whereby the holders
of Preferred Stock shall thereafter have the right to purchase and receive
upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of the Class A Common Stock of the corporation
immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such shares of stock, securities or
- 13 -
<PAGE> 14
assets as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Class A Common Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby had such
reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with
respect to the rights and interests of the holders of Preferred Stock to
the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Series A Conversion Rate, Base Series B
Conversion Rate, the Additional Conversion Rate, the Trigger Price and the
Series C Conversion Rate) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of the rights represented hereby (including
an immediate adjustment, by reason of such consolidation or merger, of the
Trigger Price to the value for the Class A Common Stock reflected by the
terms of such consolidation or merger if the value so reflected is less
than the Trigger Price in effect immediately prior to such consolidation
or merger). In the event of a merger or consolidation of the corporation
with or into another corporation as a result of which a number of shares
of common stock of the surviving corporation greater or lesser than the
number of shares of Class A Common Stock of the corporation outstanding
immediately prior to such merger or consolidation are issuable to holders
of Class A Common Stock of the corporation, then the Trigger Price in
effect immediately prior to such merger or consolidation shall be adjusted
in the same manner as though there were a subdivision or combination of
the outstanding shares of Class A Common Stock of the corporation
outstanding immediately prior to such merger or consolidation.
(I) Notice of Adjustment. Upon any
adjustment of the Trigger Price or any determination of the Additional
Conversion Rate pursuant to Section 4.2.5(c), then and in each such case,
the corporation shall give written notice thereof, by first class mail,
postage prepaid, addressed to each holder of Series A Preferred Stock or
Series B Preferred Stock at the address of such holder as shown on the
books of the corporation, which notice shall state the Trigger Price
resulting from such adjustment and the increase or decrease, if any, in
the number of shares into which a share of Series A Preferred Stock or
Series B Preferred Stock would then be convertible, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
- 14 -
<PAGE> 15
(J) Other Notices. In case at any
time:
(I) the corporation shall
offer for subscription to the holders of any of its Class A Common Stock
any additional shares of stock of any class or other rights;
(II) there shall be any
capital reorganization, reclassification of the capital stock of the
corporation or consolidation or merger of the corporation with, or sale of
all or substantially all of its assets to, another corporation; or
(III) there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the
corporation;
then, in any one or more of said cases (unless a waiver of such notice
shall have been given by the holders of a majority of the outstanding
shares of Series A Preferred Stock, the holders of a majority of the
outstanding shares of Series B Preferred Stock and the holders of a
majority of the outstanding shares of Series C Preferred Stock), the
corporation shall give, by first class mail, postage prepaid, addressed to
each holder of Preferred Stock at the address of such holder as shown on
the books of the corporation, (i) at least 10 business days' prior written
notice of the date on which the books of the corporation shall close or a
record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up and (ii) in the case of such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least 10 business days' prior
written notice of the date when the same shall take place. Any notice
required by clause (II) or (III) shall also specify the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
(K) Duty to Make Fair Adjustments in
Certain Cases. If any event occurs as to which in the opinion of any of
(i) the Board of Directors of the corporation, (ii) the holders of a
majority of the shares of Series A Preferred Stock (the holders of such a
majority being referred to as the "Series A Preferred Holders") or
- 15 -
<PAGE> 16
(iii) the holders of a majority of the shares of Series B Preferred Stock
(the holders of such a majority being referred to as the "Series B
Preferred Holders") the provisions of this Section 4.2.5(b) are not
strictly applicable or if strictly applicable would not fairly protect the
conversion rights of the holders of Series A Preferred Stock or Series B
Preferred Stock in accordance with the essential intent and principles of
such provisions, then the Board of Directors and the Series A Preferred
Holders and Series B Preferred Holders shall mutually agree upon an
adjustment in the application of such provisions (subject to the
provisions of Section 4.2.5(i)(2)(to the extent necessary)), in accordance
with such essential intent and principles, so as to protect such purchase
rights as aforesaid, but in no event shall any such adjustment have the
effect of increasing the Trigger Price as otherwise determined pursuant to
this Section 4.2.5(b)(ii) except in the event of an increase in option
price, additional consideration or conversion rate as contemplated by
paragraph (D), or a combination of shares of the type contemplated in
paragraph (H) and then in no event to an amount larger than the Trigger
Price as adjusted pursuant to paragraph (D) or paragraph (H).
(c) Conversion of Series B Preferred Stock.
(i) Each holder of Series B Preferred Stock shall have the right at any
time to convert, without the payment of any additional consideration, all
or any of its shares of Series B Preferred Stock into the number of fully
paid and nonassessable shares of Class A Common Stock determined by
multiplying the number of shares of Series B Preferred Stock being so
converted by the sum of (x) the Base Series B Conversion Rate and (y) if a
Fundamental Change has occurred, the Additional Conversion Rate. The Base
Series B Conversion Rate shall be 195 multiplied by the Adjustment
Fraction (as determined in accordance with Section 4.2.5(b)). The
Additional Conversion Rate shall be determined upon the first Fundamental
Change. In connection with such determination, the Conversion Rate shall
be adjusted to include an Additional Conversion Rate as provided in this
Section 4.2.5(c). The determination of the Additional Conversion Rate
pursuant to this Section 4.2.5(c)(i) shall be made one time only and shall
be made on or before the effective date of the Fundamental Change, and
shall thereafter remain the same for all conversions except for any
adjustment provided in Section 4.2.5(c)(ii). In order to determine the
Additional Conversion Rate (as adjusted for this Section 4.2.5(c)), the
net fair market value of the aggregate Class A Common Stock, Class B
Common Stock, Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock of the corporation (the
- 16 -
<PAGE> 17
"Fair Market Value") shall first be determined. The Fair Market Value
shall be determined by the Board of Directors of the corporation, acting
in good faith and based on the value placed on the corporation in the
transaction constituting the Fundamental Change, without adjustment for
any changes that may occur after the date of that transaction.
The Additional Conversion Rate shall be determined pursuant to
this Section 4.2.5(c)(i) based on the relationship between (A) the
annualized rate of return on the shares of Series A Preferred Stock from
the date of original issuance (or, if shares of Series A Preferred Stock
have been issued at more than one time, a combined Series A Preferred
Stock annualized rate of return taking into account the timing and amount
of additional issues of Series A Preferred Stock), calculated on the
$1,000 per share original purchase price thereof, taking into account
dividends and other distributions, assuming the Series A Preferred Stock
were then being sold for cash at its net fair market value, and
compounding annually (the "Series A Rate of Return") and (B) the
percentage of the Fully Diluted Shares issuable to the holders of the
Series B Preferred Stock on account of the Additional Conversion Rate. The
Board of Directors shall determine the Additional Conversion Rate as
follows:
(1) First, the amount of the Fair Market Value
attributable to the Fully Diluted Shares shall be determined by
subtracting from the total Fair Market Value the sum of (i) the portion of
the Fair Market Value that is attributable to any Class B Common Stock
outstanding or issuable under outstanding options, warrants, conversion
rights or the like and to any Class A Common Stock issued in respect of
Class B Common Stock pursuant to Section 4.3.4, plus (ii) the portion of
the Fair Market Value that is attributable to any Series C Preferred Stock
outstanding or to any Class A Common Stock issued or issuable upon
conversion of Series C Preferred Stock. The portion of the Fair Market
Value attributable to the Class B Common Stock (or Class A Common Stock
issued in respect of Class B Common Stock pursuant to Section 4.3.4) is
4.159%, subject to reduction as provided in Section 4.3.4. The portion of
the Fair Market Value attributable to the Series C Preferred Stock and any
Class A Common Stock issued or issuable upon conversion thereof is
7.8971%. The percentages given in this clause (1) for the portion of the
Fair Market Value attributable to the Class B Common Stock and the Series
C Preferred Stock are based on the number of authorized shares of capital
stock as of September 23, 1997, and upon any
- 17 -
<PAGE> 18
amendment of this Certificate of Incorporation to change the number of
authorized shares, this clause (1) shall also be amended to adjust those
percentages in a manner that causes such change to affect all authorized
shares of capital stock as of September 23, 1997 proportionately on a
fully diluted basis. The amount of the Fair Market Value attributable to
the Fully Diluted Shares is referred to as the "Fully Diluted Fair Market
Value."
(2) Second, the number of shares of Class A Common
Stock then issuable upon conversion of the Series A Preferred Stock and
the Series B Preferred Stock shall be determined, assuming that the
Additional Conversion Rate is zero, and the resulting number of Fully
Diluted Shares shall be calculated. The Fully Diluted Fair Market Value
shall then be divided among the shares of Class A Common Stock issuable
upon conversion of the Series A Preferred Stock (the "Series A Conversion
Shares"), the shares of Class A Common Stock issuable upon conversion of
the Series B Preferred Stock (the "Series B Conversion Shares"), and all
other shares of Class A Common Stock included in Fully Diluted Shares (the
"Other Shares"), as so calculated, based on the number of shares in each
group.
(3) The Series A Rate of Return shall then be
computed based on a net fair market value for the Series A Preferred Stock
equal to the value allocated to the Series A Conversion Shares in (2)
above. If that Series A Rate of Return is less than 10%, the Additional
Conversion Rate shall be zero. If that Series A Rate of Return is 10% or
greater, the Additional Conversion Rate shall be determined as provided in
(4) below.
(4) Through an iterative trial and error process, the
Board of Directors shall increase the number of Series B Conversion Shares
(reallocating the Fully Diluted Fair Market Value among the Series A
Conversion Shares, the Series B Conversion Shares and the Other Shares and
recomputing the resulting Series A Rate of Return each time as provided in
(2) and (3) above) until the relationship between the Series A Rate of
Return and the percentage of the Fully Diluted Shares represented by the
increase in the number of Series B Conversion Shares (the "Additional
Series B Conversion Shares") meets the requirements of the following
table:
- 18 -
<PAGE> 19
<TABLE>
<CAPTION>
Percentage of Fully Diluted Shares
Represented by Additional Series B
Series A Rate of Return Conversion Shares
----------------------- --------------------------------------------
<S> <C>
Less than 10% 0
10% 9.640% (or so much thereof as does not
cause the Series A Rate of Return to be
less than 10%)
More than 10% but less than 20% Sum of (i) 9.640% plus (ii)(A) the excess
of Series A Rate of Return over 10%
multiplied by (B) .9640, rounded to the
nearest .0001%
20% 19.280%
More than 20% but less than 45% Sum of (i) 19.280% plus (ii) (A) the excess
of Series A Rate of Return over 20%
multiplied by (B) .57840, rounded to the
nearest .0001%
45% or more 33.740%
</TABLE>
Examples of such computations (with some rounding) are set forth in
Appendix 1-C hereto.
All computations and determinations required by this subsection (c) shall
be made by the Board of Directors of the corporation, acting in good
faith, subject to the provisions of Section 4.2.5(i).
(ii) If the Trigger Price is adjusted pursuant to
Section 4.2.5(b) after the determination of the Additional Conversion Rate
pursuant to Section 4.2.5(c)(i) for an event not taken into account in
making the determination of the Additional Conversion Rate as provided
therein, the Additional Conversion Rate at the time of a conversion shall
be adjusted to equal the Additional Conversion Rate as initially
determined pursuant to Section 4.2.5(c)(i) multiplied by a fraction, the
numerator of which shall be the Trigger Price in effect at the time the
events giving rise to the determination of the Additional Conversion Rate
accrued and the denominator of which is the Trigger Price in effect
immediately prior to such conversion.
- 19 -
<PAGE> 20
(d) Conversion of Series C Preferred Stock. Each
holder of Series C Preferred Stock shall have the right at any time to
convert, without the payment of any additional consideration, all or any
portion of its shares of Series C Preferred Stock into the number of fully
paid and nonassessable shares of Class A Common Stock determined by
multiplying the number of Shares of Series C Preferred Stock by the Series
C Conversion Rate, subject to adjustments as provided in this Section
4.2.5. The Series C Conversion Rate shall be determined by dividing (a)
7.8971% of the Assumed Common Shares (as defined below) as of the
Conversion Date by (b) 3000. For that purpose, the Assumed Common Shares
shall mean the quotient of (i) the number of shares of Common Stock
(regardless of class) that would be outstanding if all authorized shares
of Series A Preferred Stock (whether or not issued or outstanding) and
Series B Preferred Stock (whether or not issued or outstanding) were then
converted into Class A Common Stock and all outstanding options or other
rights to purchase or acquire Common Stock (whether or not then
exercisable) were then exercised, divided by (ii) .921029. The 7.8971%
and .921029 figures given this Section 4.2.5(d) are based on the number of
authorized shares of capital stock as of September 23, 1997, and upon any
amendment of this Certificate of Incorporation to change the number of
authorized shares, this Section 4.2.5(d) shall also be amended to adjust
those figures in a manner that causes such change to affect all authorized
shares of capital stock as of September 23, 1997 proportionately on a
fully diluted basis. If any shares of Series C Preferred Stock are
converted before the occurrence of the first Fundamental Change, the
Assumed Common Shares shall include the number of Additional Series B
Conversion Shares that would be issuable upon conversion of the Series B
Preferred Stock if a Fundamental Change had occurred and the Series A Rate
of Return were 45% or more. In that event, the additional shares issuable
upon conversion as a result of the inclusion of the Additional Series B
Conversion Shares in the Assumed Common Shares (the "Excess Shares") shall
be represented by a separate certificate that bears a legend referring to
the corporation's right to recover Excess Shares under this Section
4.2.5(d). If, upon the occurrence of the first Fundamental Change after
the conversion of any Series C Preferred Stock, the Series A Rate of
Return is less than 45%, then the Series C Conversion Rate shall be
recomputed based on a number of Assumed Common Shares determined as of the
Conversion Date, but taking into account the actual number of Additional
Series B Conversion Shares, and the then holders of the Excess Shares (in
proportion to their holdings thereof) shall return to the corporation for
- 20 -
<PAGE> 21
cancellation a number of Excess Shares equal to the excess of the number
of shares of Class A Common Stock originally issued upon such conversion
of Series C Preferred Stock over the number of shares of Class A Common
Stock that would have been so issued based on the recomputed Series C
Conversion Rate. If, after the conversion of any Series C Preferred Stock
but prior to the conversion of all of the Series B Preferred Stock, the
Additional Conversion Rate is adjusted as provided in Section
4.2.5(c)(ii), the Series C Conversion Rate shall be redetermined as of the
Conversion Date, but taking into account the adjusted Additional
Conversion Rate, and the corporation shall issue to the then holders of
the shares of Class A Common Stock issued upon such conversion, without
additional consideration, a number of shares of Class A Common Stock equal
to the additional shares of Class A Common Stock that would have been
issued upon such conversion based on the recomputed Series C Conversion
Rate.
(e) No adjustment shall be required under Section
4.2.5(b), (c) or (d) unless such adjustment would require an increase or
decrease of at least 1% in the number of shares of Class A Common Stock
issuable upon conversion of a share of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, respectively; provided,
however, that any adjustments which by reason of this Section 4.2.5(e) are
not required to be made shall be carried forward and taken into account in
any subsequent adjustment.
(f) (i) The corporation shall not effect any
consolidation, merger or sale unless, prior to the consummation thereof,
the successor corporation (if other than the corporation) resulting from
such consolidation or merger or the corporation purchasing such assets, as
the case may be, shall assume by written instrument executed and mailed or
delivered to the holders of the Preferred Stock at the last address of
such holders appearing on the books of the corporation, the obligation to
deliver to such holders such shares of stock, securities or assets as, in
accordance with the provisions of this Section 4.2.5, are deliverable upon
conversion of the Preferred Stock.
(ii) If a purchase, tender or exchange offer
is made to and accepted by the holders of more than 50% of the outstanding
shares of Common Stock, then the corporation shall not effect any
consolidation, merger or sale with the Person (hereinafter defined) having
made such offer or with any Affiliate (hereinafter defined) of such Person
unless, prior to the consummation of such
- 21 -
<PAGE> 22
consolidation, merger or sale, the holders of the Preferred Stock shall
have been given a reasonable opportunity to then elect to receive upon the
conversion of their shares of Preferred Stock either the stock, securities
or assets then issuable with respect to the Class A Common Stock or, if
different, the stock, securities or assets, of the equivalent, issued to
previous holders of the Class A Common Stock in accordance with such
offer, computed as though the holders of the Preferred Stock had been, at
the time of such offer, holders of the stock, securities or assets then
purchasable upon the exercise of the conversion rights represented hereby.
(iii) As used in this Section 4.2.5(f), the
term "Person" shall include an individual, a partnership, a corporation, a
limited liability company, a trust, a joint venture, an unincorporated
organization and a government or any department or agency thereof, and an
"Affiliate" of any Person shall mean any Person directly or indirectly
controlling, controlled by or under direct or indirect common control
with, such other Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by
contract or otherwise.
(g) No fractional shares of Class A Common Stock
shall be issued upon conversion of Preferred Stock. If more than one
certificate evidencing shares of Preferred Stock shall be surrendered for
conversion at one time by the holder, the number of full shared issuable
upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Preferred Stock so surrendered. Instead of any
fractional share of Class A Common Stock that would otherwise be issuable
to a holder upon conversion of any shares of Preferred Stock, the
corporation shall pay a cash adjustment in respect of such fractional
share in an amount equal to the value thereof based on the value thereof
as determined in good faith by the Board of Directors of the corporation.
(h) The corporation shall at all times reserve and
keep available, free from preemptive rights out of its authorized and
unissued stock, solely for the purpose of effecting the conversion of the
Preferred Stock, such number of shares of its Class A Common Stock as
shall from time to time be sufficient to effect the conversion of all
shares of Preferred Stock from time to time outstanding.
- 22 -
<PAGE> 23
(i) (1) If the Board of Directors of the corporation
makes a determination pursuant to Section 4.2.5(b)(ii)(E) or makes a
determination of the Additional Conversion Rate pursuant to Section
4.2.5(c) and such determination is made without the affirmative vote or
consent of a Series B Director (including, without limitation, a situation
in which there is no Series B Director), the Series B Holders may demand,
by notice delivered to the corporation by registered or certified mail not
later than 30 days after such holders were mailed notice of such
determination by the corporation pursuant to Section 4.2.5(b)(ii)(I), that
the correctness of such determination be submitted to binding arbitration
under the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall be conducted in Denver, Colorado
before a single arbitrator jointly selected by the Board of Directors of
the corporation (the "Board") and the Series B Holders or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Board, one selected by a majority of the Series B Holders
and the third selected by the other two arbitrators. Failing the
selection of any required arbitrator, the selection shall be made by the
American Arbitration Association.
(2) If the Board makes a determination pursuant
to Section 4.2.5(b)(ii)(K) and such determination is made without the
affirmative vote or consent (i) of a majority of the members of the Board
who have been designated for election by a majority of the Series A
Preferred Holders (the "Series A Directors"), including, without
limitation, a situation in which there are no Series A Directors, and (ii)
of a Series B Director, then the Series A Holders, if such affirmative
vote or consent of the Series A Directors was not obtained (the "Series A
Disapproval"), or the Series B Holders, if such affirmative vote or
consent of a Series B Director was not obtained (the "Series B
Disapproval"), may demand, by notice delivered to the corporation by
registered or certified mail not later than 30 days after such holders
were mailed notice of such determination by the corporation pursuant to
Section 4.2.5(b)(ii)(I), that the correctness of such determination be
submitted to binding arbitration under the Commercial Arbitration Rules of
the American Arbitration Association. The arbitration shall be conducted
in Denver, Colorado before a single arbitrator jointly selected by the
Board, the Series A Holders (in the event of a Series A Disapproval) and
the Series B Holders (in the event of a Series B Disapproval) or, if they
are unable to agree on an arbitrator, before a panel of three arbitrators,
one selected by the Board, one selected
- 23 -
<PAGE> 24
by a majority of the Series A Holders (in the event of a Series A
Disapproval) and the third selected by a majority of the Series B Holders
(in the event of a Series B Disapproval); provided, however, that if there
was not a Series A Disapproval or a Series B Disapproval, as the case may
be, then the third arbitrator shall be selected by the other two
arbitrators who were selected pursuant to the procedure described above in
this sentence. Failing the selection of any arbitrator, the selection
shall be made by the American Arbitration Association.
(3) Where the dispute involves solely
financial or accounting matters, the arbitrator or arbitrators shall be
certified public accountants or other persons with appropriate financial
and accounting knowledge and experience to handle such matters; and where
it involves solely matters of legal interpretation, the arbitrator or
arbitrators shall be lawyers, law professors or other persons with
appropriate legal knowledge and experience to handle such matters. Where
the dispute involves mixed financial, accounting and legal issues, a good
faith attempt will be made by the parties to select an arbitrator or
arbitrators with an appropriate mix of knowledge and experience to handle
such matters. The determination of the arbitrators shall be final and
binding and shall replace the determination previously made pursuant to
Section 4.2.5(b)(ii)(E), Section 4.2.5(c) or Section 4.2.5(b)(ii)(K), as
the case may be. The prevailing party or parties in any such arbitration
shall be entitled to all reasonable out-of-pocket costs and expenses,
including fees and expenses of the arbitrators and attorneys, incurred in
connection therewith. Notwithstanding anything to the contrary set forth
in this Section 4.2.5(i), the right of the Series A Holders or the Series
B Holders to demand arbitration shall be conditioned upon at least a
majority of the Series A Holders or at least a majority of the Series B
Holders, as the case may be, delivering to the corporation their agreement
to be bound by the terms of the preceding sentence.
4.3 Common Stock. Except as otherwise provided in this
Certificate of Incorporation, the rights of Class A Common Stock and the
Class B Common Stock shall be identical in all respects on a
share-for-share basis.
4.3.1 Voting. Each outstanding share of Class A Common
Stock shall have one vote on all matters submitted to a vote of the
stockholders. The Class A Common Stock shall vote as a single class with
the Preferred Stock. The holders of the Class B Common Stock shall not be
entitled to vote on any matter submitted to the stockholders, except as
otherwise required by Section 242 of
- 24 -
<PAGE> 25
the Delaware General Corporation Law; provided, however, that the holders
of the Class B Common Stock shall not be entitled to vote on any amendment
to the Certificate of Incorporation that would increase or decrease the
number of authorized shares of Class B Common Stock.
4.3.2 Dividends. (a) Subject to the preferential
rights of the holders of Preferred Stock, the holders of the Class A
Common Stock shall be entitled to share in the payment of dividends as,
when and if declared by the Board of Directors out of funds legally
available therefor to the extent provided in Section 4.2.1(d).
(b) The holders of Class B Common Stock shall not be
entitled to receive any dividends and the Board of Directors shall not
declare or pay any dividends or make any other distributions (other than
distributions in liquidation permitted by Section 4.2.3) on the Class B
Common Stock.
4.3.3 Liquidation. Holders of Common Stock shall have
the right to participate in the assets of the corporation upon the
liquidation, dissolution or winding up of the corporation to the extent
provided in Section 4.2.3.
4.3.4 Conversion of Class B Common Stock. Effective
concurrently with the closing of an underwritten public offering
registered under the Securities Act of 1933, as amended from time to time,
of Common Stock of the corporation, each share of the corporation's Class
B Common Stock issued and outstanding as of such time shall, without
further action, be reclassified and changed into a number of shares of
fully paid and nonassessable share of Class A Common Stock equal to the
Class B Reclassification Rate, and all then outstanding rights to purchase
of otherwise acquire shares of Class B Common Stock from the corporation
shall, without further action, represent the right to purchase or
otherwise acquire, for the same aggregate consideration, a number of
shares of Class A Common Stock equal to the number of shares of Class B
Common Stock covered thereby multiplied by the Class B Reclassification
Rate. The Class B Reclassification Rate shall be determined by: (a)
dividing the sum of (i) the number of Fully Diluted Shares (determined as
provided in Section 4.2.5) plus (ii) the number of shares of Class A
Common Stock issued or issuable upon conversion of the Series C Preferred
Stock, by .95841; (b) multiplying the quotient obtained in (a) by 4.159%;
and (c) dividing the product obtained in (b) by the
- 25 -
<PAGE> 26
total number of authorized shares of Class B Common Stock. If less than
all of the Class B Common Stock has been issued or is subject to
outstanding options at the time of the reclassification under this Section
4.3.4, (i) the 4.159% number given above shall be reduced by multiplying
such number by a fraction, the numerator of which is the sum of the number
of shares of Class B Common Stock then outstanding and the number of
shares of Class B Common Stock issuable under then outstanding options
(whether or not such options are then exercisable), and the denominator of
which is the total number of authorized shares of Class B Common Stock,
and (ii) the .95841 number given above shall be increased to a number
determined by subtracting the percentage obtained in (i), expressed as a
decimal, from 100. The 4.159% and .95841 figures given in this Section
4.3.4 are based on the number of authorized shares of capital stock as of
September 23, 1997, and upon any amendment of this Certificate of
Incorporation to change the number of authorized shares, this Section
4.3.4 shall also be amended to adjust those figures in a manner that
causes such change to affect all authorized shares of capital stock as of
September 23, 1997 proportionately on a fully diluted basis. The holders
of record of certificates for shares of Class B Common Stock as of the
time of such reclassification shall promptly surrender such certificates
in exchange for a certificate or certificates representing the shares of
Class A Common Stock into which such shares of Class B Common Stock have
been reclassified. Class B Common Stock so reclassified may not be
reissued.
4.4 Automatic Conversion and Change of Capitalization Upon
Qualified Public Offering. Notwithstanding any other provisions in this
Article 4, if a Qualified Public Offering is consummated on or before
December 31, 1997, the following shall automatically occur:
4.4.1 Conversion of Preferred Stock. All outstanding
shares of Preferred Stock shall be converted into Class A Common Stock on
the basis described in Section 4.2.5 without further act by the holders
thereof.
4.4.2 Reclassification of Class B Common Stock. All
outstanding shares of Class B Common Stock shall be reclassified and
changed into Class A Common Stock on the basis described in Section 4.3.4.
- 26 -
<PAGE> 27
4.4.3 Redesignation of Class A Common Stock. The Class
A Common Stock shall be redesignated "Common Stock."
4.4.4 Amended Capitalization. Article 4 of this
Amended and Restated Certificate of Incorporation shall be amended to read
in its entirety as follows:
The total number of shares of all classes of stock which the
corporation shall have authority to issue is 20,000,000, consisting of
19,000,000 shares of Common Stock, par value $.01 per share, and
1,000,000 shares of Preferred Stock, par value $.01 per share.
Subject to preferential rights of any outstanding Preferred Stock:
(i) the holders of shares of Common Stock shall be entitled to receive,
when and if declared by the Board of Directors, out of assets of the
corporation which are by law available therefor, dividends payable either
in cash, in property or in shares of Common Stock; (ii) at every annual or
special meeting of stockholders of the corporation, every holder of Common
Stock shall be entitled to one vote, in person or by proxy, for each share
of Common Stock standing in his name on the books of the corporation; and
(iii) in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation, after payment
or provision for payment of the debts and other liabilities of the
corporation, the holders of all outstanding shares of Common Stock shall
be entitled to share ratably in the remaining net assets of the
corporation.
The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable
law of the State of Delaware, to establish from time to time the number of
shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof. The authority of the
Board with respect to each series shall include, but not be limited to,
determination of the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
- 27 -
<PAGE> 28
and the relative rights of priority, if any, of payments of dividends on
shares of that series;
(c) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such voting
rights;
(d) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the
Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable,
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund; and
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of
shares of that series.
ARTICLE 5
DIRECTORS
The number of directors of the corporation shall be fixed from
time to time in the manner provided in the bylaws and may be increased or
decreased from time to time in the manner provided in the bylaws.
Election of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation.
- 28 -
<PAGE> 29
ARTICLE 6
BYLAWS
In furtherance and not in limitation of the powers conferred by
statue, the board of directors of the corporation is expressly authorized
to make, alter or repeal the bylaws of the corporation, but such
authorization shall not divest the stockholders of the power, nor limit
their power, to make, alter or repeal bylaws.
ARTICLE 7
LIMITATIONS OF DIRECTORS' LIABILITY
No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as to liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for violations of Section
174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived any improper personal benefit. If the
Delaware General Corporation Law hereafter is amended to eliminate or
limit further the liability of a director, then, in addition to the
elimination and limitation of liability provided by the preceding
sentence, the liability of each director shall be eliminated or limited to
the fullest extent provided or permitted by the amended Delaware General
Corporation Law. Any repeal or modification of this Article 7 shall not
adversely affect any right or protection of a director under this Article7
as in effect immediately prior to such repeal or modification with respect
to any liability that would have accrued, but for this Article 7, prior to
such repeal or modification.
ARTICLE 8
INDEMNIFICATION
The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware (or any
successor section), as the same may be amended and supplemented, indemnify
any director or officer of the corporation, including any director or
officer of the corporation who was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
- 29 -
<PAGE> 30
enterprise, against any and all of the expenses, liabilities or other
matters referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any Bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office, shall continued as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs,
executors, and administrators of such person. No amendment or repeal of
this Article 8 shall apply to or have any affect on any right to
indemnification provided hereunder with respect to any acts or omissions
occurring prior to such amendment or repeal.
ARTICLE 9
RESERVATION OF POWER TO AMEND
The corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, as from time to time amended, in
the manner now or hereafter prescribed by law; and all rights, preferences
and privileges of whatsoever nature conferred upon stockholders, directors
or any other persons whomsoever by and pursuant to this Amended and
Restated Certificate of Incorporation in its present form or as hereafter
amended are granted subject to the right reserved in this Article 9.
ARTICLE 10
TRANSACTIONS WITH DIRECTORS AND OFFICERS
The corporation shall have authority, to the fullest extent now or
hereafter permitted by the Delaware General Corporation Law, or by any
other applicable law, to enter into any contract or transaction with one
or more of its directors or officers, or with any corporation,
partnership, joint venture, trust, association or other entity in which
one or more of its directors or officers are directors or officers or have
a financial interest, notwithstanding such relationships and
notwithstanding the fact that the director or officer is present at or
participates in the meeting of the board of directors or committee thereof
which authorizes the contract or transaction.
- 30 -
<PAGE> 31
IN WITNESS WHEREOF, RentX Industries, Inc. has caused this Amended and
Restated Certificate to be executed by Arnold A. Bernstein, its President, on
this 19th day of September, 1997.
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A. BERNSTEIN
-------------------------------------
Arnold A. Bernstein, President
- 31 -
<PAGE> 32
RentX Industries, Inc.
Share Conversion Analysis
Assumptions: additional conversion rate maximized, dividends accrued,
fundamental change on 11/10/97
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Investment in Investment in Investment in
Investment Series A Series A Preferred Series B Series B Preferred Series C
Date Preferred Shares Issued Preferred Shares Issued Preferred
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
05/15/96 5,020,000 5,020 200,000 200
05/29/96 1,887,000 1,887
08/02/96 1,340,000 1,340
11/01/96 1,140,000 1,140
12/20/96 206,000 206
01/06/97 271,000 271
01/31/97 86,000 86
02/14/97 1,842,000 1,842
03/14/97 1,834,000 1,834
04/21/97 1,110,000 1,110
05/19/97 765,000 765
05/22/97 525,000 525
06/09/97 200,000 200
06/26/97 969,000 969 3,000,000
11/10/97
- -------------------------------------------------------------------------------------------------------------------
TOTALS 17,195,000 17,195 200,000 200 3,000,000
===================================================================================================================
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Preferred A Divs Preferred B Divs Preferred C Divs
Investment Series C Preferred Accrued on Each Accrued on Each Accrued on Each
Date Shares Issued Investment Investment Investment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
05/15/96 378,641 15,085
05/29/96 138,536
08/02/96 85,934
11/01/96 58,441
12/20/96 9,147
01/06/97 11,390
01/31/97 3,316
02/14/97 67,439
03/14/97 60,044
04/21/97 30,533
05/19/97 18,106
05/22/97 12,210
06/09/97 4,160
06/26/97 3,000 17,909 60,411
11/10/97
- -------------------------------------------------------------------------------------------------------------------
TOTALS 3,000 895,805 15,085 60,411
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Investment in Investment in
Series A Series A Preferred Series B Series B Preferred
Preferred Shares Issued Preferred Shares Issued
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fundamental Change
Values:
Assumed Total Fair
Market Value (FMV)
Less: dividends
payable on Series A, ---------------------------------------------
B and C 895,805 15,085 60,411
Total FMV after ---------------------------------------------
payment of accrued
dividends
Less: FMV attributable
to Class B Common,
Series C and any
excluded shares
Fully Diluted Fair
Market Value
% of Fully Diluted FMV
Attributable to
Series B Preferred
Additional Conversion
Rate:
FMV to Series B
Preferred of Additional
Conversion Rate
Series B Preferred Value
due to Base Series B
Conversion Rate
FMV to Series B
Preferred
FMV to Series A
Preferred
Dividends Paid to
Series A Preferred
Series A Rate of Return
Confirm Share to
Series B Attributable
to Additional
Conversion Rate
Up to 20%
Above 20% 0.57840 times 25.0000% (the maximum)
Total
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Preferred A Divs Preferred B Divs
Accrued on Each Accrued on Each
Investment Investment
- ---------------------------------------------------------------------------------------------------------------
Fundamental Change % of FMV after
Values: VALUES Dividends
---------- ---------
<S> <C> <C>
Assumed Total Fair
Market Value (FMV) 80,000,000
Less: dividends
payable on Series A,
B and C 971,302
Total FMV after ----------
payment of accrued
dividends 79,028,698 100.0000%
Less: FMV attributable
to Class B Common,
Series C and any
excluded shares 9,527,773 12.0561%
Fully Diluted Fair ----------
Market Value 69,500,926
% of Fully Diluted FMV
Attributable to
Series B Preferred
Additional Conversion
Rate: 33.7400%
FMV to Series B
Preferred of Additional
Conversion Rate 23,449,612
Series B Preferred Value
due to Base Series B
Conversion Rate 529,478
FMV to Series B ----------
Preferred 23,979,090 30.3424%
FMV to Series A
Preferred 45,521,836 57.6015%
Dividends Paid to
Series A Preferred 895,805
----------
Series A Rate of Return 144.1528%
Confirm Share to ----------
Series B Attributable
to Additional
Conversion Rate
Up to 20% 19.2800%
Above 20% 14.4600%
Total 33.7400%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred A Divs Preferred B Divs
Series B Preferred Accrued on Each Accrued on Each
Shares Issued Investment Investment
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding After Fundamental Change, Series A Conversion, Series B Conversion and Series C Conversion
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series A Conversion Rate: 200.00 [1] Assumes no change in Trigger Price.
Series B Base Conversion Rate: 195.00
Series B Additional Conversion Rate: 8,857.69 -- 33.7400%
Series C Conversion Rate: 157.16
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Series B Holders
from Initial Shares Additional
and Base Series B Totals for Class B Common,
Series A Holders Conversion Rate Conversion Shares Series B any excluded shares
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Common Stock 3,439,000 40,000 1,771,538 1,811,538
Class B Common Stock 0 248,308
--------------------------------------------------------------------------------------------------------
Total Common Shares 3,439,000 40,000 1,771,538 1,811,538 248,308
% of Total Common 57.6015% 0.6700% 29.6724% 30.3424% 4.1590%
<CAPTION>
------------------------------
Series C Total
------------------------------
<S> <C> <C>
Class A Common Stock 471,480 5,250,538
Class B Common Stock
------------------------------
Total Common Shares 471,480 5,970,326
% of Total Common 7.8971% 100.0000%
</TABLE>
<PAGE> 33
RentX Industries, Inc.
Share Conversion Analysis
Assumptions: additional conversion rate of zero, dividends paid currently,
fundamental change on 1/31/99
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Investment in Investment in Investment in
Investment Series A Series A Preferred Series B Series B Preferred Series C Series C Preferred
Date Preferred Shares Issued Preferred Shares Issued Preferred Shares Issued
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
05/15/96 5,020,000 5,020 200,000 200
05/29/96 1,887,000 1,887
08/02/96 1,340,000 1,340
11/01/96 1,140,000 1,140
12/20/96 206,000 206
01/06/97 271,000 271
01/31/97 86,000 86
01/31/97
02/14/97 1,842,000 1,842
03/14/97 1,834,000 1,834
04/21/97 1,110,000 1,110
05/19/97 765,000 765
05/22/97 525,000 525
06/09/97 200,000 200
06/26/97 969,000 969 3,000,000 3,000
01/31/98
01/31/99
- ------------------------------------------------------------------------------------------------------------------------------
TOTALS 17,195,000 17,195 200,000 200 3,000,000 3,000
==============================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------
Preferred A Divs Preferred B Divs Preferred C Divs
Investment Paid on Each Paid on Each Paid on Each
Date Investment Investment Investment
- -----------------------------------------------------------------------
<S> <C> <C> <C>
05/15/96
05/29/96
08/02/96
11/01/96
12/20/96
01/06/97
01/31/97
01/31/97 293,062 7,151
02/14/97
03/14/97
04/21/97
05/19/97
05/22/97
06/09/97
06/26/97
01/31/98 791,286 10,000 90,000
01/31/99 859,750 10,000 150,000
- -----------------------------------------------------------------------
TOTALS 1,944,099 27,151 240,000
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Preferred A Divs Preferred B Divs
Paid on Each Paid on Each
Investment Investment
- ------------------------------------------------------------------------------------------------------------------------------
Fundamental Change Values: % of total
VALUES FMV
------------------------------------
<S> <C> <C>
Assumed Total Fair Market Value (FMV) 19,000,000 100.0000%
Less: FMV attributable to Class B Common, Series C and any excluded shares 2,290,657 12.0561%
----------
Fully Diluted Fair Market Value 16,709,343
Series B Preferred Value due to Base Series B Conversion Rate 192,117
----------
% of Fully Diluted FMV Attributable to Series B Preferred Additional Conversion Rate: 0.0000%
FMV to Series B Preferred of Additional Conversion Rate --
----------
FMV to Series B Preferred 192,117 1.0111%
FMV to Series A Preferred 16,517,226 86.9328%
Dividends Paid to Series A Preferred 1,944,099
Series A Rate of Return 3.3013%
- --------------------------------------------------------------------------------------------------------------------------
Confirm Share to Series B Attributable to Additional Conversion Rate
Less than 10% 0.0000%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding After Fundamental Change, Series A Conversion, Series B Conversion and Series C Conversion
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred A Divs Preferred B Divs
Series B Preferred Paid on Each Paid on Each
Shares Issued Investment Investment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Series A Conversion Rate: 200.00 [1] Assumes no change in Trigger Price.
Series B Base Conversion Rate: 195.00
Series B Additional Conversion Rate: 0 -- 0.0000%
Series C Conversion Rate: 104.13
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Series B Holders
from Initial Shares Additional
and Base Series B
Series A Holders Conversion Rate Conversion Shares
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Common Stock 3,439,000 40,000 --
Class B Common Stock
- ---------------------------------------------------------------------------------------
Total Common Shares 3,439,000 40,000 --
% of Total Common 86.9328% 1.0111% 0.0000%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Totals for Class B Common,
Series B any excluded shares Series C Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock 40,000 312,402 3,479,000
Class B Common Stock 0 164,529
- ------------------------------------------------------------------------------------------------------------------------
Total Common Shares 40,000 164,529 312,402 3,955,931
% of Total Common 1.0111% 4.1590% 7.8971% 100.0000%
</TABLE>
<PAGE> 34
RentX Industries, Inc.
Share Conversion Analysis
Assumptions: additional conversion rate not maximized, dividends paid
currently, fundamental change on 1/31/00
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Investment in Series A Investment in Series B Investment in Series C
Investment Series A Preferred Series B Preferred Series C Preferred
Date Preferred Shares Issued Preferred Shares Issued Preferred Shares Issued
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
05/15/96 5,020,000 5,020 200,000 200
05/29/96 1,887,000 1,887
08/02/96 1,340,000 1,340
11/01/96 1,140,000 1,140
12/20/96 206,000 206
01/06/97 271,000 271
01/31/97 86,000 86
01/31/97
02/14/97 1,842,000 1,842
03/14/97 1,834,000 1,834
04/21/97 1,110,000 1,110
05/19/97 765,000 765
05/22/97 525,000 525
06/09/97 200,000 200
06/26/97 969,000 969 3,000,000 3,000
01/31/98
01/31/99
01/31/00
- -----------------------------------------------------------------------------------------------------------
TOTALS 17,195,000 17,195 200,000 200 3,000,000 3,000
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Preferred A Preferred B Divs Preferred C Divs
Investment Divs Paid on Paid on Each Paid on Each
Date Each Investment Investment Investment
- ------------------------------------------------------------------
<S> <C> <C> <C>
05/15/96
05/29/96
08/02/96
11/01/96
12/20/96
01/06/97
01/31/97
01/31/97 293,062 7,151
02/14/97
03/14/97
04/21/97
05/19/97
05/22/97
06/09/97
06/26/97
01/31/98 791,286 10,000 90,000
01/31/99 859,750 10,000 150,000
01/31/00 859,750 10,000 150,000
- ------------------------------------------------------------------
TOTALS 2,803,849 37,151 390,000
==================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Preferred A Preferred B Divs
Divs Paid on Paid on Each
Each Investment Investment
- ---------------------------------------------------------------------------------------------------------------------------------
Fundamental Change Values: VALUES % of total FMV
---------- --------------
<S> <C> <C>
Assumed Total Fair Market Value (FMV) 45,000,000 100.0000%
Less: FMV attributable to Class B Common, Series C and any excluded shares 5,425,241 12.0561%
----------
Fully Diluted Fair Market Value 39,574,759
% of Fully Diluted FMV Attributable to Series B Preferred Additional Conversion Rate: 21.3601%
FMV to Series B Preferred of Additional Conversion Rate 8,453,189
Series B Preferred Value due to Base Series B Conversion Rate 357,822
----------
FMV to Series B Preferred 8,811,011 19.5800%
FMV to Series A Preferred 30,763,747 68.3639%
Dividends Paid to Series A Preferred 2,803,849
Series A Rate of Return 23.59622%
- ---------------------------------------------------------------------------------------------------------------------------------
Confirm Share to Series B Attributable to Additional Conversion Rate
Investment in Investment in Preferred A
Series A Series B Divs Paid on
Preferred Preferred Each Investment
- ---------------------------------------------------------------------------------------------------------------------------------
Up to 20% 19.2800%
Above 20% 0.57840 times 3.5962% equals 2.0801%
Total 21.3601%
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding After Fundamental Change, Series A Conversion, Series B Conversion and Series C Conversion
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Series B Preferred A Preferred B Divs
Preferred Divs Paid on Paid on Each
Shares Issued Each Investment Investment
- ---------------------------------------------------------------------------------------------------------------------------------
Series A Conversion Rate: 200.00 [1] Assumes no change in Trigger Price.
Series B Base Conversion Rate: 195.00
Series B Additional Conversion Rate: 4,724.80 -- 21.3601%
Series C Conversion Rate: 132.42
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Series B Holders Additional Class B
from Initial Series B Total for Common,
Series A Shares and Base Conversion Series any excluded
Holders Conversion Rate Shares B Holders shares Series C Total
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Common Stock 3,439,000 40,000 944,960 984,960 397,256 4,423,960
Class B Common Stock 209,218
-------------------------------------------------------------------------------------------------------
Total Common Shares 3,439,000 40,000 944,960 984,960 209,218 397,256 5,030,434
% of Total Common 68.3639% 0.7952% 18.7849% 19.5800% 4.1590% 7.8971% 100.0000%
</TABLE>
<PAGE> 35
RentX Industries, Inc.
Share Conversion Analysis
Assumptions: additional conversion rate not maximized, dividends accrued,
fundamental change in year 5
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Investment in Investment in Investment in
Investment Series A Series A Preferred Series B Series B Preferred Series C Series C Preferred
Date Preferred Shares Issued Preferred Shares Issued Preferred Shares Issued
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
05/15/96 5,020,000 5,020 200,000 200
05/29/96 1,887,000 1,887
08/02/96 1,340,000 1,340
11/01/96 1,140,000 1,140
12/20/96 206,000 206
01/06/97 271,000 271
01/31/97 86,000 86
02/14/97 1,842,000 1,842
03/14/97 1,834,000 1,834
04/21/97 1,110,000 1,110
05/19/97 765,000 765
05/22/97 525,000 525
06/09/97 200,000 200
06/26/97 969,000 969 3,000,000 3,000
05/15/2001
- ----------------------------------------------------------------------------------------------------------------------
TOTALS 17,195,000 17,195 200,000 200 3,000,000 3,000
======================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------
Preferred A Divs Preferred B Divs Preferred C Divs
Investment Accrued on Each Accrued on Each Accrued on Each
Date Investment Investment Investment
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
05/15/96 1,386,719 55,248
05/29/96 516,763
08/02/96 352,208
11/01/96 282,246
12/20/96 49,326
01/06/97 64,128
01/31/97 19,996
02/14/97 424,042
03/14/97 413,778
04/21/97 243,544
05/19/97 164,366
05/22/97 112,544
06/09/97 42,291
06/26/97 202,236 626,118
05/15/2001
- -------------------------------------------------------------------------
TOTALS 4,274,187 55,248 626,118
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Investment in Investment in Investment in
Series A Series A Preferred Series B Series B Preferred Series C
Preferred Shares Issued Preferred Shares Issued Preferred
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fundamental Change Values:
Assumed Total
Fair Market Value (FMV)
Less: dividends payable -------------------------------------------
on Series A, B and C 4,274,187 55,248 626,118
Total FMV after -------------------------------------------
payment of accrued
dividends
Less: FMV attributable
to Class B Common,
Series C and any
excluded shares
Fully Diluted Fair
Market Value
% of Fully Diluted FMV
Attributable to Series B
Preferred Additional
Conversion Rate:
FMV to Series B Preferred
of Additional Conversion
Rate
Series B Preferred Value
due to Base Series B
Conversion Rate
FMV to Series B Preferred
FMV to Series A Preferred
Dividends Paid to Series A
Preferred
Series A Rate of Return
Confirm Share to Series B
Attributable to Additional
Conversion Rate
Greater than 10%
But less than 20% 9.6400% plus ( . 9640 times 3.5927%) equals 13.1033%
<CAPTION>
--------------------------------------
Preferred A Divs Preferred B Divs
Accrued on Each Accrued on Each
Investment Investment
--------------------------------------
Fundamental Change Values: % of FMV after
VALUES Dividends
--------------------------------------
<S> <C> <C>
Assumed Total Fair Market Value (FMV) 40,000,000
Less: dividends payable on Series A, B and C 4,955,552
----------
Total FMV after payment of accrued dividends 35,044,448 100.0000%
Less: FMV attributable to Class B Common, Series C and any excluded shares 4,224,991 12.0561%
----------
Fully Diluted Fair Market Value 30,819,457
% of Fully Diluted FMV Attributable to Series B Preferred Additional Conversion Rate: 13.1033%
----------
FMV to Series B Preferred of Additional Conversion Rate 4,038,379
Series B Preferred Value due to Base Series B Conversion Rate 307,917
----------
FMV to Series B Preferred 4,346,296 12.4022%
FMV to Series A Preferred 26,473,161 75.5417%
Dividends Paid to Series A Preferred 4,274,187
Series A Rate of Return 13.5927%
- ---------------------------------------------------------------------------------------------------------------------------
Confirm Share to Series B Attributable to Additional Conversion Rate
Investment in Investment in Preferred A
Series A Series B Divs Paid on
Preferred Preferred Each Investment
- ---------------------------------------------------------------------------------------------------------------------------
Greater than 10%
But less than 20% 9.6400% plus (9640 times) 3.5927% equals 13.1033%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
-------------------------------------------------------
Preferred A Divs
Series B Preferred Accured on Each
Shares Issued Investment
-------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding After Fundamental Change, Series A Conversion, Series B Conversion and Series C Conversion
- ------------------------------------------------------------------------------------------------------------------------------------
Series A Conversion Rate: 200.00 [1] Assumes no change in Trigger Price.
Series B Base Conversion Rate: 195.00
Series B Additional Conversion Rate: 2,623.032 --
Series C Conversion Rate: 119.837
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Series B Holders
from Initial Shares Additional
and Base Series B Total for Series Class B Common,
Series A Holders Conversion Rate Conversion Shares B Holders any excluded shares
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Common Stock 3,439,000 40,000 524,606 564,606
Class B Common Stock -- 189,338
------------------------------------------------------------------------------------------------------
Total Common Shares 3,439,000 40,000 524,606 564,606 189,338
% of Total Common 75.5417% 0.8786% 11.5236% 12.4022% 4.1590%
<CAPTION>
------------------------------------
Series C Total
------------------------------------
<S> <C> <C>
Class A Common Stock 359,510 4,003,606
Class B Common Stock
------------------------------------
Total Common Shares 359,510 4,552,454
% of Total Common 7.8971% 100.0000%
</TABLE>
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
RENTX INDUSTRIES, INC.
<PAGE> 2
AMENDED AND RESTATED
BYLAWS
OF
RENTX INDUSTRIES, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1.01 REGISTERED OFFICE. The registered office of RentX
Industries, Inc. (hereinafter called the "Corporation") shall be at such place
in the State of Delaware as shall be designated by the Board of Directors
(hereinafter called the "Board").
Section 1.02 PRINCIPAL OFFICE. The principal office for the
transaction of the business of the Corporation shall be at such location, within
or without the State of Delaware, as shall be designated by the Board.
Section 1.03 OTHER OFFICES. The Corporation may also have an
office or offices at such other place or places either within or without the
State of Delaware, as the Board may from time to time determine or as the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01 ANNUAL MEETINGS. Annual meetings of the
stockholders of the Corporation for the purpose of electing directors and for
the transaction of such other proper business as may come before such meetings
may be held at such time, date and place as the Board shall determine by
resolution.
Section 2.02 SPECIAL MEETINGS. Special meetings of the
stockholders of the Corporation for any purpose or purposes may be called at any
time by the Board pursuant to a resolution approved by a majority of the entire
Board, or by the Chairman of the Board or the President and Chief Executive
Officer of the Corporation or by a committee of the Board (duly authorized and
empowered by the Board to call such meetings), but such special meetings shall
not be called by any other person or persons.
Section 2.03 PLACE OF MEETINGS. All meetings of the
stockholders shall be held at such places, within or without the State of
Delaware, as may from time to time be designated
-2-
<PAGE> 3
by the person or persons calling the respective meetings and specified in the
respective notices or waivers of notice thereof. In the absence of any such
designation, stockholders' meetings shall be held at the principal executive
offices of the Corporation.
Section 2.04 NOTICE OF MEETINGS. Except as otherwise required
by law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten nor more than 60 days before the date of the
meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his address furnished by him to the Secretary of the
Corporation for such purpose or, if he shall not have furnished to the Secretary
his address for such purpose, then at his address last known to the Secretary or
by transmitting a notice thereof to him at such address by telegraph or
facsimile transmission. Every notice of a meeting of the stockholders shall
state the place, date and hour of the meeting, and, in the case of a special
meeting, shall also state the purpose or purposes for which the meeting is
called. Except as otherwise expressly required by law, notice of any adjourned
meeting of the stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
Section 2.05 QUORUM. The holders of record of a majority in
voting interest of the shares of stock of the Corporation entitled to be voted,
present in person or by proxy, shall constitute a quorum for the transaction of
business at any meeting of the stockholders of the Corporation or any
adjournment thereof. The stockholders present at a duly called or held meeting
at which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. In the absence of a quorum at any meeting or any adjournment thereof, a
majority in voting interest of the stockholders present in person or by proxy
and entitled to vote thereat may adjourn such meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At any such adjourned meeting at which a quorum is present or
represented any business may be transacted which might have been transacted at
the meeting as originally called. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat.
Section 2.06 VOTING.
(a) At each meeting of the stockholders, each stockholder
shall be entitled to vote in person or by proxy each share or fractional share
of the stock of the Corporation which has voting rights on the matter in
question, unless the question is one upon which by express provision of statute
or the Certificate of Incorporation or these Bylaws, a different vote is
required, in which case such express provisions shall govern and control the
decision of such question.
-3-
<PAGE> 4
Section 2.07 LIST OF STOCKHOLDERS. The Secretary of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the entire duration thereof, and may be inspected by any stockholder who
is present.
Section 2.08 INSPECTORS OF ELECTION. If at any meeting of the
stockholders a vote by written ballot shall be taken on any question, the
chairman of such meeting may appoint an inspector or inspectors of election to
act with respect to such vote. Each inspector so appointed shall first subscribe
an oath faithfully to execute the duties of an inspector at such meeting with
strict impartiality and according to the best of his ability. Such inspectors
shall decide upon the qualification of the voters and shall report the number of
shares represented at the meeting and entitled to vote on such question, shall
conduct and accept the votes, and, when the voting is completed, shall ascertain
and report the number of shares voted respectively for and against the question.
Reports of the inspectors shall be in writing and subscribed and delivered by
them to the Secretary of the Corporation. Inspectors need not be stockholders of
the Corporation, and any officer of the Corporation may be an inspector on any
question other than a vote for or against a proposal in which he shall have a
material interest.
Section 2.09 ADVANCE NOTICE OF STOCKHOLDER PROPOSALS BEFORE
ANY MEETING OF STOCKHOLDERS. To be properly brought before any meeting of
stockholders, business must be specified in the notice of meeting (or any
supplement or amendment thereto) given by or at the direction of the Board,
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before any meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at the principal executive offices of the
Corporation not less than 50 days nor more than 75 days prior to the annual
meeting; provided, however, that in the event less than 60 days' notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought and the
reasons for conducting such business at the annual meeting; (ii) the name and
record address of the stockholder proposing such business and any other
stockholders known by such stockholder to be supporting such proposal; (iii) the
class, series and number of
-4-
<PAGE> 5
shares of the Corporation which are beneficially owned by the stockholder and by
any other stockholders known by such stockholder to be supporting such proposal;
and (iv) any material or financial interest of the stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 2.09. The Chairman of the Board or other presiding officer
of the annual meeting shall, if the facts warrant, determine and declare at a
meeting of the stockholders that business was not properly brought before the
meeting in accordance with the provisions of this Section 2.09, and if he should
so determine, he shall so declare to the meeting that any such business not
properly brought before the meeting shall not be transacted.
Section 2.10 STOCKHOLDER ACTION WITHOUT MEETINGS. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law of Delaware to be taken at any annual or special
meeting of the stockholders, or any action which may be taken at any annual or
special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing setting forth the
action so taken shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01 GENERAL POWERS. The property, business and
affairs of the Corporation shall be managed by or under the direction of the
Board, which may exercise all of the powers of the Corporation, except such as
are by the Certificate of Incorporation, by these Bylaws or by law conferred
upon or reserved to the stockholders.
Section 3.02 NUMBER. The authorized number of the directors of
the Corporation shall be established from time to time by the Board.
Section 3.03 ELECTION OF DIRECTORS. The directors shall be
elected by the stockholders of the Corporation, and at each election the persons
receiving the greatest number of votes, up to the number of directors then to be
elected, shall be the persons then elected. The directors shall be elected at
the annual meeting of stockholders, except as provided in Section 3.06 of this
Article, and each director elected shall hold office until his successor is
elected and qualified; provided, however, that unless otherwise restricted by
the Certificate of Incorporation or by law, any director or the entire Board may
be removed, with or without cause, from the Board at any meeting of stockholders
by a majority of the stock represented and entitled to vote thereat.
-5-
<PAGE> 6
Section 3.04 NOMINATION OF DIRECTORS. Nomination of persons
for election to the Board, other than those made by or at the direction of the
Board or by any nominating committee or person appointed by the Board, shall be
made by a stockholder only if timely written notice of such nomination or
nominations has been given to the Secretary of the Corporation. To be timely,
such notice shall be delivered to or mailed and received at the principal
executive offices of the Corporation not less than 50 days nor more than 75 days
prior to the annual meeting; provided, however, that in the event less than 60
days' notice or prior public disclosure of the date of the annual meeting is
given or made to stockholders, notice by the stockholder to be timely must be
received not later than the close of business on the tenth day following the day
of which such notice of the date of the annual meeting was mailed or such public
disclosure was made. Each such notice to the Secretary shall set forth: (i) the
name and address of record of the stockholder who intends to make the nomination
or nominations; (ii) the class and number of shares of capital stock of the
Corporation that are beneficially owned by the stockholder and a representation
that the stockholder intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) the name, age,
business address and residence address, and principal occupation or employment
of each nominee; (iv) the class and number of shares of capital stock of the
Corporation that are beneficially owned by each nominee; (v) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons pursuant to which the nomination or nominations are
to be made by the stockholder; (vi) such other information regarding each
nominee as would be required to be disclosed and included in a proxy statement
pursuant to the proxy rules then in effect promulgated by the Securities
Exchange Act of 1934, as amended; and (vii) the consent of each nominee to serve
as a director of the Corporation if so elected. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as a director of the Corporation.
The Board may reject any nomination by a stockholder not
timely made or otherwise not in accordance with the terms of this Section 3.04.
If the Board determines that the information provided in the stockholder's
notice does not satisfy the informational requirements of this Section 3.04 in
any material respect, the Secretary of the Corporation shall promptly notify
such stockholder of the deficiency in writing. The stockholder shall have an
opportunity to cure the deficiency by providing additional information to the
Secretary within such period of time, not to exceed ten days from the date such
deficiency notice is given to the stockholder, as the Board shall determine. If
the deficiency is not cured within such period, or if the Board of Directors
reasonably determines that the additional information provided by the
stockholder, together with the information previously provided, does not satisfy
the requirements of this Section 3.04 in any material respect, then the Board
may reject such stockholder's nomination. The Secretary of the Corporation shall
notify a stockholder in writing whether his nomination has been made in
accordance with the requirements of this Section 3.04.
Section 3.05 RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such
-6-
<PAGE> 7
resignation shall take effect at the time specified therein, or, if the time is
not specified, it shall take effect immediately upon its receipt; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 3.06 VACANCIES. Any vacancy on the Board, whether
because of death, resignation, disqualification, an increase in the number of
directors, or any other cause, may be filled by vote of the majority of the
remaining directors, although less than a quorum, or by a sole remaining
director. Each director so chosen to fill a vacancy shall hold office until the
next annual election of directors and his successor shall have been elected and
shall qualify or until he shall resign or shall have been removed. If there are
no directors in office, then an election of directors may be held in the manner
prescribed by statute. No reduction of the authorized number of directors shall
have the effect of removing any director prior to the expiration of his term of
office. Upon the resignation of one or more directors from the Board, effective
at a future date, a majority of the directors then in office, including those
who have so resigned, shall have the power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations shall
become effective, and each director so chosen shall hold office as provided
hereinabove in the filling of other vacancies.
Section 3.07 PLACE OF MEETING; TELEPHONE CONFERENCE MEETING.
The Board may hold any of its meetings at such place or places within or without
the State of Delaware as the Board may from time to time by resolution designate
or as shall be designated by the person or persons calling the meeting or in the
notice or waiver of notice of any such meeting. Directors may participate in any
regular or special meeting of the Board, or any committee designated by the
Board, by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting can hear each other,
and such participation shall constitute presence in person at such meeting.
Section 3.08 FIRST MEETING. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
Section 3.09 REGULAR MEETINGS. Regular meetings of the Board
may be held at such times as the Board shall from time to time by resolution
determine. If any day fixed for a meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day which is not a legal holiday.
Except as provided by law, notice of regular meetings need not be given.
Section 3.10 SPECIAL MEETINGS. Special meetings of the Board
may be called at any time by the President and Chief Executive Officer or
Chairman of the Board on not less than forty-eight hours' notice to each
director, either personally, by mail, by telegram, by courier, by facsimile
transmission or by telephone. Special meetings shall be called by the Secretary
in like manner and on like notice on the written request of two directors unless
the Board consists of only
-7-
<PAGE> 8
one director, in which case special meetings shall be called by the Secretary in
like manner or on like notice on the written request of the sole director.
Section 3.11 QUORUM AND ACTION. Except as otherwise provided
in these Bylaws or by law, the presence of a majority of the authorized number
of directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. If only one
director is authorized, such sole director shall constitute a quorum. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
Section 3.12 ACTION BY CONSENT. Any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting if a written consent thereto is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or such committee.
Such action by written consent shall have the same force and effect as the
unanimous vote of such directors.
Section 3.13 COMPENSATION. No stated salary need be paid to
directors, as such, for their services but, as fixed from time to time by
resolution of the Board, the directors may receive directors' fees, compensation
and reimbursement for expenses for attendance at directors' meetings, for
serving on committees and for discharging their duties; provided that nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 3.14 COMMITTEES. The Board may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
Board, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have any power or authority in reference to
approving or adopting, or recommending to the stockholders, any action or matter
expressly required by the General Corporation Law of Delaware to be submitted to
stockholders for approval or adoption or amending or repealing any bylaw of the
Corporation. Meetings of any committee may be called in the manner provided in
these Bylaws for the calling of meetings of the Board. Any such committee shall
keep written minutes of its meetings and report the same to the Board when
required.
-8-
<PAGE> 9
In the absence or disqualification of any member of any such
committee, the members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of such absent or
disqualified member.
A majority of the members, or replacements thereof, of any
such committee shall constitute a quorum for the transaction of business. Every
act or decision done or made by a majority of the members, or replacements
thereof, of any such committee shall be regarded as the act or decision of the
entire committee.
ARTICLE IV
OFFICERS
Section 4.01 OFFICERS. The officers of the Corporation shall
be a Chairman of the Board, a President and Chief Executive Officer, a Secretary
and a Treasurer. The Corporation may also have, at the discretion of the Board,
one or more Vice Chairmen of the Board, a Chief Operating Officer, a Chief
Financial Officer, one or more Vice Presidents, one or more Assistant
Secretaries and Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 4.03 of these Bylaws. One
person may hold two or more offices. The salaries of all officers of the
Corporation, except such officers as may be appointed by the President and Chief
Executive Officer in accordance with the provisions of Section 4.03 of these
Bylaws, shall be fixed by the Board.
Section 4.02 ELECTION. The officers of the Corporation, except
such officers as may be appointed by the President and Chief Executive Officer
in accordance with the provisions of Section 4.03 of these Bylaws, shall be
chosen annually by the Board, and each shall hold office until they shall resign
or shall be removed or otherwise disqualified to serve, or until their
successors shall be elected and qualified.
Section 4.03 SUBORDINATE OFFICERS. The Board may appoint, or
may authorize the President and Chief Executive Officer to appoint such
assistant or other officers as the business of the Corporation may require, each
of whom shall have such authority and perform such duties as are provided in
these Bylaws or as the Board or the President and Chief Executive Officer from
time to time may specify, and shall hold office until he or she shall resign or
shall be removed or otherwise disqualified to serve.
Section 4.04 REMOVAL AND RESIGNATION. Any officer may be
removed, with or without cause, by a majority of the directors at the time in
office, at any regular or special meeting of the Board. An officer appointed by
the President and Chief Executive Officer pursuant to Section 4.03 of these
Bylaws may also be removed by the President and Chief Executive Officer. Any
officer may resign at any time by giving written notice to the Board, the
Chairman of the Board,
-9-
<PAGE> 10
the President and Chief Executive Officer or the Secretary of the Corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 4.05 VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these Bylaws for the regular elections or
appointments to such office.
Section 4.06 POWERS AND DUTIES OF EXECUTIVE OFFICERS. The
officers of the Corporation shall have such powers and duties in the management
of the Corporation as may be prescribed in a resolution by the Board and, to the
extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board. The Board may require any officer, agent or
employee to give security for the faithful performance of his duties.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 5.01 CERTIFICATES FOR STOCK. Every owner of stock of
the Corporation shall be entitled to have a certificate or certificates, in such
form as the Board shall prescribe, certifying the number and class of shares of
the stock of the Corporation owned by him. The certificates representing the
shares of such stock shall be numbered in the order in which they shall be
issued and shall be signed in the name of the Corporation by the Chairman of the
Board, the President and Chief Executive Officer or a Vice President and by the
Secretary or an Assistant Secretary or by the Treasurer or an Assistant
Treasurer. Any or all of the signatures on the certificates may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon any such certificate shall thereafter
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, such certificate may nevertheless be issued by the
Corporation with the same effect as though the person who signed such
certificate, or whose facsimile signature shall have been placed thereupon, were
such officer, transfer agent or registrar at the date of issue. A record shall
be kept of the respective names of the persons, firms or corporations owning the
stock represented by such certificates, the number and class of shares
represented by such certificates, respectively, and the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been canceled, except in cases provided for in Section 5.04 of these
Bylaws.
Section 5.02 TRANSFER OF STOCK. Transfer of shares of stock of
the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 5.03 of these Bylaws, and
-10-
<PAGE> 11
upon surrender of the certificate or certificates for such shares properly
endorsed and the payment of all taxes thereon. The person in whose name shares
of stock stand on the books of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation.
Section 5.03 REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. The Board may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
Section 5.04 LOST, STOLEN, DESTROYED AND MUTILATED
CERTIFICATES. In any case of loss, theft, destruction, or mutilation of any
certificate of stock, another may be issued in its place upon proof of such
loss, theft, destruction, or mutilation and upon the giving of a bond of
indemnity to the Corporation in such form and in such sums as the Board may
direct; provided, however, that a new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is proper to do so.
Section 5.05 RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders or any adjournment thereof, to consent to corporate action
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any
other change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which shall not be more than 60 nor less than ten days before the date of
such meeting, shall not be more than ten days after the resolution fixing the
record date for such consent or shall not be more than 60 days prior to any
other action, as the case may be. If, in any such case, the Board shall not fix
a record date, the record date for determining stockholders for any such purpose
shall be determined as provided in the General Corporation Law of Delaware. A
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
Section 5.06 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The President and Chief Executive Officer or any Vice President and the
Secretary or any Assistant Secretary of this Corporation are authorized to vote,
represent and exercise on behalf of this Corporation all rights incident to all
shares of any other corporation or corporations standing in the name of this
Corporation. The authority herein granted to said officers to vote or represent
on behalf of this Corporation any and all shares held by this Corporation in any
other corporation or corporations may be exercised either by such officers in
person or by any person authorized so to do by proxy or power of attorney duly
executed by said officers.
-11-
<PAGE> 12
Section 5.07 STATEMENT OF STOCK RIGHTS, PREFERENCES,
PRIVILEGES. If the Corporation shall be authorized to issue more than one class
of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
ARTICLE VI
INDEMNIFICATION
Section 6.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was a director or officer of the Corporation against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actual and reasonably incurred by him or her in connection with such
action, suit or proceeding if he or she acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, that he
or she had reasonable cause to believe that his or her conduct was unlawful.
Section 6.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director or officer of the
Corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter
-12-
<PAGE> 13
as to which such person shall have been adjudged to be liable to the Corporation
unless the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 6.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any
indemnification under Section 6.01 or 6.02 of these Bylaws (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director or officer is proper
in the circumstances because he or she has met the applicable standard of
conduct set forth in Sections 6.01 and 6.02 of these Bylaws. Such determination
shall be made (i) by a majority vote of directors who were not parties to such
action, suit or proceeding, even though less than a quorum, or (ii) if there are
no such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (iii) by the stockholders.
Section 6.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL
PARTY. Notwithstanding the other provisions of this Article VI, to the extent
that a director or officer of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
6.01 or 6.02 of these Bylaws, or in defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
Section 6.05 ADVANCE OF EXPENSES. Expenses (including
attorneys' fees) incurred by an officer or director in defending a civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
Corporation as authorized in this Article VI.
Section 6.06 BROADEST LAWFUL INDEMNIFICATION. In addition to
the foregoing, the Corporation shall, to the broadest and maximum extent
permitted by Delaware law, as the same exists from time to time (but, in case of
any amendment to or change in Delaware law, only to the extent that such
amendment or change permits the Corporation to provide broader rights of
indemnification than is permitted to the Corporation prior to such amendment or
change), indemnify each person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding
whether civil, criminal, administrative or investigative by reason of the fact
that he or she is or was a director or officer of the Corporation against
expenses (including attorneys' fees), judgments, fine and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding. In addition, the Corporation shall, to the
broadest and maximum extent permitted by Delaware law, as the same may exist
from time to time (but, in case of an amendment to or change in Delaware law,
only to the extent that such amendment or change permits the Corporation to
provide broader rights
-13-
<PAGE> 14
of payment of expenses incurred in advance of the final disposition of an
action, disposition, suit or proceeding than is permitted to the Corporation
prior to such amendment or change), pay to such person any and all expenses
(including attorneys' fees) incurred in defending or settling any such action,
suit or proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer, to repay such amount if it shall ultimately be determined by a final
judgment or other final adjudication that he or she is not entitled to be
indemnified by the Corporation as authorized in this Section 6.06. The first
sentence of this Section 6.06 to the contrary notwithstanding, the Corporation
shall not indemnify any such person under any provision of this Article VI with
respect to any of the following matters: (i) remuneration paid to such person
under any provision of this Article VI if it shall be determined by a final
judgment or other final adjudication that such remuneration was in violation of
law; or (ii) any accounting of profits made from the purchase or sale by such
person of the Corporation's securities within the meaning of Section 16(b) of
the Securities Exchange Act of 1934 and amendments thereto or similar provisions
of any federal, state or local statutory law; or (iii) actions brought about or
contributed to by the dishonesty of such person, if a final judgment or other
final adjudication adverse to such person establishes that acts of active and
deliberate dishonesty were committed or attempted by such person with actual
dishonest purpose and intent and were material to the adjudication; or (iv)
actions based on or attributable to such person having gained any personal
profit or advantage to which he was not entitled, in the event that a final
judgment or other final adjudication adverse to such person establishes that
such person in fact gained such personal profit or other advantage to which he
was not entitled; or (v) any matter in respect of which a final decision by a
court with competent jurisdiction shall determine that indemnification is
unlawful; provided, however, that the Corporation shall perform its obligations
under the second sentence of this Section 6.06 on behalf of such person until
such time as it shall be ultimately determined by a final judgment or other
final adjudication that he is not entitled to be indemnified by the Corporation
as authorized by the first sentence of this Section 6.06 by virtue of any of the
preceding clauses (i), (ii), (iii), (iv) or (v).
Section 6.07 OTHER ENTERPRISES. For the purposes of this
Article VI, a director or officer of the Corporation who is made a party or is
threatened to be made a party to any threatened, pending or completed suit or
proceeding by reason of the fact that he or she is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall be
deemed to have been so made or threatened to be made a party by reason of the
fact that he or she is or was a director or officer of the Corporation. For that
purpose, references to an "other enterprise" shall include any employee benefit
plan; references in this Article VI to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
in this Article to "serving at the request of the Corporation," shall include
any service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to any employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
-14-
<PAGE> 15
opposed to the best interests of the Corporation" as referred to in this Article
VI. A director or officer of the Corporation who was a director, officer,
employee or agent of a corporation or other enterprise whose business is
acquired by the Corporation, whether in a purchase of stock or assets, a merger
or otherwise, shall not be entitled to indemnification or the advancement of
expenses under this Article VI in respect of any claim or matter relating to the
assets or business of such corporation or other enterprise to the extent that it
arises out of or relates to facts or circumstances occurring or existing prior
to such acquisition or to the extent that the Corporation has a claim against
such officer, director, corporation or other enterprise in respect of such claim
or matter under the agreements entered into in connection with such acquisition.
Section 6.08 NON-EXCLUSIVITY. The indemnification provided by
this Article VI shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 6.09 INSURANCE. Upon resolution passed by the Board,
the Corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this Article VI.
Section 6.10 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The
Corporation may, but shall not be obligated to, indemnify and advance expenses
to any employee or agent of the Corporation to the same extent that it is
obligated to indemnify directors and officers under this Article VI, but any
such action shall be taken only if and to the extent specifically authorized by
the Board in the particular case.
Section 6.11 SEVERABILITY. If any part of this Article VI
shall be found in any action, suit or proceeding or appeal therefrom or in any
other circumstances or as to any particular officer, director, employee or agent
to be unenforceable, ineffective or invalid for any reason, the enforceability,
effect and validity of the remaining parts or of such parts in other
circumstances shall not be affected, except as otherwise required by applicable
law.
Section 6.12 AMENDMENTS. The foregoing provisions of this
Article VI shall be deemed to constitute an agreement between the Corporation
and each of the persons entitled to indemnification hereunder, as long as such
provisions remain in effect. Any amendment to the foregoing provisions of this
Article VI which limits or otherwise adversely affects the scope of
indemnification or rights of any such persons hereunder shall, as to such
persons, apply only to
-15-
<PAGE> 16
claims arising, or causes or events occurring, after such amendment and delivery
of notice of such amendment is given to the person or persons whose rights
hereunder are adversely affected. Any person entitled to indemnification under
the foregoing provisions of this Article VI shall, as to any act or omission
occurring prior to the date of receipt of such notice, be entitled to
indemnification to the same extent as had such provisions continued as Bylaws of
the Corporation without such amendment.
ARTICLE VII
MISCELLANEOUS
Section 7.01 SEAL. The Board shall provide a corporate seal
which shall be in the form of a circle and shall bear the name of the
Corporation and words and figures showing that the Corporation was incorporated
in the State of Delaware and showing the year of incorporation.
Section 7.02 WAIVER OF NOTICES. Whenever notice is required to
be given by these Bylaws or the Certificate of Incorporation or by law, the
person entitled to said notice may waive such notice in writing, either before
or after the time stated therein, and such waiver shall be deemed equivalent to
notice.
Section 7.03 LOANS AND GUARANTIES. The Corporation may lend
money to, or guarantee any obligation of, and otherwise assist any officer or
other employee of the Corporation or of its subsidiaries, including any officer
or employee who is a director of the Corporation or of its subsidiaries,
whenever, in the judgment of the Board, such loan, guaranty or assistance may
reasonably be expected to benefit the Corporation. The loan, guaranty, or other
assistance may be with or without interest, and may be unsecured or secured in
such manner as the Board shall approve, including, without limitation, a pledge
of shares of stock of the Corporation.
Section 7.04 GENDER. All personal pronouns used in these
Bylaws shall include the other genders, whether used in the masculine, feminine
or neuter gender, and the singular shall include the plural, and vice versa,
whenever and as often as may be appropriate.
-16-
<PAGE> 1
EXHIBIT 10.1
================================================================================
CREDIT AGREEMENT
DATED AS OF MAY 15, 1996,
AMONG
RENTX INDUSTRIES, INC.,
THE LENDERS
PARTY HERETO,
AND
HARRIS TRUST AND SAVINGS BANK,
INDIVIDUALLY AND AS AGENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C> <C>
SECTION 1. THE CREDITS. ............................................... 1
Section 1.1. Revolving Credit. ....................................... 1
Section 1.2. Revolving Credit Loans. ................................. 1
Section 1.3. Term Credit. ............................................ 2
Section 1.4. Manner and Disbursement of Loans. ....................... 3
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES. ...................... 4
Section 2.1. Interest Rate Options. .................................. 4
Section 2.2. Minimum LIBOR Portion Amounts. .......................... 5
Section 2.3. Computation of Interest. ................................ 5
Section 2.4. Manner of Rate Selection. ............................... 5
Section 2.5. Change of Law. .......................................... 5
Section 2.6. Unavailability of Deposits or Inability to
Ascertain Adjusted LIBOR. ............................. 6
Section 2.7. Taxes and Increased Costs. .............................. 6
Section 2.8. Change in Capital Adequacy Requirements. ................ 7
Section 2.9. Funding Indemnity ....................................... 7
Section 2.10. Lending Branch. ......................................... 8
Section 2.11. Discretion of Lenders as to Manner of Funding. .......... 8
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, AND APPLICATIONS. ......... 8
Section 3.1. Fees. ................................................... 8
Section 3.2. Voluntary Prepayments. .................................. 9
Section 3.3. Mandatory Prepayments. .................................. 10
Section 3.4. Terminations. ........................................... 10
Section 3.5. Place and Application of Payments. ...................... 10
Section 3.6. Notations. .............................................. 11
SECTION 4. COLLATERAL. ................................................ 12
Section 4.1. Generally ............................................... 12
Section 4.2. Liens on After Acquired Real Property ................... 12
Section 4.3. Further Assurances ...................................... 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C> <C>
SECTION 5. DEFINITIONS; INTERPRETATION. ............................... 13
Section 5.1. Definitions. ............................................ 13
Section 5.2. Interpretation. ......................................... 24
SECTION 6. REPRESENTATIONS AND WARRANTIES. ............................ 24
Section 6.1. Organization and Qualification .......................... 24
Section 6.2. Subsidiaries ............................................ 24
Section 6.3. Corporate Authority and Validity of Obligations ......... 25
Section 6.4. Use of Proceeds; Margin Stock ........................... 25
Section 6.5. Financial Reports ....................................... 25
Section 6.6. No Material Adverse Change .............................. 26
Section 6.7. Full Disclosure ......................................... 26
Section 6.8. Good Title .............................................. 26
Section 6.9. Litigation and Other Controversies ...................... 26
Section 6.10. Taxes ................................................... 26
Section 6.11. Approvals ............................................... 26
Section 6.12. Affiliate Transactions .................................. 27
Section 6.13. Investment Company; Public Utility Holding Company ...... 27
Section 6.14. ERISA ................................................... 27
Section 6.15. Compliance with Laws .................................... 27
Section 6.16. Other Agreements ........................................ 28
Section 6.17. No Default .............................................. 28
SECTION 7. CONDITIONS PRECEDENT ....................................... 28
Section 7.1. All Advances. ........................................... 28
Section 7.2. Initial Advance ......................................... 29
SECTION 8. COVENANTS .................................................. 30
Section 8.1. Maintenance of Business ................................. 30
Section 8.2. Maintenance of Properties ............................... 30
Section 8.3. Taxes and Assessments ................................... 31
Section 8.4. Insurance ............................................... 31
Section 8.5. Financial Reports ....................................... 31
Section 8.6. Inspection .............................................. 33
Section 8.7. Rental Inventory Leases ................................. 33
Section 8.8. Store Leases ............................................ 33
Section 8.9. Senior Funded Debt to Annualized EBITDA ................. 33
Section 8.10. Actual EBITDA ........................................... 33
Section 8.11. Overhead to Revenue Ratio ............................... 34
Section 8.12. Store Openings .......................................... 34
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C> <C>
Section 8.13. Indebtedness for Borrowed Money ......................... 34
Section 8.14. Liens ................................................... 34
Section 8.15. Investments, Loans, Advances and Guaranties ............. 35
Section 8.16. Acquisitions ............................................ 36
Section 8.17. Mergers, Consolidations and Sales ....................... 37
Section 8.18. Maintenance of Subsidiaries ............................. 37
Section 8.19. Dividends and Certain Other Restricted Payments ......... 37
Section 8.20. Subordinated Debt ....................................... 38
Section 8.21. ERISA ................................................... 38
Section 8.22. Compliance with Laws .................................... 38
Section 8.23. Burdensome Contracts With Affiliates .................... 38
Section 8.24. No Changes in Fiscal Year ............................... 39
Section 8.25. Formation of Subsidiaries ............................... 39
Section 8.26. Change in the Nature of Business ........................ 39
Section 8.27. BACE Management Agreement ............................... 39
SECTION 9. EVENTS OF DEFAULT AND REMEDIES ............................. 39
Section 9.1. Events of Default. ...................................... 39
Section 9.2. Non-Bankruptcy Defaults. ................................ 42
Section 9.3. Bankruptcy Defaults ..................................... 42
SECTION 10. THE AGENT .................................................. 42
Section 10.1. Appointment and Authorization. .......................... 42
Section 10.2. Rights as a Lender ...................................... 43
Section 10.3. Standard of Care ........................................ 43
Section 10.4. Costs and Expenses ...................................... 44
Section 10.5. Indemnity ............................................... 44
SECTION 11. MISCELLANEOUS. ............................................. 44
Section 11.1. Withholding Taxes ....................................... 44
Section 11.2. Non-Business Days. ...................................... 45
Section 11.3. No Waiver, Cumulative Remedies. ......................... 45
Section 11.4. Waivers, Modifications and Amendments ................... 46
Section 11.5. Costs and Expenses ...................................... 46
Section 11.6. Documentary Taxes. ...................................... 47
Section 11.7. Survival of Representations. ............................ 47
Section 11.8. Survival of Indemnities. ................................ 47
Section 11.9. Participations .......................................... 47
Section 11.10. Assignment Agreements ................................... 47
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C> <C>
Section 11.11. Notices ................................................. 48
Section 11.12. Construction ............................................ 49
Section 11.13. Headings ................................................ 49
Section 11.14. Severability of Provisions. ............................. 49
Section 11.15 Counterparts. ........................................... 49
Section 11.16. Entire Understanding .................................... 49
Section 11.17. Binding Nature, Governing Law, Etc ...................... 49
Section 11.18. Submission to Jurisdiction; Waiver of Jury Trial ........ 50
Signature .................................................................. 50
</TABLE>
Exhibit A - Revolving Credit Note
Exhibit B - Term Note
Exhibit C - Compliance Certificate
Schedule 6.2 - Subsidiaries
-iv-
<PAGE> 6
CREDIT AGREEMENT
To each of the Lenders party hereto:
Ladies and Gentlemen:
The undersigned, RentX Industries, Inc., a Delaware corporation (the
"Company"), applies to you for your several commitments, subject to the terms
and conditions hereof and on the basis of the representations and warranties
hereinafter set forth, to extend credit to the Company, all as more fully
hereinafter set forth.
SECTION 1. THE CREDITS.
Section 1.1. Revolving Credit. (a) General Terms. Subject to the terms
and conditions hereof, each Lender severally agrees to extend a revolving
credit (the "Revolving Credit") to the Company which may be availed of by the
Company from time to time during the period from and including the date hereof
to but not including the Revolving Credit Termination Date, at which time the
commitments of the Lenders to extend credit under the Revolving Credit shall
expire. The maximum amount of the Revolving Credit which each Lender agrees to
extend to the Company shall be as set forth opposite such Lender's signature
hereto under the heading "Revolving Credit Commitment" or as otherwise
provided in Section 11.10 hereof, as such amount may be reduced pursuant
hereto. The Revolving Credit may be utilized by the Company in the form of
Revolving Credit Loans, all as more fully hereinafter set forth; provided,
however, that the aggregate principal amount of Revolving Credit Loans
outstanding at any one time shall not exceed the lesser of (x) the Revolving
Credit Commitments or (y) the Revolver Advance Limit as then determined and
computed. During the period from and including the date hereof to but not
including the Revolving Credit Termination Date, the Company may use the
Revolving Credit Commitments by borrowing, repaying and reborrowing Revolving
Credit Loans in whole or in part, all in accordance with the terms and
conditions of this Agreement. The obligations of the Lenders hereunder are
several and not joint, and no Lender shall under any circumstances be
obligated to extend credit under the Revolving Credit in excess of its
Revolving Credit Commitment.
(b) Use of Proceeds. The Company shall use the proceeds of the Revolving
Credit Loans solely for working capital purposes, including the purchase of
rental inventory and covering costs of opening of Start-Up Stores, in each case
in the ordinary course of business.
Section 1.2. Revolving Credit Loans. Subject to the terms and conditions
hereof, the Revolving Credit may be availed of by the Company in the form of
loans (individually a "Revolving Credit Loan" and collectively the "Revolving
Credit Loans"). Each Borrowing of Revolving Credit Loans shall be made ratably
by the Lenders in accordance with their Percentages of the Revolving Credit
Commitments. Each Borrowing of Revolving Credit Loans shall be in an amount of
$25,000 or such greater amount which is an
<PAGE> 7
integral multiple of $1,000; provided, however, that a Borrowing of Revolving
Credit Loans which bears interest with reference to the Adjusted LIBOR shall
be in such greater amount as is required by Section 2 hereof. Each Borrowing
of Revolving Credit Loans shall be further subject to the limitations
contained in Section 1.1(b) above. All Revolving Credit Loans made by a Lender
shall be made against and evidenced by a single Revolving Credit Note of the
Company (individually a "Revolving Credit Note" and collectively the
"Revolving Credit Notes") payable to the order of such Lender in the amount of
its Revolving Credit Commitment, with each Revolving Credit Note to be in the
form (with appropriate insertions) attached hereto as Exhibit A. Each
Revolving Credit Note shall be dated the date of issuance thereof, be
expressed to bear interest as set forth in Section 2 hereof, and be expressed
to mature on the Revolving Credit Termination Date. Without regard to the
principal amount of each Revolving Credit Note stated on its face, the actual
principal amount at any time outstanding and owing by the Company on account
thereof shall be the sum of all advances then or theretofore made thereon less
all payments of principal actually received.
Section 1.3. Term Credit. (a) General Terms. Subject to the terms and
conditions hereof, each Lender severally agrees to make loans (individually a
"Term Loan" and collectively the "Term Loans") to the Company in a cumulative
amount not exceeding such Lender's commitment set forth opposite such Lender's
signature hereto under the heading "Term Loan Commitment" or as otherwise
provided in Section 11.10 hereof; provided, however, that notwithstanding
anything herein to the contrary, (i) the aggregate amount of Term Loans
outstanding at any one time shall not exceed the Term Credit Earnings Limit as
then determined and computed and (ii) the aggregate cumulative amount of Term
Loans made after the date hereof shall not exceed the Term Loan Commitments.
There may be multiple Borrowings under the Term Loan Commitments which shall
be made ratably by the Lenders in accordance with their Percentage of the Term
Loan Commitments and which shall be made, if at all, before the Term Credit
Termination Date, at which time the commitments of the Lenders to make Term
Loans under the Term Loan Commitments shall expire. Each Borrowing of Term
Loans shall be in a minimum amount of $1,000,000; provided, however, that a
Borrowing of Term Loans which bears interest with reference to the Adjusted
LIBOR shall be in such greater amount as is required by Section 2 hereof. Each
Borrowing of Term Loans shall be further subject to the limitations contained
in Section 1.3(b) below. All Term Loans made by each Lender to the Company
shall be evidenced by a single Term Note of the Company (individually a "Term
Note" and collectively the "Term Notes") payable to the order of such Lender
in the amount of its Term Loan Commitment, with each Term Note to be in the
form (with appropriate insertions) attached hereto as Exhibit B. Each Term
Note shall be dated the date of issuance thereof, be expressed to bear
interest as set forth in Section 2 hereof, and be expressed to mature on the
Term Credit Termination Date. Without regard to the principal amount of each
Term Note stated on its face, the actual principal amount at any time
outstanding and owing by the Company on account thereof shall be the sum of
all advances then or theretofore made thereon less all payments of principal
actually received. No amount paid or prepaid on the Term Loans may be
reborrowed.
-2-
<PAGE> 8
(b) Use of Proceeds. The Company shall use the proceeds of the Term Loans
solely for Permitted Acquisitions. No Borrowing of Term Loans shall be
permitted if after giving effect thereto, the aggregate principal amount of
Term Loans made on a cumulative basis would exceed 60% of the aggregate cost,
including closing costs, on a cumulative basis of all the Permitted
Acquisitions closed on and at any time after the date hereof.
Section 1.4. Manner and Disbursement of Loans. The Company shall give
written or telephonic notice to the Agent (which notice shall be irrevocable
once given and, if given by telephone, shall be promptly confirmed in writing)
by no later than 11:00 a.m. (Chicago time) on the date the Company requests
that any Borrowing of Loans be made to it under the Commitments, and the Agent
shall promptly notify each Lender of the Agent's receipt of each such notice.
Each such notice shall specify the date of the Borrowing of Loans requested
(which must be a Business Day), the type of Loan being requested, and the
amount of such Borrowing. Each Borrowing of Loans shall initially constitute
part of the applicable Domestic Rate Portion except to the extent the Company
has otherwise timely elected that such Borrowing, or any part thereof,
constitute part of a LIBOR Portion as provided in Section 2 hereof. The Company
agrees that the Agent may rely upon any written or telephonic notice given by
any person the Agent in good faith believes is an Authorized Representative
without the necessity of independent investigation and, in the event any
telephonic notice conflicts with the written confirmation, such telephonic
notice shall govern if the Agent and the Lenders have acted in reliance
thereon. Not later than 1:00 p.m. (Chicago time) on the date specified for any
Borrowing of Loans to be made hereunder, each Lender shall make the proceeds of
its Loan comprising part of such Borrowing available to the Agent in Chicago,
Illinois in immediately available funds. Subject to the provisions of Section 7
hereof, the proceeds of each Loan shall be made available to the Company at the
principal office of the Agent in Chicago, Illinois, in immediately available
funds, upon receipt by the Agent from each Lender of its Percentage of such
Borrowing. Unless the Agent shall have been notified by a Lender prior to 1:00
p.m. (Chicago time) on the date a Borrowing is to be made hereunder that such
Lender does not intend to make the proceeds of its Loan available to the Agent,
the Agent may assume that such Lender has made such proceeds available to the
Agent on such date and the Agent may in reliance upon such assumption make
available to the Company a corresponding amount. If such corresponding amount
is not in fact made available to the Agent by such Lender and the Agent has
made such amount available to the Company, the Agent shall be entitled to
receive such amount from such Lender forthwith upon the Agent's demand,
together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Company and ending
on but excluding the date the Agent recovers such amount at a rate per annum
equal to the effective rate charged to the Agent for overnight federal funds
transactions with member banks of the federal reserve system for each day as
determined by the Agent (or in the case of a day which is not a Business Day,
then for the preceding day). If such amount is not received from such Lender by
the Agent immediately upon demand, the Company will, on demand, repay to the
Agent the proceeds of such Loan attributable to such Lender with interest
thereon at a rate per annum equal to the interest rate applicable to the
relevant Loan, but without such payment being considered a payment or
prepayment of a LIBOR Portion, so that the Company will have no liability under
Section 2.9 hereof with respect to such payment.
-3-
<PAGE> 9
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES.
Section 2.1. Interest Rate Options. (a) Portions. Subject to the terms and
conditions of this Section 2, portions of the principal indebtedness evidenced
by the Notes (all of the indebtedness evidenced by Notes of the same type
bearing interest at the same rate for the same period of time being hereinafter
referred to as a "Portion") may, at the option of the Company, bear interest
with reference to the Domestic Rate ("Domestic Rate Portions") or with
reference to the Adjusted LIBOR ("LIBOR Portions"), and Portions may be
converted from time to time from one basis to another. All of the indebtedness
evidenced by Notes of the same type which is not part of a LIBOR Portion shall
constitute a single Domestic Rate Portion. All of the indebtedness evidenced by
Notes of the same type which bears interest with reference to a particular
Adjusted LIBOR for a particular Interest Period shall constitute a single LIBOR
Portion. Each Lender shall have a ratable interest in each Portion based on its
Percentage. Anything contained herein to the contrary notwithstanding, the
obligation of the Lenders to create, continue or effect by conversion any LIBOR
Portion shall be conditioned upon the fact that at the time no Default or Event
of Default shall have occurred and be continuing. The Company hereby promises
to pay interest on each Portion at the rates and times specified in this
Section 2.
(b) Domestic Rate Portion. Each Domestic Rate Portion shall bear interest
at the rate per annum equal to the Domestic Rate as in effect from time to
time, provided that if a Domestic Rate Portion or any part thereof is not paid
when due (whether by lapse of time, acceleration or otherwise) such Portion
shall bear interest, whether before or after judgment, until payment in full
thereof at the rate per annum determined by adding 2% to the interest rate
which would otherwise be applicable thereto from time to time. Interest on
each Domestic Rate Portion shall be payable monthly in arrears on the last day
of each month in each year (commencing June 30, 1996) and at maturity of the
applicable Notes, and interest after maturity (whether by lapse of time,
acceleration or otherwise) shall be due and payable upon demand. Any change in
the interest rate on the Domestic Rate Portions resulting from a change in the
Domestic Rate shall be effective on the date of the relevant change in the
Domestic Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding two
and one-half percent (2-1/2%) to the Adjusted LIBOR for such Interest Period,
provided that if any LIBOR Portion is not paid when due (whether by lapse of
time, acceleration or otherwise) such Portion shall bear interest, whether
before or after judgment, until payment in full thereof through the end of the
Interest Period then applicable thereto at the rate per annum determined by
adding 2% to the interest rate which would otherwise be applicable thereto,
and effective at the end of such Interest Period such LIBOR Portion shall
automatically be converted into and added to the applicable Domestic Rate
Portion and shall thereafter bear interest at the interest rate applicable to
such Domestic Rate Portion after default. Interest on each LIBOR Portion shall
be due and payable on the last day of each Interest Period applicable thereto
and, with respect to any Interest Period applicable to a LIBOR Portion in
excess of 3 months, on the date occurring every 3 months after the date such
Interest Period began and at the end of such Interest Period, and interest
after maturity (whether by lapse of time,
-4-
<PAGE> 10
acceleration or otherwise) shall be due and payable upon demand. The Company
shall notify the Agent on or before 11:00 a.m. (Chicago time) on the third
Business Day preceding the end of an Interest Period applicable to a LIBOR
Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in which
event the Company shall notify the Agent of the new Interest Period selected
therefor, and in the event the Company shall fail to so notify the Agent, such
LIBOR Portion shall automatically be converted into and added to the
applicable Domestic Rate Portion as of and on the last day of such Interest
Period. The Agent shall promptly notify each Lender of each notice received
from the Company pursuant to the foregoing provision.
Section 2.2. Minimum LIBOR Portion Amounts. Each LIBOR Portion shall be in
an amount equal to $1,000,000 or such greater amount which is an integral
multiple of $10,000.
Section 2.3. Computation of Interest. All interest on the Notes shall be
computed on the basis of a year of 360 days for the actual number of days
elapsed.
Section 2.4. Manner of Rate Selection. The Company shall notify the Agent
by 11:00 a.m. (Chicago time) at least 3 Business Days prior to the date upon
which the Company requests that any LIBOR Portion be created or that any part
of the applicable Domestic Rate Portion be converted into a LIBOR Portion
(each such notice to specify in each instance the amount thereof and the
Interest Period selected therefor), and the Agent shall promptly notify each
Lender of each notice received from the Company pursuant to the foregoing
provision. If any request is made to convert a LIBOR Portion into another type
of Portion available hereunder, such conversion shall only be made so as to
become effective as of the last day of the Interest Period applicable thereto.
All requests for the creation, continuance and conversion of Portions under
this Agreement shall be irrevocable. Such requests may be written or oral and
the Agent is hereby authorized to honor telephonic requests for creations,
continuances and conversions received by it from any person the Agent in good
faith believes to be an Authorized Representative without the necessity of
independent investigation, the Company hereby indemnifying the Agent and the
Lenders from any liability or loss ensuing from so acting.
Section 2.5. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time any Lender shall determine in good faith
that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for such Lender to create or continue
to maintain any LIBOR Portion, it shall promptly so notify the Agent (which
shall in turn promptly notify the Company and the other Lenders) and the
obligation of such Lender to create, continue or maintain any such LIBOR
Portion under this Agreement shall terminate until it is no longer unlawful
for such Lender to create, continue or maintain such LIBOR Portion. The
Company, on demand, shall, if the continued maintenance of any such LIBOR
Portion is unlawful, thereupon prepay the outstanding principal amount of the
affected LIBOR Portion, together with all interest accrued thereon and all
other amounts payable to affected Lender with respect thereto under this
Agreement; provided, however, that the Company may elect
-5-
<PAGE> 11
to convert the principal amount of the affected Portion into another type of
Portion available hereunder, subject to the terms and conditions of this
Agreement.
Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provision of this Agreement or any
Note, if prior to the commencement of any Interest Period, the Required
Lenders shall determine in good faith that deposits in the amount of any LIBOR
Portion scheduled to be outstanding during such Interest Period are not
readily available to such Lenders in the relevant market or, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining Adjusted LIBOR, then such Lenders shall promptly
give notice thereof to the Agent (which shall in turn promptly notify the
Company and the other Lenders) and the obligations of the Lenders to create or
effect by conversion any such LIBOR Portion in such amount and for such
Interest Period, or to continue an existing LIBOR Portion beyond its current
Interest Period for such new Interest Period, in each case shall terminate
until deposits in such amount and for the Interest Period selected by the
Company shall again be readily available in the relevant market and adequate
and reasonable means exist for ascertaining Adjusted LIBOR.
Section 2.7. Taxes and Increased Costs. With respect to any LIBOR
Portion, if any Lender shall determine in good faith that any change after the
date hereof in any applicable law, treaty, regulation or guideline (including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System) or any new law, treaty, regulation or guideline, or any
interpretation of any of the foregoing by any governmental authority charged
with the administration thereof or any central bank or other fiscal, monetary
or other authority having jurisdiction over such Lender or its lending branch
or the LIBOR Portions contemplated by this Agreement (whether or not having
the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special deposit
or similar requirement against assets held by, or deposits in or for the
account of, or loans by, or any other acquisition of funds or
disbursements by, such Lender which is not in any instance already
accounted for in computing the interest rate applicable to such LIBOR
Portion;
(ii) subject such Lender, any LIBOR Portion or a Note to the extent
it evidences such a Portion to any tax (including, without limitation, any
United States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, stamp tax, fee,
deduction or withholding in respect of this Agreement, any LIBOR Portion
or a Note to the extent it evidences such a Portion, except such taxes as
may be measured by the overall net income or gross receipts of such Lender
or its lending branches and imposed by the jurisdiction, or any political
subdivision or taxing authority thereof, in which such Lender's principal
executive office or its lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to such Lender hereunder or under a Note to
the extent it evidences any LIBOR Portion
-6-
<PAGE> 12
(other than by a change in taxation of the overall net income or gross
receipts of such Lender or its lending branches); or
(iv) impose on such Lender any penalty with respect to the foregoing
or any other condition regarding this Agreement, any LIBOR Portion, or its
disbursement, or a Note to the extent it evidences any LIBOR Portion;
and such Lender shall determine in good faith that the result of any of the
foregoing is to increase the cost (whether by incurring a cost or adding to a
cost) to such Lender of creating or maintaining any LIBOR Portion hereunder or
to reduce the amount of principal or interest received or receivable by such
Lender (without benefit of, or credit for, any prorations, exemption, credits
or other offsets available under any such laws, treaties, regulations,
guidelines or interpretations thereof), then the Company shall pay on demand
to such Lender from time to time as specified by such Lender such additional
amounts as such Lender shall reasonably determine are sufficient to compensate
and indemnify it for such increased cost or reduced amount. If a Lender makes
such a claim for compensation, it shall provide to the Company (with a copy to
the Agent) a certificate setting forth the computation of the increased cost
or reduced amount as a result of any event mentioned herein in reasonable
detail and such certificate shall be conclusive if reasonably determined.
Section 2.8. Change in Capital Adequacy Requirements. If any Lender shall
reasonably determine that the adoption after the date hereof of any applicable
law, rule or regulation regarding capital adequacy, or any change in any
existing law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by such Lender (or any of its branches) or any corporation
controlling such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on such Lender's or such corporation's capital, as the case
may be, as a consequence of such Lender's obligations hereunder or for the
credit which is the subject matter hereof to a level below that which such
Lender or such corporation could have achieved but for such adoption, change
or compliance (taking into consideration such Lender's or such corporation's
policies with respect to liquidity and capital adequacy) by an amount
reasonably deemed by such Lender to be material, then from time to time,
within fifteen (15) days after demand by such Lender, the Company shall pay to
such Lender such additional amount or amounts reasonably determined by such
Lender as will compensate such Lender for such reduction.
Section 2.9. Funding Indemnity. In the event any Lender shall incur any
loss, cost or expense (including, without limitation, any loss (including loss
of profit), cost or expense incurred by reason of the liquidation or
re-employment of deposits or other funds acquired or contracted to be acquired
by such Lender to fund or maintain its part of any LIBOR Portion or the
relending or reinvesting of such deposits or other funds or amounts paid or
prepaid to such Lender) as a result of:
-7-
<PAGE> 13
(i) any payment of a LIBOR Portion on a date other than the last day
of the then applicable Interest Period for any reason, whether before or
after default, and whether or not such payment is required by any
provisions of this Agreement; or
(ii) any failure by the Company to create, borrow, continue or effect
by conversion a LIBOR Portion on the date specified in a notice given
pursuant to this Agreement;
then, upon the demand of such Lender, the Company shall pay to such Lender
such amount as will reimburse such Lender for such loss, cost or expense. If a
Lender requests such a reimbursement, it shall provide to the Company (with a
copy to the Agent) a certificate setting forth the computation of the loss,
cost or expense giving rise to the request for reimbursement in reasonable
detail and such certificate shall be conclusive if reasonably determined.
Section 2.10. Lending Branch. Each Lender may, at its option, elect to
make, fund or maintain its pro rata share of the Loans hereunder at the
branches or offices specified on the signature pages hereof or on any
Assignment Agreement executed and delivered pursuant to Section 11.10 hereof
or at such of its branches or offices as such Lender may from time to time
elect.
Section 2.11. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Notes in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including, without
limitation, determinations under Sections 2.6, 2.7 and 2.9 hereof) shall be
made as if each Lender had actually funded and maintained each LIBOR Portion
during each Interest Period applicable thereto through the purchase of
deposits in the relevant market in the amount of its pro rata share of such
LIBOR Portion, having a maturity corresponding to such Interest Period, and
bearing an interest rate equal to the LIBOR for such Interest Period.
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, AND APPLICATIONS.
Section 3.1. Fees. (a) Commitment Fee on Term Credit. For the period from
and including the date hereof to but not including the Term Credit Termination
Date, the Company shall pay to the Agent for the account of the Lenders a
commitment fee at the rate of 1/2 of 1% per annum (computed on the basis of a
year of 360 days for the actual number of days elapsed) on the average daily
unused amount (the Term Loan Commitments to be deemed used in an amount equal
to the principal of each Term Loan made thereunder, whether or not subsequently
repaid) of the Term Credit Commitments (whether or not available). Such
commitment fee shall be payable quarterly in arrears on the last day of each
June, September, December, and March in each year (commencing June 30, 1996)
and on the Term Credit Termination Date.
(b) Commitment Fee on Revolving Credit. For the period from and including
the date hereof to but not including the Revolving Credit Termination Date,
the Company shall pay to the Agent for the
-8-
<PAGE> 14
account of the Lenders a commitment fee at the rate of 1/2 of 1% per annum
(computed on the basis of a year of 360 days for the actual number of days
elapsed) on the average daily unused portion (the Revolving Credit Commitments
to be deemed used at any time in an amount equal to the principal of the
Revolving Credit Loans then outstanding) of the Revolving Credit Commitments
(whether or not available). Such commitment fee shall be payable quarterly in
arrears on the last day of each June, September, December and March in each
year (commencing June 30, 1996) and on the Revolving Credit Termination Date.
(c) Agent's Fee. On the date hereof, and on the date occurring on each
anniversary of the date hereof when any credit, or commitment to extend
credit, is outstanding hereunder, the Company shall pay to the Agent, for its
own use and benefit, an Agent's fee as mutually agreed upon by the Company and
the Agent (it being understood and agreed no such Agent's fee is payable as of
the date hereof and that no such fee shall be due unless and to the extent the
Company in its discretion agrees to be liable for one).
(d) Closing Fee. The Company shall pay to the Agent for the ratable
account of the Lenders party hereto as of the date hereof, a non-refundable
closing fee equal to $150,000, with $75,000 of such fee to be payable on or
before the date hereof and the balance of $75,000 to be due and payable on or
before the earlier of (x) the maturity of the Revolving Credit Notes (whether
by lapse of time, acceleration or otherwise) or (y) an initial public offering
of debt or equity securities issued by the Company or any Subsidiary.
(e) Audit Fees. The Company shall pay to the Agent for its own use and
benefit charges for audits of the Collateral performed by the Agent or its
agents or representatives in such amounts as the Agent may from time to time
request (the Agent acknowledging and agreeing that such charges shall be
computed in the same manner as it at the time customarily uses for the
assessment of charges for similar collateral audits); provided, however, that
in the absence of any Default or Event of Default, the Company shall not be
required to pay the Agent for more than one such audit per calendar year.
Section 3.2. Voluntary Prepayments. The Company shall have the privilege
of prepaying the Revolving Credit Notes and the Term Notes in whole or in part
(but if in part, then in a minimum amount of $25,000 or such greater amount
which is an integral multiple of $1,000 as to any particular class of Notes
being prepaid, provided that no such prepayment shall reduce any LIBOR Portion
to an amount less than $1,000,000 or such greater amount which is an integral
multiple of $10,000) at any time upon 1 Business Day's prior notice to the
Agent (such notice if received subsequent to 11:00 a.m. (Chicago time) on a
given day to be treated as though received at the opening of business on the
next Business Day), which shall promptly so notify the Lenders, by paying to
the Agent for the account of the Lenders the principal amount to be prepaid
and (i) if such a prepayment prepays the Term Notes in full, accrued interest
thereon to the date of prepayment, (ii) if such a prepayment prepays the
Revolving Credit Notes in full and is accompanied by the termination in whole
of the Revolving Credit Commitments, accrued interest thereon to the date of
prepayment and (iii) any amounts due to the Lenders under Section 2.9 hereof.
-9-
<PAGE> 15
Section 3.3. Mandatory Prepayments. (a) Revolver Advance Limit. The
Company covenants and agrees that if at any time the then unpaid principal
balance of the Revolving Credit Notes shall be in excess of the Revolver
Advance Limit as then determined and computed, the Company shall, within 2
Business Days after demand from the Agent, pay over the amount of such excess
to the Agent for the account of the Lenders as and for a mandatory prepayment
on such Obligations until payment in full thereof.
(b) Term Credit Earnings Limit. The Company covenants and agrees that if
at any time the sum of the then unpaid principal balance of the Term Loans
shall be in excess of the Term Credit Earnings Limit as then determined and
computed, the Company shall, within 2 Business Days after demand from the
Agent, pay over the amount of such excess to the Agent for the account of the
Lenders as and for a mandatory prepayment on such Obligations until payment in
full thereof.
Section 3.4. Terminations. The Company shall have the right at any time
and from time to time, upon 3 Business Days' prior notice to the Agent (which
shall promptly so notify the Lenders), to ratably terminate without premium or
penalty and in whole or in part (but if in part, then in an aggregate amount
not less than $100,000 or such greater amount which is an integral multiple of
$100,000) either the Revolving Credit Commitments or the Term Credit
Commitments, provided that the Commitments may not be reduced to an amount
less than the aggregate principal amount of the Loans then outstanding
thereunder. Any termination of the Commitments pursuant to this Section may
not be reinstated.
Section 3.5. Place and Application of Payments. All payments of
principal, interest, fees and all other Obligations payable hereunder and
under the other Loan Documents shall be made to the Agent at its office at 111
West Monroe Street, Chicago, Illinois (or at such other place as the Agent may
specify) on the date any such payment is due and payable. Payments received by
the Agent after 11:00 a.m. (Chicago time) shall be deemed received as of the
opening of business on the next Business Day. All such payments shall be made
in lawful money of the United States of America, in immediately available
funds at the place of payment, without set-off or counterclaim and without
reduction for, and free from, any and all present or future taxes, levies,
imposts, duties, fees, charges, deductions, withholdings, restrictions and
conditions of any nature imposed by any government or any political
subdivision or taxing authority thereof (but excluding any taxes imposed on or
measured by the net income of any Lender). Except as herein provided, all
payments shall be received by the Agent for the ratable account of the Lenders
and shall be promptly distributed by the Agent ratably to the Lenders in
accordance with their respective Percentages. No amount paid or prepaid on the
Term Notes may be reborrowed, and partial prepayments of the Term Notes shall
be applied in the inverse order of their maturities. Unless the Company
otherwise directs, principal payments on Notes of a given type shall be first
applied to the Domestic Rate Portion of such Notes until payment in full
thereof, with any balance applied to the LIBOR Portions of the relevant Notes
in the order in which their Interest Periods expire. All payments (whether
voluntary or required) shall be accompanied by any amount due the Lenders
under Section 2.9 hereof, but no acceptance of such a payment without
requiring
-10-
<PAGE> 16
payment of amounts due under Section 2.9 shall preclude a later demand by the
Lenders for any amount due them under Section 2.9 in respect of such payment.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of the Obligations and all proceeds of the
Collateral received, in each instance, by the Agent or any of the Lenders after
the occurrence of an Event of Default shall be remitted to the Agent and
distributed as follows:
(a) first, to the payment of any outstanding reasonable costs and
expenses incurred by the Agent in monitoring, verifying, protecting,
preserving or enforcing the Liens on the Collateral, and in protecting,
preserving or enforcing rights under this Agreement or any of the other
Loan Documents, and in any event including all costs and expenses of a
character which the Company has agreed to pay under Section 11.5 hereof
(such funds to be retained by the Agent for its own account unless it has
previously been reimbursed for such costs and expenses by the Lenders, in
which event such amounts shall be remitted to the Lenders to reimburse
them for payments theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or other fees
or amounts due under this Agreement or any of the other Loan Documents
other than for principal, pro rata as among the Agent and the Lenders in
accord with the amount of such interest and other fees or amounts owing
each;
(c) third, to the payment of the principal of the Notes, pro rata as
among the Lenders in accord with the then respective unpaid principal
balances of the Notes;
(d) fourth, to the Agent and the Lenders pro rata in accord with the
amounts of any other indebtedness, obligations or liabilities of the
Company owing to them and secured by the Collateral Documents unless and
until all such indebtedness, obligations and liabilities have been fully
paid and satisfied; and
(e) fifth, to the Company or to whomever the Agent reasonably
determines to be lawfully entitled thereto.
Section 3.6. Notations. Each Loan made against a Note, the status of all
amounts evidenced by a Note as constituting part of the Domestic Rate Portion
or a LIBOR Portion, and, in the case of any LIBOR Portion, the rates of
interest and Interest Periods applicable to such Portions shall be recorded by
the relevant Lender on its books and records or, at its option in any
instance, endorsed on a schedule to its Note and the unpaid principal balance
and status, rates and Interest Periods so recorded or endorsed by such Lender
shall, absent manifest error, be prima facie evidence in any court or other
proceeding brought to enforce such Note of the principal amount remaining
unpaid thereon, the status of the Loan or Loans evidenced thereby and the
interest rates and Interest Periods applicable thereto; provided that the
failure of a
-11-
<PAGE> 17
Lender to record any of the foregoing shall not limit or otherwise affect the
obligation of the Company to repay the principal amount of each Note together
with accrued interest thereon. Prior to any negotiation of a Note, a Lender
shall record on a schedule thereto the status of all amounts evidenced thereby
as constituting part of the applicable Domestic Rate Portion or a LIBOR
Portion and, in the case of any LIBOR Portion, the rates of interest and the
Interest Periods applicable thereto.
SECTION 4. COLLATERAL.
Section 4.1. Generally. The payment and performance of the Obligations
shall be secured by valid and enforceable Liens in favor of the Agent for the
benefit of the Lenders on (a) all of the Company's now existing or hereafter
arising or acquired accounts, general intangibles, inventory, equipment and all
other goods, chattel paper, instruments, documents and certain other assets and
property of the Company as more fully described in the Security Agreement
(provided such Lien shall not extend to rental inventory or equipment subject
to a Capitalized Lease or purchase money financing in each case permitted by
this Agreement if the terms of such Capitalized Lease or other financing
prohibit the Company's grant of a Lien on such Collateral to secure the
Obligations) and (b) at least 66-2/3% of the issued and outstanding Voting
Stock of the Company, together with all related rights and properties, as more
fully described in the Stock Pledge Agreements.
Section 4.2. Liens on After Acquired Real Property. In the event that the
Company hereafter acquires a fee interest in any real property with a value
which the Required Lenders in good faith deem material, it will execute and
deliver to the Agent or a security trustee therefor a mortgage or deed of trust
acceptable in form and substance to the Agent for the purpose of granting to
the Agent a lien on such real property to secure the Notes and the other
Obligations, will pay all costs and expenses incurred by the Agent in recording
such mortgage or deed of trust and will at its expense supply to the Agent (i)
a mortgagee's policy of title insurance from a title insurer reasonably
acceptable to the Agent insuring the validity of such mortgage or deed of trust
and its status as a first lien (subject to liens permitted by this Agreement)
on the real property encumbered thereby, (ii) an ALTA survey prepared by a
licensed surveyor of each parcel of such real property, (iii) a report of an
independent firm of environmental engineers acceptable to the Agent concerning
the environmental hazards and matters with respect to such real property, (iv)
an appraisal of such real property in form and substance acceptable to the
Agent, (v) an opinion of counsel in form and substance acceptable to the Agent
and in any event covering the scope of the matters set forth in Section 7.2(e)
hereof and (vi) any and all other documents, reports and things as the Agent
may reasonably request in connection with the mortgage of such real property.
Section 4.3. Further Assurances. The Company covenants and agrees that it
shall comply with all the terms and conditions of each of the Collateral
Documents and that it shall, at any time and from time to time as requested by
the Agent or the Required Lenders, execute and deliver such further instruments
and do such acts and things as the Agent or the Required Lenders may deem
necessary or desirable to provide for or protect or perfect the Lien of the
Agent in the Collateral.
-12-
<PAGE> 18
Section 5.1. Definitions. The following terms when used herein shall have
the following meanings:
"A to Z Washington Acquisition" means (i) the acquisition by the Company
of the Voting Stock of A to Z Rentals and Sales, Inc., a Washington Corporation
("A to Z Washington"), pursuant to a Stock Purchase Agreement between the
Company, Milton L. Neuman, Alice E. Neuman and related parties in the same or
substantially the same form of the April 14, 1996 draft furnished to the Agent
and (ii) the substantially concurrent merger of A to Z Washington with and into
the Company, with the Company being the corporation surviving such merger.
"Acquired Store" means a retail rental store which commenced operations
under prior ownership before the Company acquired ownership of the same.
"Acquisition" means (i) the acquisition of all or any substantial part of
the Property or business of any other firm or corporation or (ii) any
acquisition of a majority of the common stock or other equity interest in any
other firm or corporation.
"Adjusted Actual EBITDA" shall mean, with reference to any period (the
"measurement period"), the sum (without duplication) of (i) the EBITDA of the
Company and its Subsidiaries during the entire measurement period on a
consolidated basis to the extent attributable to Acquired Stores owned by the
Company for the entire measurement period and (ii) in the case of each Acquired
Store not owned by the Company during the entire measurement period, the EBITDA
of the Company and its Subsidiaries attributable to each such Acquired Store
during each full calendar quarter within such measurement period which
commenced and was completed in each case while the Company owned such Acquired
Store and (iii) the Corporate Overhead of the Company and its Subsidiaries to
the extent deducted in computing the EBITDA amount in clauses (i) or (ii)
above.
"Adjusted Base EBITDA" shall mean, in each comparison to Adjusted Actual
EBITDA for any measurement period (as "measurement period" is defined with
respect to such Adjusted Actual EBITDA), the EBITDA attributable to each
Acquired Store which the Company owned as of the close of such measurement
period, but computed for the calendar period corresponding to such measurement
period but occurring in the twelve calendar months preceding the Company's
acquisition of such Acquired Store.
"Adjusted LIBOR" means a rate per annum determined by the Agent in
accordance with the following formula:
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve Percentage
-13-
<PAGE> 19
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR,
the maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in Regulation
D) for the applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by such Board
or its successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this
definition, LIBOR Portions shall be deemed to be Eurocurrency liabilities as
defined in Regulation D without benefit of or credit for prorations, exemptions
or offsets under Regulation D. "LIBOR" means, for each Interest Period, (a) the
LIBOR Index Rate for such Interest Period, if such rate is available, and (b)
if the LIBOR Index Rate cannot be determined, the arithmetic average of the
rates of interest per annum (rounded upward, if necessary, to the nearest
1/100th of 1%) at which deposits in U.S. Dollars in immediately available funds
are offered to the Agent at 11:00 a.m. (London, England time) 2 Business Days
before the beginning of such Interest Period by 3 or more major banks in the
interbank eurodollar market selected by the Agent for a period equal to such
Interest Period and in an amount equal or comparable to the applicable LIBOR
Portion scheduled to be outstanding from the Agent during such Interest Period.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum (rounded
upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars for a period equal to such
Interest Period which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the date 2 Business Days before the commencement of
such Interest Period. "Telerate Page 3750" means the display designated as
"Page 3750" on the Telerate Service (or such other page as may replace Page
3750 on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Banker's Association Interest Settlement Rates for U.S. Dollar
deposits). Each determination of LIBOR made by the Agent shall be conclusive
and binding on the Company and the Lenders absent manifest error.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise; provided that, in any event for
purposes of this definition, (a) any Person that owns, directly or indirectly,
15% or more of the securities having the ordinary voting power for the election
of directors or governing body of a corporation or 15% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation or other Person and (b) BACE Investments, BACE Industries shall
each be deemed an Affiliate of the Company if and so long as such Person owns,
directly or indirectly, any equity interest in the Company.
"Agent" means Harris Trust and Savings Bank and any successor thereto
appointed pursuant to Section 10.1 hereof.
-14-
<PAGE> 20
"Agreement" means this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
"Assignment Agreements" is defined in Section 11.10 hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Company pursuant to Section 7.2(a) hereof or on any
update of any such list provided by the Company to the Agent, or any further or
different officer of the Company so named by any Authorized Representative of
the Company in a written notice to the Agent.
"BACE Industries" means Bace Industries, LLC, a Colorado limited liability
company.
"BACE Investments" means BACE Investments, LLC, a Colorado limited
liability company.
"BACE Management Agreement" means that certain Management Agreement dated
as of May 1, 1996 by and between Bace Industries and the Company.
"Borrowing" means the total of Loans of a single type made to the Company
by all the Lenders on a single date under the Revolving Credit Commitments or
the Term Loan Commitments, and if such Loans are to be part of a LIBOR Portion,
for a single Interest Period. Borrowings of Loans are made and maintained
ratably from each of the Lenders according to their Percentages of the
applicable Commitments.
"Business Day" means any day other than a Saturday or Sunday on which
banks are not authorized or required to close in Chicago, Illinois and, when
used with respect to LIBOR Portions, a day on which banks are also dealing in
United States Dollar deposits in London, England and Nassau, Bahamas.
"Capital Lease" means any lease of Property which in accordance with GAAP
is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown on
the balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Collateral" means all properties, rights, interests and privileges from
time to time subject to the Liens granted to the Agent for the benefit of the
Lenders by the Collateral Documents.
"Collateral Documents" means the Security Agreement, the Stock Pledge
Agreements and all other mortgages, deeds of trust, security agreements,
assignments, financing statements and other documents as shall from time to
time secure the Obligations.
-15-
<PAGE> 21
"Commitments" means and includes the Revolving Credit Commitments and the
Term Loan Commitments.
"Company" is defined in the introductory paragraph hereof.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Corporate Overhead" shall mean, with reference to any period, the salary,
general, administrative and overhead expense of the Company and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP to the extent deducted in computing their Net Income on a
consolidated basis during such period, but in any event excluding therefrom any
such expense which is attributable exclusively to any single retail rental
store or any particular regional group of retail rental stores.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Domestic Rate" means, for any day, the greater of (i) the rate of
interest announced by the Agent from time to time as its prime commercial rate,
as in effect on such day (it being understood and agreed that such rate may not
be the Agent's best or lowest rate); and (ii) the sum of (x) the rate
determined by the Agent to be the average (rounded upwards, if necessary, to
the next higher 1/100 of 1%) of the rates per annum quoted to the Agent at
approximately 10:00 a.m. (Chicago time) (or as soon thereafter as is
practicable) on such day (or, if such day is not a Business Day, on the
immediately preceding Business Day) by two or more Federal funds brokers
selected by the Agent for the sale to the Agent at face value of Federal funds
in an amount equal or comparable to the principal amount owed to the Agent for
which such rate is being determined, plus (y) 1/2 of 1%.
"Domestic Rate Portions" is defined in Section 2.1(a) hereof.
"EBITDA" means, for any Person and with reference to any period, the Net
Income of such Person for such period plus all amounts deducted in arriving at
such Net Income amount in respect of (i) Interest Expense for such period, plus
(ii) federal, state and local income taxes for such period, plus (iii) all
amounts properly charged for depreciation of fixed assets and amortization of
intangible assets during such period on the books of such Person, plus (iv) the
aggregate amount of management fees, non-operating expenses and excess
compensation in each case paid to each former owner of each Acquired Store
during such period, plus (v) the compensation paid to BACE Industries during
such period under the BACE Management Agreement.
"Edgewater" means The Edgewater Private Equity Fund II, L.P., a Delaware
limited partnership.
-16-
<PAGE> 22
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Event of Default" means any event or condition identified as such in
Section 9.1 hereof.
"GAAP" means (a) with respect to the Company and its Subsidiaries,
generally accepted accounting principles as in effect from time to time,
applied by the Company and its Subsidiaries on a basis consistent with the
preparation of the Company's most recent financial statements furnished to the
Lenders pursuant to Section 6.5 hereof and (b) with respect to any other
Person, the accounting principles used in preparing the most recent financial
statements furnished to the Lenders for such Person.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any manner by
such Person representing money borrowed (including by the issuance of debt
securities), (ii) all indebtedness for the deferred purchase price of property
or services (other than trade accounts payable arising in the ordinary course
of business which are not more than 60 days past due, deferred compensation to
officers and employees and accrued management fees), (iii) all indebtedness
secured by any Lien upon Property of such Person, whether or not such Person
has assumed or become liable for the payment of such indebtedness, (iv) all
Capitalized Lease Obligations of such Person and (v) all obligations of such
Person on or with respect to letters of credit, bankers' acceptances and other
extensions of credit whether or not representing obligations for borrowed
money.
"Interest Expense" means, for any Person and with reference to any period,
the sum of all interest charges (including imputed interest charges with
respect to Capitalized Lease Obligations and all amortization of debt discount
and expense) with respect to all Indebtedness for Borrowed Money of such Person
(including in the case of the Company, without limitation, the Zodiac Debt)
during such period determined in accordance with GAAP.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion
date with respect to such LIBOR Portion and ending 1, 2, 3 or 6 months
thereafter as selected by the Company in its notice as provided herein;
provided, however, that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which is not
a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless in the case of an Interest Period for a
LIBOR Portion the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of
the relevant Notes;
-17-
<PAGE> 23
(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment scheduled
to be made during such Interest Period without paying part of a LIBOR
Portion on a date other than the last day of the Interest Period
applicable thereto.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the
month in which an Interest Period is to end, then such Interest Period shall
end on the last Business Day of such month.
"Investment Agreement" means that certain Investment Agreement dated as of
May 15, 1996 by and among the Company, Mesirow, Edgewater, BACE Investments and
any other Purchasers party thereto.
"Lender" means Harris Trust and Savings Bank, the other signatories hereto
(other than the Company) and all other lenders becoming parties hereto pursuant
to Section 11.10 hereof.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of
a vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
"Loan Documents" means this Agreement, the Notes, the Collateral Documents
and each other instrument or document to be delivered hereunder or thereunder
or otherwise in connection therewith.
"Loans" means and includes Revolving Credit Loans and the Term Loans.
"Mesirow" means Mesirow Capital Partners VI, an Illinois limited
partnership.
"Net Income" means, for any Person and with reference to any period, the
net income (or net loss) of such Person for such period as computed in
accordance with GAAP, and, without limiting the foregoing, after deduction from
gross income of all expenses and reserves, including reserves for all taxes on
or measured by income, but excluding any extraordinary or non-recurring profits
and extraordinary or non-recurring losses and also excluding any taxes on such
profits and any tax credits on account of such losses.
"Notes" means and includes the Revolving Credit Notes and the Term Notes.
-18-
<PAGE> 24
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all fees and charges payable hereunder, and all other
payment obligations of the Company arising under or in relation to any Loan
Document, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired.
"Operating Lease" means any lease of Property which is not a Capital
Lease.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Percentage" means, for each Lender, the percentage of the relevant
Commitments represented by such Lender's Commitment or, if the Commitments have
been terminated, the percentage held by such Lender of the aggregate principal
amount of all outstanding Obligations.
"Permitted Acquisition" means the Company's acquisition of an Acquired
Store which complies with Section 8.16 hereof.
"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
that either (i) is maintained by a member of the Controlled Group for employees
of a member of the Controlled Group, or (ii) is maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within
the preceding five plan years made contributions.
"Portion" is defined in Section 2.1(a) hereof.
"Pro forma Adjusted Cash Flow" shall mean, for any period (the "relevant
period"), the EBITDA of the Company and its Subsidiaries during such relevant
period on a consolidated basis, adjusted as follows to give pro forma effect to
any Permitted Acquisitions and the opening of Start-Up Stores:
(a) The EBITDA of each Acquired Store resulting from a Permitted
Acquisition during the relevant period shall be included in such Pro forma
Adjusted Cash Flow in an amount equal to the sum (without duplication) of
(i) the actual EBITDA attributable to such Acquired Store during the
period commencing on the date of the closing of the relevant Permitted
Acquisition and ending with the close of relevant period and (ii) the sum
of (1) the actual EBITDA attributable to such Acquired Store for a period
(such period for such Acquired Store being hereinafter referred as the
"pre-
-19-
<PAGE> 25
acquisition period") commencing at the beginning of the relevant period
and ending on the date of the closing of the relevant Permitted
Acquisition and (2) the aggregate amount paid during such pre-acquisition
period to acquire rental inventory and equipment for such Acquired Store
to the extent the amount so paid was expensed rather than capitalized in
computing the EBITDA of such Acquired Store during such pre-acquisition
period;
(b) The EBITDA attributable to each Start-Up Store which commenced
operations in a calendar month no more than 12 calendar months prior to
the close of the relevant period shall be included in such Pro forma
Adjusted Cash Flow in an amount equal to the product of (i) 25% and (ii)
the aggregate amount expended on a cumulative basis over the period ending
with the close of the relevant period to purchase rental inventory and
equipment for such Start-Up Store (for such purposes, the amount so
expended to mean the hard invoiced costs of such inventory and equipment
and delivery costs and to exclude the cost of inventory and equipment
acquired as a result of a Permitted Acquisition);
(c) The EBITDA attributable to each Start-Up Store which commenced
operations in a calendar month greater than 12 but no more than 24
calendar months prior to the close of the relevant period shall be
included in such Pro forma Adjusted Cash Flow in an amount equal to the
sum of (i) the product of (1) 25% and (2) the aggregate amount expended on
a cumulative basis over the period ending immediately prior to the 13th
calendar month (the "13th calendar month") following the calendar month in
which such Start-Up Store commenced operations, to purchase rental
inventory and equipment such Start-Up Store (for such purposes, the amount
so expended to mean the hard invoiced costs of such inventory and
equipment and delivery costs and to exclude the cost of inventory and
equipment acquired as a result of a Permitted Acquisition) and (3) a
fraction, the numerator of which is the number of full calendar months in
the relevant period completed prior to such 13th calendar month and the
denominator of which is 12, and (ii) the actual EBITDA attributable to
such Start-Up Store for a period commencing at the beginning of such 13th
calendar month and ending with the close of the relevant period; and
(d) The EBITDA attributable to each Start-Up Store which commenced
operations in a calendar month 24 calendar months or more prior to the
close of the relevant period shall be included in such Pro forma Adjusted
Cash Flow in an amount equal to the actual EBITDA attributable to such
Start-Up Store during the relevant period.
"Pro forma Adjusted Revenues" shall mean, for any period (the "relevant
period"), the gross revenues of the Company and its Subsidiaries during such
relevant period on a consolidated basis attributable to all stores, but with
such gross revenues to be adjusted as follows to give pro forma effect to the
opening of Start-Up Stores:
-20-
<PAGE> 26
(a) The gross revenues of each Start-Up Store which commenced
operations in a calendar month no more than 12 calendar months prior to
the close of the relevant period shall be included in such Pro forma
Adjusted Revenues in an amount equal to 80% of the aggregate amount
expended on a cumulative basis to purchase rental inventory and equipment
for such Start-Up Store (for such purposes, the amount so expended to mean
the hard invoiced cost of such inventory and equipment and delivery costs
and to exclude the cost of inventory and equipment acquired as a result of
a Permitted Acquisition);
(b) The gross revenues of each Start-Up Store which commenced
operations in a calendar month greater than 12 but no more than 24
calendar months prior to the close of the relevant period shall be
included in such Pro forma Adjusted Revenues in an amount equal to the sum
of (i) the actual gross revenues attributable to such Start-Up Store
during the period beginning at the commencement of the 13th calendar month
(the "thirteenth calendar month") following the calendar month in which
such Start-Up Store commenced operations and ending with the close of the
relevant period and (ii) the product of (1) 80% of the aggregate amount
expended on a cumulative basis prior to such 13th calendar month to
purchase rental inventory and equipment for such Start-Up Store (for such
purposes, the amount so expended to mean the hard invoiced cost of such
inventory and equipment and delivery costs and to exclude the cost of
inventory and equipment acquired as a result of a Permitted Acquisition)
and (2) a fraction, the numerator of which is the number of full calendar
months in the relevant period completed prior to such 13th calendar month
and the denominator of which is 12; and
(c) The Adjusted Pro forma Revenues attributable to each Start-Up
Store which commenced operations in a calendar month, 24 calendar months
or more prior to the close of the relevant period shall be included in
such Pro forma Adjusted Revenues in an amount equal to the actual gross
revenues attributable to such Start-Up Store during the relevant period.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Required Lenders" means, as of the date of determinations thereof, those
Lenders holding at least 65% of the Commitments or, in the event that no
Commitments are outstanding hereunder, holding at least 65% in aggregate
principal amount of the Loans and credit risk on the Letters of Credit
outstanding hereunder.
"Revolver Advance Limit" shall mean as of any time, the sum of (i)
$200,000 and (ii) 60% of the aggregate amount expended by the Company and its
Subsidiaries on a cumulative basis after the date hereof to purchase rental
inventory and equipment for Acquired and Start-Up Stores (for such purposes,
the amount expended to mean the hard invoiced cost of such inventory and
equipment and delivery costs and to exclude the cost of inventory and equipment
acquired as a result of a Permitted Acquisition).
-21-
<PAGE> 27
"Revolving Credit" is defined in Section 1.1 hereof.
"Revolving Credit Commitments" means the commitments of the Lenders to
extend credit under the Revolving Credit in the amounts set forth opposite
their signatures hereto under the heading "Revolving Credit Commitment" and
opposite their signatures on Assignment Agreements delivered pursuant to
Section 11.10 hereof under the heading "Revolving Credit Commitment", as such
amounts may be reduced pursuant hereto.
"Revolving Credit Loan" is defined in Section 1.2 hereof.
"Revolving Credit Note" is defined in Section 1.2 hereof.
"Revolving Credit Termination Date" means May 15, 1998, or such earlier
date on which the Revolving Credit Commitments are terminated in whole pursuant
to Section 3.4, 9.2 or 9.3 hereof.
"Security Agreement" means that certain Security Agreement dated as of May
15, 1996 from the Company to the Agent.
"Senior Funded Debt" means, at any time the same is to be determined, the
aggregate of all Indebtedness for Borrowed Money of the Company and its
Subsidiaries at such time, plus all Indebtedness for Borrowed Money of any
other Person which is directly or indirectly guaranteed by the Company or any
of its Subsidiaries or which the Company or any of its Subsidiaries has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which the Company or any of its Subsidiaries has otherwise assured a creditor
against loss; provided, however, that in no event shall Senior Funded Debt
include any Subordinated Debt.
"Start-Up Store" means a retail rental store which commences operations
after the Company acquires ownership of the same.
"Stock Pledge Agreements" means those three certain Pledge Agreements,
each dated as of May 15, 1996 to the Agent from BACE Investments, Edgewater and
Mesirow, respectively and each pledge agreement encumbering Voting Stock in the
Company from any other pledgor in the same or substantially the same form as
any of the foregoing.
"Subordinated Debt" means (i) any Indebtedness for Borrowed Money which is
subordinated in right of payment to the prior payment of the Loans and the
other Obligations, pursuant to subordination provisions approved in writing by
the Agent and Required Lenders in their sole discretion and is otherwise
pursuant to documentation that is, and which is in an amount that is, and which
contains interest rates, payment terms, maturities, amortization schedules,
covenants, defaults, remedies and other material terms that are in form
-22-
<PAGE> 28
and substance, in each case satisfactory to the Agent and Required Lenders in
their sole discretion and (ii) the Zodiac Debt.
"Subsidiary" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of its Subsidiaries.
"Term Credit Earnings Limit" shall mean as of any time, the product of (x)
Pro forma Adjusted Cash Flow for the twelve most recently completed calendar
months and (y) 3.0.
"Term Credit Termination Date" means May 15, 1998, or such earlier date on
which the Term Credit Commitments are terminated in whole pursuant to Section
3.4, 9.2 or 9.3 hereof.
"Term Loan Commitments" means the commitments of the Lenders to make the
Term Loans in the amounts set forth opposite their signatures hereto under the
heading "Term Loan Commitment" and opposite their signatures on Assignment
Agreements delivered pursuant to Section 11.10 hereof under the heading "Term
Loan Commitment", as such amounts may be reduced pursuant hereto.
"Term Note" is defined in Section 1.3 hereof.
"Term Loan" is defined in Section 1.3 hereof.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Voting Stock" of any Person means capital stock of any class or classes
or other equity interests (however designated) having ordinary voting power for
the election of directors or similar governing body of such Person, other than
stock or other equity interests having such power only by reason of the
happening of a contingency.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the issued
and outstanding shares of capital stock (other than directors' qualifying
shares as required by law) or other equity interests are owned by the Company
and/or one or more Wholly-Owned Subsidiaries within the meaning of this
definition.
-23-
<PAGE> 29
"Zodiac Acquisition" means the acquisition by the Company of the assets of
Zodiac Rentals, Inc. and Zodiac Rentals, Inc. III pursuant to the Zodiac
Purchase Agreement.
"Zodiac Debt" means the deferred cash purchase price payable by the
Company for the Zodiac Acquisition pursuant to the second paragraph of Section
2.3(a) of the Zodiac Purchase Agreement.
"Zodiac Purchase Agreement" means that certain Asset Purchase Agreement
dated as of April 3, 1996 by and among Zodiac Rentals, Inc., Zodiac Rentals,
Inc. III and individuals affiliated with such firms and the Company.
Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The
words "hereof", "herein", and "hereunder" and words of like import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All references to time of day herein
are references to Chicago, Illinois time unless otherwise specifically
provided. Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP except where such
principles are inconsistent with the specific provisions of this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Agent and the Lenders as
follows:
Section 6.1. Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the
laws of the State of Delaware, has full and adequate corporate power to own its
Property and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to be so
licensed or qualified, in the aggregate, would not have a material adverse
effect on the business or financial condition of the Company.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as now conducted, and is duly
licensed or qualified and in good standing in each jurisdiction in which the
nature of the business conducted by it or the nature of the Property owned or
leased by it requires such licensing or qualifying, except where the failure to
be so licensed or qualified, in the aggregate, would not have a material
adverse effect on the business or financial condition of such Subsidiary.
Schedule 6.2 hereto identifies each Subsidiary, the jurisdiction of its
incorporation or organization, as the case may be, the percentage of issued and
outstanding shares of each class of its capital stock or other equity interests
owned by the Company and the Subsidiaries
-24-
<PAGE> 30
and, if such percentage is not 100% (excluding directors' qualifying shares as
required by law), a description of each class of its authorized capital stock
and other equity interests and the number of shares of each class issued and
outstanding. All of the outstanding shares of capital stock and other equity
interests of each Subsidiary are validly issued and outstanding and fully paid
and nonassessable and all such shares and other equity interests indicated on
Schedule 6.2 as owned by the Company or a Subsidiary are owned, beneficially
and of record, by the Company or such Subsidiary free and clear of all Liens.
There are no outstanding commitments or other obligations of any Subsidiary to
issue, and no options, warrants or other rights of any Person to acquire, any
shares of any class of capital stock or other equity interests of any
Subsidiary.
Section 6.3. Corporate Authority and Validity of Obligations. The Company
has full right and authority to consummate each Permitted Acquisition, to enter
into this Agreement and the other Loan Documents, to make the borrowings herein
provided for, to issue its Notes in evidence thereof, to grant to the Agent the
Liens described in the Collateral Documents, and to perform all of its
obligations hereunder and under the other Loan Documents. The Loan Documents
delivered by the Company have been duly authorized, executed and delivered by
the Company and constitute valid and binding obligations of the Company
enforceable in accordance with their terms except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law); and this Agreement and the other Loan
Documents do not, nor does the performance or observance by the Company of any
of the matters and things herein or therein provided for, contravene or
constitute a default under any provision of law or any judgment, injunction,
order or decree binding upon the Company or any provision of the charter,
articles of incorporation or by-laws of the Company or any covenant, indenture
or agreement of or affecting the Company or any of its Properties, or result in
the creation or imposition of any Lien on any Property of the Company except
for the Lien granted in favor of the Agent pursuant to the Collateral
Documents.
Section 6.4. Use of Proceeds; Margin Stock. The Company shall use the
proceeds of the Loans solely as permitted under Sections 1.1(b) and 1.3(b)
hereof. Neither the Company nor any Subsidiary is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loan or any other extension of
credit made hereunder will be used to purchase or carry any such margin stock
or to extend credit to others for the purpose of purchasing or carrying any
such margin stock.
Section 6.5. Financial Reports. The proforma financial statements for the
Company and its Subsidiaries, heretofore furnished to the Lenders, fairly
present in all material respects the consolidated financial condition of the
Company and its Subsidiaries as at said dates and the consolidated results of
their operations and cash flows for the periods then ended in conformity with
GAAP applied on a consistent basis. Neither the Company nor any Subsidiary has
contingent liabilities which are material to it other than as indicated on such
financial statements or, with respect to future periods, on the financial
statements furnished pursuant to Section 8.5 hereof.
-25-
<PAGE> 31
Section 6.6. No Material Adverse Change. Since the date of the most recent
financial statements delivered to the Lenders pursuant to Section 8.5(a)
hereof, there has been no change in the condition (financial or otherwise) or
business prospects of the Company or any Subsidiary except those occurring in
the ordinary course of business, none of which individually or in the aggregate
have been materially adverse.
Section 6.7. Full Disclosure. To the best knowledge and belief of the
Company after due inquiry, the written statements and information furnished to
the Lenders in connection with the negotiation of this Agreement and the other
Loan Documents and the commitments by the Lenders to provide all or part of the
financing contemplated hereby do not contain any untrue statements of a
material fact or omit a material fact necessary to make the material statements
contained herein or therein not misleading, the Lenders acknowledging that as
to any projections furnished to Lenders, the Company only represents that the
same were prepared on the basis of assumptions and estimates the Company
believed to be reasonable.
Section 6.8. Good Title. The Company and its Subsidiaries each have good
and defensible title to their assets as reflected on the most recent
consolidated balance sheet of the Company and its Subsidiaries furnished to the
Lenders (except for sales of assets by the Company and its Subsidiaries in the
ordinary course of business), subject to no Liens other than such thereof as
are permitted by Section 8.14 hereof.
Section 6.9. Litigation and Other Controversies. There is no litigation or
governmental proceeding or labor controversy pending, nor to the knowledge of
the Company threatened, against the Company or any Subsidiary which if
adversely determined would (a) impair the validity or enforceability of, or
impair the ability of the Company to perform its obligations under, this
Agreement or any other Loan Document or (b) result in any material adverse
change in the financial condition, Properties, business or operations of the
Company or any Subsidiary.
Section 6.10. Taxes. All tax returns required to be filed by the Company
or any Subsidiary in any jurisdiction for any material tax liability have, in
fact, been filed, and all taxes, assessments, fees and other governmental
charges upon the Company or any Subsidiary or upon any of their respective
Properties, income or franchises, which are shown to be due and payable in such
returns, have been paid, except to the extent payment of the same is being
contested by appropriate proceedings which prevent enforcement of the matter
under contest and do not interfere with the conduct of the Company's business
in the ordinary course. The Company does not know of any proposed additional
tax assessment against it or its Subsidiaries for which adequate provision in
accordance with GAAP has not been made on its accounts. Adequate provisions in
accordance with GAAP for taxes on the books of the Company and each Subsidiary
have been made for all open years, and for its current fiscal period.
Section 6.11. Approvals. No authorization, consent, license, or exemption
from, or filing or registration with, any court or governmental department,
agency or instrumentality, nor any approval or consent of the stockholders of
the Company or any other Person, is or will be necessary to the valid
execution, delivery or performance by the Company of this Agreement or any
other Loan Document other
-26-
<PAGE> 32
than (i) such of the foregoing as have already been obtained and remain in full
force and effect or (ii) where the failure to obtain such of the foregoing
would not reasonably be expected to have and does not actually have a material
adverse effect on the financial condition, Properties, business or operations
of the Company and its Subsidiaries taken as a whole.
Section 6.12. Affiliate Transactions. Neither the Company nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
on terms and conditions which are less favorable to the Company or such
Subsidiary than would be usual and customary in similar contracts or agreements
between Persons not affiliated with each other, other than the BACE Management
Agreement.
Section 6.13. Investment Company; Public Utility Holding Company. Neither
the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 6.14. ERISA. The Company and each other member of its Controlled
Group has fulfilled its obligations under the minimum funding standards of and
is in compliance in all material respects with ERISA and the Code to the extent
applicable to it and has not incurred any liability to the PBGC or a Plan under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA. Neither the Company nor any Subsidiary has any contingent
liabilities with respect to any post-retirement benefits under a Welfare Plan,
other than liability for continuation coverage described in article 6 of Title
I of ERISA.
Section 6.15. Compliance with Laws. The Company and each of its
Subsidiaries are in compliance with the requirements of all federal, state and
local laws, rules and regulations applicable to or pertaining to their
Properties or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
of 1990, and laws and regulations establishing quality criteria and standards
for air, water, land and toxic or hazardous wastes and substances),
non-compliance with which would be reasonably likely to have or actually does
have a material adverse effect on the financial condition, Properties, business
or operations of the Company and its Subsidiaries taken as a whole. Neither the
Company nor any Subsidiary has received notice to the effect that its
operations are not in compliance with any of the requirements of applicable
federal, state or local environmental, health and safety statutes and
regulations or are the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action would be reasonably likely to have or actually does have a
material adverse effect on the financial condition, Properties, business or
operations of the Company and its Subsidiaries taken as a whole.
Section 6.16. Other Agreements. Neither the Company nor any Subsidiary is
in default under the terms of any covenant, indenture or agreement of or
affecting the Company, any Subsidiary or any of their
-27-
<PAGE> 33
Properties, which default if uncured would have a material adverse effect on
the financial condition, Properties, business or operations of the Company or
its Subsidiaries taken as a whole.
Section 6.17. No Default. No Default or Event of Default has occurred and
is continuing.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of the Lenders to make any Loan under this Agreement is
subject to the following conditions precedent:
Section 7.1. All Advances. As of the time of the making of each extension
of credit (including the initial extension of credit) hereunder:
(a) each of the representations and warranties set forth in Section 6
hereof and in the other Loan Documents shall be true and correct as of
such time, except to the extent the same expressly relate to an earlier
date;
(b) the Company shall be in full compliance with all of the terms and
conditions of this Agreement and of the other Loan Documents, and no
Default or Event of Default shall have occurred and be continuing or would
occur as a result of making such extension of credit;
(c) in the case of the extension of each Revolving Credit Loan, after
giving effect to such Loan, the aggregate principal amount of all
Revolving Credit Loans outstanding under this Agreement shall not exceed
the lesser of (i) the Revolving Credit Commitments and (ii) the Revolver
Advance Limit as then determined and computed;
(d) in the case of the extension of each Term Loan, after giving
effect to such Loan and any Permitted Acquisition to be financed thereby,
the aggregate cumulative principal amount of all Term Loans made under
this Agreement shall not exceed the lesser of (i) the Term Credit
Commitments and (ii) the Term Credit Earnings Limit as then determined and
computed on a pro forma basis assuming the closing of such Permitted
Acquisition;
(e) the Lenders shall have received such information as the Agent or
any Lender shall reasonably request to satisfy the Agent and the Required
Lenders that the foregoing conditions have been satisfied; and
(f) such extension of credit shall not violate any order, judgment or
decree of any court or other authority or any provision of law or
regulation applicable to the Agent or any Lender (including, without
limitation, Regulation U of the Board of Governors of the Federal Reserve
System) as then in effect.
-28-
<PAGE> 34
The Company's request for any Loan shall constitute its warranty as to the
facts specified in subsections (a) through (e), both inclusive, above.
Section 7.2. Initial Advance. At or prior to the making of the initial
extension of credit hereunder, the following conditions precedent shall also
have been satisfied:
(a) the Agent shall have received the following for the account of
the Lenders (each to be properly executed and completed) and the same
shall have been approved as to form and substance by the Agent and the
Lenders:
(i) the Notes;
(ii) the Security Agreement, together with any financing
statements requested by the Agent in connection therewith;
(iii) the Pledge Agreement, together with certificates
evidencing all of the issued and outstanding capital stock of the
Company to be pledged pursuant thereto and blank stock powers
therefor;
(iv) copies (executed or certified, as may be appropriate) of
all legal documents or proceedings taken in connection with the
execution and delivery of this Agreement and the other Loan Documents
to the extent the Agent or its counsel may reasonably request;
(v) an incumbency certificate containing the name, title and
genuine signatures of each of the Company's Authorized
Representatives;
(vi) evidence of insurance required by Section 8.4 hereof;
(vii) landlords' lien waivers in connection with the Property of
the Company located in leased premises (provided that this condition
shall be deemed satisfied in the case of each landlord not affiliated
with the Company or any party to a Permitted Acquisition if the
Company is unable despite its reasonable best efforts to obtain such
a waiver);
(viii) copy of BACE Management Agreement; and
(ix) copy of the Investment Agreement.
(b) the Agent shall have received for itself and for the Lenders the
initial fees called for hereby;
-29-
<PAGE> 35
(c) each Lender shall have received such valuations and
certifications as it may require in order to satisfy itself as to the
value of the Collateral, the financial condition of the Company and its
Subsidiaries, and the lack of material contingent liabilities of the
Company and its Subsidiaries;
(d) the Company shall have obtained written commitments satisfactory
to the Lenders in their sole discretion from third parties committing them
to make at least $8,500,000 in cash equity contributions to the Company;
(e) legal matters incident to the execution and delivery of this
Agreement and the other Loan Documents and to the transactions
contemplated hereby shall be satisfactory to each Lender and its counsel;
and the Agent shall have received for the account of the Lenders the
favorable written opinion of counsel for the Company in form and substance
satisfactory to each Lender and its counsel;
(f) the Agent shall have received for the account of the Lenders a
good standing certificate for the Company (dated as of the date no earlier
than 15 days prior to the date hereof) from the office of the secretary of
state of the state of its incorporation and each state in which it is
qualified to do business as a foreign corporation;
(g) the Liens granted to the Agent under the Collateral Documents
shall have been perfected in a manner satisfactory to each Lender and its
counsel; and
(h) the Agent shall have received for the account of the Lenders such
other agreements, instruments, documents, certificates and opinions as the
Agent or the Lenders may reasonably request.
SECTION 8. COVENANTS.
The Company agrees that, so long as any credit is available to or in use
by the Company hereunder, except to the extent compliance in any case or cases
is waived in writing by the Required Lenders:
Section 8.1. Maintenance of Business. The Company shall, and shall cause
each Subsidiary to, preserve and maintain its existence, except to the extent a
Subsidiary merges into the Company to effect a Permitted Acquisition or any
other merger permitted by Section 8.17 hereof. The Company shall, and shall
cause each Subsidiary to, preserve and keep in force and effect all licenses,
permits and franchises necessary to the proper conduct of its business, except
to the extent a Subsidiary merges into the Company to effect a Permitted
Acquisition or any other merger permitted by Section 8.17 hereof.
Section 8.2. Maintenance of Properties. The Company shall maintain,
preserve and keep those items of property, plant and equipment in adequate
repair, working order and condition necessary for the
-30-
<PAGE> 36
conduct of business in the ordinary course (ordinary wear and tear excepted)
and shall from time to time make all needful and proper repairs, renewals,
replacements, additions and betterments thereto so that at all times the
efficiency thereof shall be fully preserved and maintained, and shall cause
each Subsidiary to do so in respect of Property owned or used by it.
Section 8.3. Taxes and Assessments. The Company shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, all
taxes, rates, assessments, fees and governmental charges upon or against it or
its Properties, in each case before the same become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves are provided
therefor.
Section 8.4. Insurance. The Company shall insure and keep insured, and
shall cause each Subsidiary to insure and keep insured, with recognized and
responsible insurance companies, all insurable Property owned by it which is of
a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Company shall insure, and shall cause each Subsidiary to
insure, such other hazards and risks (including employers' and public liability
risks) with recognized and responsible insurance companies as and to the extent
usually insured by Persons similarly situated and conducting similar
businesses. The Company shall in any event maintain insurance on the Collateral
to the extent required by the Collateral Documents. The Company shall upon
request furnish to the Agent and any Lender a certificate setting forth in
summary form the nature and extent of the insurance maintained pursuant to this
Section.
Section 8.5. Financial Reports. The Company shall, and shall cause each
Subsidiary to, maintain a standard system of accounting in accordance with GAAP
and shall furnish to the Agent, each Lender and each of their duly authorized
representatives such information respecting the business and financial
condition of the Company and its Subsidiaries as the Agent or such Lender may
reasonably request; and without any request, shall furnish to the Lenders:
(a) as soon as available, and in any event within 30 days after the
close of each month, a copy of the consolidated and consolidating balance
sheet of the Company and its Subsidiaries as of the last day of such
period and the consolidated and consolidating statements of income,
retained earnings and cash flows of the Company and its Subsidiaries for
the month and for the fiscal year-to-date period then ended, each in
reasonable detail and (commencing with the financial statements for May of
1997) showing in comparative form the figures for the corresponding date
and period in the previous fiscal year, prepared by the Company in
accordance with GAAP and certified to by its President, Executive Vice
President or chief financial officer;
-31-
<PAGE> 37
(b) as soon as available, and in any event within 90 days after the
close of each annual accounting period of the Company, a copy of the
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the last day of the period then ended and the
consolidated and consolidating statements of income, retained earnings and
cash flows of the Company and its Subsidiaries for the period then ended,
and accompanying notes thereto, each in reasonable detail and showing
(commencing with the financial statements for May of 1997) in comparative
form the figures for the previous fiscal year, accompanied by an
unqualified opinion thereon of Ernst & Young or another firm of
independent public accountants of recognized national standing, selected
by the Company and satisfactory to the Required Lenders, to the effect
that the financial statements have been prepared in accordance with GAAP
and present fairly in accordance with GAAP the consolidated financial
condition of the Company and its Subsidiaries as of the close of such
fiscal year and the results of their operations and cash flows for the
fiscal year then ended and that an examination of such accounts in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, such examination
included such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances;
(c) within the period provided in subsection (b) above, the written
statement of the accountants who certified the audit report thereby
required that in the course of their audit they have obtained no knowledge
of any Default or Event of Default, or, if such accountants have obtained
knowledge of any such Default or Event of Default, they shall disclose in
such statement the nature and period of the existence thereof;
(d) promptly after receipt thereof, any additional written reports,
management letters or other detailed information contained in writing
concerning significant aspects of the Company's or any Subsidiary's
operations and financial affairs given to it by its independent public
accountants;
(e) as soon as available, and in any event within 15 days prior to
the end of each fiscal year of the Company, a copy of the Company's
consolidated and consolidating business plan for the following fiscal
year, such business plan to show the Company's projected consolidated and
consolidating revenues, expenses, and balance sheet on month-by-month
basis, such business plan to be in reasonable detail prepared by the
Company and in form reasonably satisfactory to the Required Lenders; and
(f) promptly after knowledge thereof shall have come to the attention
of any responsible officer of the Company, written notice of any
threatened or pending litigation or governmental proceeding or labor
controversy against the Company or any Subsidiary which, if adversely
determined, would materially and adversely effect the financial condition,
Properties, business or operations of the Company or any Subsidiary or of
the occurrence of any Default or Event of Default hereunder.
-32-
<PAGE> 38
Each of the financial statements furnished to the Lenders pursuant to
subsections (a) and (b) of this Section shall be accompanied by a written
certificate in the form attached hereto as Exhibit C signed by the President,
Executive Vice President or chief financial officer of the Company to the
effect that to the best of such officer's knowledge and belief no Default or
Event of Default has occurred during the period covered by such statements or,
if any such Default or Event of Default has occurred during such period,
setting forth a description of such Default or Event of Default and specifying
the action, if any, taken by the Company to remedy the same. Such certificate
shall also set forth the calculations supporting such statements in respect of
Sections 8.7, 8.8, 8.9, 8.10, 8.11 and 8.12 of this Agreement.
Section 8.6. Inspection. The Company shall, and shall cause each
Subsidiary to, permit the Agent, each Lender and each of their duly authorized
representatives and agents to visit and inspect any of the Properties,
corporate books and financial records of the Company and each Subsidiary, to
examine and make copies of the books of accounts and other financial records of
the Company and each Subsidiary, and to discuss the affairs, finances and
accounts of the Company and each Subsidiary with, and to be advised as to the
same by, its officers, employees and independent public accountants (and by
this provision the Company hereby authorizes such accountants to discuss with
the Agent and such Lenders the finances and affairs of the Company and of each
Subsidiary) at such reasonable times and reasonable intervals as the Agent or
any such Lender may designate; provided, however, that prior to any Default or
Event of Default, neither the Agent nor any Lender shall exercise their
visitation and inspection rights under this Section without prior notice to the
Company.
Section 8.7. Rental Inventory Leases. The Company shall not, nor shall it
permit any Subsidiary to, acquire the use or possession of any Property under a
lease or similar arrangement, whether or not the Company or any Subsidiary has
the express or implied right to acquire title to or purchase such Property, at
any time if, after giving effect thereto, the aggregate value of such Property
so acquired (excluding real property used for retail rental store locations)
would at any time exceed $1,500,000.
Section 8.8. Store Leases. The Company shall not, and shall not permit any
Subsidiary to, acquire the use of or possession of any real property to be used
as a retail rental store location under any lease or similar arrangement which
has a term (excluding renewal terms exercisable at the discretion of the
lessee) that is over five calendar years in length; provided, however, that the
foregoing shall not restrict nor operate to prevent the Company from entering
into leases or similar arrangements for such real property each with a term
(excluding renewal terms exercisable at the discretion of the lessee) not
exceeding seven calendar years in length if, after giving effect thereto, the
aggregate amount of fixed rentals and other consideration payable by the
Company and its Subsidiaries during any calendar year by the Company and its
Subsidiaries under all such leases and similar arrangements with terms
(excluding such renewal terms) in excess of five calendar years would not
exceed 10% of the aggregate amount of fixed rentals and other considerations
payable by the Company under all such leases and similar arrangements of
whatever term.
-33-
<PAGE> 39
Section 8.9. Senior Funded Debt to Annualized EBITDA. The Company shall,
as of the last day of each calendar month, maintain the ratio of Senior Funded
Debt on such date to Pro forma Adjusted Cash Flow for the twelve calendar
months then ended in an amount not greater than 3.0 to 1.
Section 8.10. Actual EBITDA. The Company shall, as of the last day of each
calendar quarter (commencing with the calendar quarter ending December 31,
1996), maintain the ratio (the "Cash Flow Shrinkage Ratio") of Adjusted Actual
EBITDA for the four calendar quarters then ended to the relevant Adjusted Base
EBITDA in an amount not less than 0.85 to 1 (provided that the Cash Flow
Shrinkage Ratio shall be computed: as of December 31, 1996, for the period of
two calendar quarters then ended; and as of March 31, 1997, for the period of
three calendar quarters then ended).
Section 8.11. Overhead to Revenue Ratio. The Company shall, as of the last
day of each August, November, February and May of each calendar year
(commencing with the calendar month ending August 31, 1996), maintain the ratio
(the "Overhead Ratio") of (x) the aggregate amount expended by the Company and
its Subsidiaries for Corporate Overhead during the twelve calendar months then
ended to (y) Pro forma Adjusted Revenues for the same period of twelve calendar
months in an amount not greater than 0.05 to 1 through May 31, 1997 and 0.04 to
1 at all times thereafter (provided that the Overhead Ratio shall be computed:
as of August 31, 1996, for the period of three calendar months then ended; as
of November 30, 1996, for the period of six calendar months then ended; and as
of February 28, 1997, for the period of nine calendar months then ended).
Section 8.12. Store Openings. The Company shall not, nor shall it permit
any Subsidiary to, commence the operation of any Start-Up Store if immediately
after giving effect thereto, the ratio of (x) the number of Start-Up Stores
then operating and owned by the Company to (y) the number of all retail rental
stores (not just Start-Up Stores) then operating and owned by the Company would
exceed 0.25 to 1.
Section 8.13. Indebtedness for Borrowed Money. The Company shall not, nor
shall it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing shall not restrict nor operate to prevent:
(a) the Obligations of the Company owing to the Agent and the Lenders
hereunder;
(b) purchase money indebtedness and Capitalized Lease Obligations
secured by Liens permitted by Section 8.14(e) hereof in an aggregate
amount not to exceed $1,500,000 at any one time outstanding;
(c) Subordinated Debt representing the deferred purchase price paid
by the Company and its Subsidiaries for Permitted Acquisitions; and
-34-
<PAGE> 40
(d) indebtedness not otherwise permitted by this Section aggregating
not more than $100,000 at any one time outstanding.
Section 8.14. Liens. The Company shall not, nor shall it permit any
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by the Company or any Subsidiary; provided, however, that the
foregoing shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith cash deposits in connection with tenders, contracts or
leases to which the Company or any Subsidiary is a party or other cash
deposits required to be made in the ordinary course of business, provided
in each case that the obligation is not for borrowed money and that the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves have been established therefor;
(b) mechanics', workmen's, materialmen's, landlords', carriers', or
other similar Liens arising in the ordinary course of business with
respect to obligations which are not due or which are being contested in
good faith by appropriate proceedings which prevent enforcement of the
matter under contest;
(c) the pledge of assets for the purpose of securing an appeal, stay
or discharge in the course of any legal proceeding, provided that the
aggregate amount of liabilities of the Company and its Subsidiaries
secured by a pledge of assets permitted under this subsection, including
interest and penalties thereon, if any, shall not be in excess of $100,000
at any one time outstanding;
(d) the Liens granted in favor of the Agent for the benefit of the
Lenders pursuant to the Collateral Documents;
(e) Liens on property of the Company or any of its Subsidiaries
created solely for the purpose of securing indebtedness permitted by
Section 8.13(b) hereof, representing or incurred to finance, refinance or
refund the purchase price of Property, provided that no such Lien shall
extend to or cover other Property of the Company or such Subsidiary other
than the respective Property so acquired, and the principal amount of
indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such Property; and
(f) the Liens described on Schedule 8.14 hereto.
Section 8.15. Investments, Loans, Advances and Guaranties. The Company
shall not, nor shall it permit any Subsidiary to, directly or indirectly, make,
retain or have outstanding any investments (whether
-35-
<PAGE> 41
through purchase of stock or obligations or otherwise) in, or loans or advances
(other than for travel advances and other similar cash advances made to
employees in the ordinary course of business) to, any other Person, or be or
become liable as endorser, guarantor, surety or otherwise for any debt,
obligation or undertaking of any other Person, or otherwise agree to provide
funds for payment of the obligations of another, or supply funds thereto or
invest therein or otherwise assure a creditor of another against loss, or apply
for or become liable to the issuer of a letter of credit which supports an
obligation of another, or subordinate any claim or demand it may have to the
claim or demand of any other Person; provided, however, that the foregoing
shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United States of America
or of any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America,
provided that any such obligations shall mature within one year of the
date of issuance thereof;
(b) investments in commercial paper rated at least P-1 by Moody's
Investors Services, Inc. and at least A-1 by Standard & Poor's Corporation
maturing within 270 days of the date of issuance thereof;
(c) investments in certificates of deposit issued by any United
States commercial bank having capital and surplus of not less than
$100,000,000 which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of commercial
paper received in the ordinary course of business;
(e) trade credit extended on ordinary trade terms in the ordinary
course of business; and
(f) investments, loans, advances and guarantees not otherwise
permitted by this Section aggregating not more than $200,000 at any one
time outstanding.
In determining the amount of investments, loans, advances and guarantees
permitted under this Section, investments shall always be taken at the original
cost thereof (regardless of any subsequent appreciation or depreciation
therein), loans and advances shall be taken at the principal amount thereof
then remaining unpaid, and guarantees shall be taken at the amount of
obligations guaranteed thereby.
Section 8.16. Acquisitions. The Company will not, nor will it permit any
Subsidiary to, make or commit to make any Acquisition; provided, however, that
the Company may make one or more Acquisitions of a retail rental business (and
Acquisitions of the capital stock of any corporation, or the equity interests
in any partnership or other firm, in each case engaged primarily in the retail
rental business if substantially concurrent with such Acquisition, the
corporation, partnership or firm so acquired merges or dissolves into the
Company) if:
-36-
<PAGE> 42
(a) the Company promptly informs the Lenders of all principal terms
and conditions applicable to the Acquisition and furnishes the Lenders
such other information regarding the Acquisition as the Agent or any
Lender shall reasonably request;
(b) the Company demonstrates that on a pro forma basis after giving
effect to the subject Acquisition, the Company will continue to comply
with all the terms and conditions of the Loan Documents, such
demonstration to require even without request from any Lender that the
Company provide each Lender no later than 30 days prior to the closing of
such Acquisition (i) a certificate signed by the President, Executive Vice
President or the chief financial officer of the Company in the form of
Exhibit C attached hereto prepared on a pro forma basis after giving
effect to the closing of such Acquisition and (ii) pro forma financial
projections for the twelve months following the subject Acquisition;
(c) after giving effect to such Acquisition, at least 40% of the
aggregate consideration paid by the Company and its Subsidiaries for such
Acquisition and all other Acquisitions closed on and at any time after the
date hereof on a cumulative basis (including as such consideration, the
assumption by the Company or any Subsidiary of any Indebtedness for
Borrowed Money of each Person acquired) will have been funded out of the
proceeds of substantially concurrent cash equity contributions to the
Company, or to the extent the Required Lenders in their sole discretion
agree, the proceeds of Subordinated Debt issued by the Company or any
Subsidiary;
(d) the Board of Directors or other governing body of the Person
whose assets or capital stock is being so acquired has approved the terms
of the Acquisition;
(e) at the time of such Acquisition and immediately giving effect
thereto, no Default or Event of Default shall have occurred or be
continuing; and
(f) except in the case of the Zodiac Acquisition and the A to Z
Washington Acquisition, the Required Lenders in their sole discretion
shall have provided their written consent to such Acquisition.
Section 8.17. Mergers, Consolidations and Sales. The Company shall not,
nor shall it permit any Subsidiary to, be a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of all or any
substantial part of its Property, including any disposition of Property as part
of a sale and leaseback transaction, or in any event sell or discount (with or
without recourse) any of its notes or accounts receivable; provided, however,
that this Section shall not apply to nor operate to prevent (x) the Company or
any Subsidiary from selling its inventory and equipment in the ordinary course
of its business or (y) any Subsidiary from merging into the Company to effect a
Permitted Acquisition. A sale or other disposition of 5% or more of the total
assets of the Company shall be deemed "substantial" for the foregoing purposes.
-37-
<PAGE> 43
Section 8.18. Maintenance of Subsidiaries. The Company shall not assign,
sell or transfer, or permit any Subsidiary to issue, assign, sell or transfer,
any shares of capital stock of a Subsidiary; provided that the foregoing shall
not operate to prevent the issuance, sale and transfer to any person of any
shares of capital stock of a Subsidiary solely for the purpose of qualifying,
and to the extent legally necessary to qualify, such person as a director of
such Subsidiary.
Section 8.19. Dividends and Certain Other Restricted Payments. The Company
will not during any fiscal year (a) declare or pay any dividends on or make any
other distributions in respect of any class or series of its capital stock
(other than dividends payable solely in its capital stock) or (b) directly or
indirectly purchase, redeem or otherwise acquire or retire any of its capital
stock; provided, however, that the Company may, in the ordinary course,
purchase or redeem common capital stock of the Company from its employees under
currently existing employee stock repurchase agreements or similar agreements
entered into with the Company's employees in the ordinary course of business if
at the time of each such purchase or redemption and immediately after giving
effect thereto, (i) no Default or Event of Default shall occur or be continuing
and (ii) the aggregate amount so expended in any calendar year does not exceed
the sum of $200,000 plus the proceeds received by the Company during such year
under key man life insurance policies maintained by the Company for such
purpose.
Section 8.20. Subordinated Debt. The Company will not, and will not permit
any Subsidiary to, amend or modify the terms and conditions applicable to any
Subordinated Debt, except that the Company may agree to a decrease in the
interest rate or premium applicable thereto or to a deferral of repayment of
any of principal of or interest or premium on any Subordinated Debt beyond the
due date applicable thereto as of the date such indebtedness is initially
approved by the Required Lenders. The Company will not, and will not permit any
Subsidiary to, make any payment of principal, interest or premium, if any, on
or in respect of any Subordinated Debt or otherwise acquire, prepay or retire
any such Subordinated Debt prior to the maturities thereof or prior to any
other times required for payment thereof as are in force and effect as of the
date such indebtedness is initially approved by the Required Lenders.
Section 8.21. ERISA. The Company shall, and shall cause each Subsidiary
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its Properties. The Company shall, and
shall cause each Subsidiary to, promptly notify the Agent and each Lender of
(i) the occurrence of any reportable event (as defined in ERISA) with respect
to a Plan, (ii) receipt of any notice from the PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor, (iii) its
intention to terminate or withdraw from any Plan, and (iv) the occurrence of
any event with respect to any Plan which would result in the incurrence by the
Company or any Subsidiary of any material liability, fine or penalty, or any
material increase in the contingent liability of the Company or any Subsidiary
with respect to any post-retirement Welfare Plan benefit.
-38-
<PAGE> 44
Section 8.22. Compliance with Laws. The Company shall, and shall cause
each Subsidiary to, comply in all respects with the requirements of all
federal, state and local laws, rules, regulations, ordinances and orders
applicable to or pertaining to their Properties or business operations,
non-compliance with which could have a material adverse effect on the financial
condition, Properties, business or operations of the Company or any Subsidiary
or could result in a material Lien upon any of their Property.
Section 8.23. Burdensome Contracts With Affiliates. The Company shall not,
nor shall it permit any Subsidiary to, enter into any contract, agreement or
business arrangement (other than the BACE Management Agreement) with any of its
Affiliates (other than with Wholly-Owned Subsidiaries) on terms and conditions
which are less favorable to the Company or such Subsidiary than would be usual
and customary in similar contracts, agreements or business arrangements between
Persons not affiliated with each other.
Section 8.24. No Changes in Fiscal Year. Neither the Company nor any
Subsidiary shall change its fiscal year from its present basis without the
prior written consent of the Required Lenders.
Section 8.25. Formation of Subsidiaries. Except for existing Subsidiaries
designated on Schedule 6.2 hereto, the Company shall not, nor shall it permit
any Subsidiary to, form or acquire any Subsidiary without the prior written
consent of the Required Lenders.
Section 8.26. Change in the Nature of Business. The Company shall not, and
shall not permit any Subsidiary to, engage in any business or activity if as a
result the general nature of the business of the Company or any Subsidiary
would be changed in any material respect from the general nature of the
business engaged in by the Company or such Subsidiary on the date of this
Agreement.
Section 8.27. BACE Management Agreement. The Company will not, and will
not permit any Subsidiary to, amend or modify any provision of the BACE
Management Agreement relating to the compensation payable to BACE and any of
its Affiliates.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) default for five days or more in the payment when due of all or
any part of the principal of or interest on any Note (whether at the
stated maturity thereof or at any other time provided for in this
Agreement) or of any reimbursement obligation owing under any Application
or of any fee or other Obligation payable by the Company hereunder or
under any other Loan Document; or
-39-
<PAGE> 45
(b) default in the observance or performance of any covenant set
forth in Sections 8.5(f), 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.14,
8.15, 8.16, 8.17, 8.19 or 8.20 hereof or of any provision of any Loan
Document requiring the maintenance of insurance on the Collateral subject
thereto or dealing with the use or remittance of proceeds of Collateral;
or
(c) default in the observance or performance of any other provision
hereof or of any other Loan Document which is not remedied within 30 days
after the earlier of (i) the date on which such failure shall first become
known to any officer of the Company or (ii) written notice thereof is
given to the Company by the Agent or any Lender; or
(d) any representation or warranty made by the Company herein or in
any other Loan Document, or in any statement or certificate furnished by
it pursuant hereto or thereto, or in connection with any extension of
credit made hereunder, proves untrue in any material respect as of the
date of the issuance or making thereof; or
(e) any event occurs or condition exists (other than those described
in subsections (a) through (d) above) which is specified as an event of
default under any of the other Loan Documents, or any of the Loan
Documents shall for any reason not be or shall cease to be in full force
and effect, or any of the Loan Documents is declared to be null and void,
or any of the Collateral Documents shall for any reason fail to create a
valid and perfected first priority Lien in favor of the Agent in any
Collateral aggregating $50,000 or more in value purported to be covered
thereby except as expressly permitted by the terms thereof, or the Stock
Pledge Agreements taken together shall for any reason fail to create a
valid and perfected first priority Lien in favor of the Agent on at least
66-2/3% of the issued and outstanding Voting Stock of the Company; or
(f) default shall occur under any Indebtedness for Borrowed Money
aggregating $100,000 or more issued, assumed or guaranteed by the Company
or any Subsidiary, or under any indenture, agreement or other instrument
under which the same may be issued, and such default shall continue for a
period of time sufficient to permit the acceleration of the maturity of
any such Indebtedness for Borrowed Money (whether or not such maturity is
in fact accelerated), or any such Indebtedness for Borrowed Money shall
not be paid when due (whether by lapse of time, acceleration or otherwise
and any grace period applicable to such default in payment (but in no
event in excess of 5 days) shall have lapsed); or
(g) any judgment or judgments, writ or writs, or warrant or warrants
of attachment, or any similar process or processes in an aggregate amount
in excess of $100,000 shall be entered or filed against the Company or any
Subsidiary or against any of their Property and which remains unvacated,
unbonded, unstayed or unsatisfied for a period of 30 days; or
-40-
<PAGE> 46
(h) any agreement purporting to subordinate payment of any
Subordinated Debt to the prior payment of any Loan or any other
Obligations shall purport to be terminated or shall cease to have any
force or effect; or
(i) the Company or any Subsidiary makes any payment or other
distribution on account of the principal of or interest on any
Subordinated Debt or any other indebtedness, which payment or distribution
as prohibited under the terms of any instrument subordinating such
indebtedness to the prior payment of the Loans or any of the other
Obligations; or
(j) the Company or any member of its Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess $100,000 which it
shall have become liable to pay to the PBGC or to a Plan under Title IV of
ERISA; or notice of intent to terminate a Plan or Plans having aggregate
Unfunded Vested Liabilities in excess of $100,000 (collectively, a
"Material Plan") shall be filed under Title IV of ERISA by the Company or
any other member of its Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed
to administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against the Company or any member of its
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated; or
(k) dissolution or termination of the existence of the Company or any
Subsidiary (except for the merger of a Subsidiary into the Company to
effect a Permitted Acquisition); or
(l) the Company shall not have obtained on or before November 15,
1996 (the "Financing Deadline") from one or more commercial banks their
written commitments (subject to no conditions precedent to funding other
than those customarily required by prudent lenders similarly situated
extending like credit) for their participation in additional credit to be
extended on the terms and conditions of this Agreement (except to the
extent the Lenders and the Company in their discretion shall agree to
other terms) which when taken together with the Commitments then in effect
hereunder would aggregate at least $35,000,000; or
(m) BACE Investments, Mesirow and Edgewater, taken collectively,
shall at any time and for any reason cease to own, both legally and
beneficially, at least 51% of the issued and outstanding Voting Stock of
the Company; or
(n) the Company or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an
assignment for the benefit of
-41-
<PAGE> 47
creditors, (iv) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its Property, (v)
institute any proceeding seeking to have entered against it an order for
relief under the United States Bankruptcy Code, as amended, to adjudicate
it insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (vi) take
any corporate action in furtherance of any matter described in parts (i)
through (v) above, or (vii) fail to contest in good faith any appointment
or proceeding described in Section 9.1(o) hereof; or
(o) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Company or any Subsidiary or any
substantial part of any of their Property, or a proceeding described in
Section 9.1(n)(v) shall be instituted against the Company or any
Subsidiary, and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of 60 days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default described
in subsection (a) through (m), both inclusive, of Section 9.1 has occurred and
is continuing, the Agent shall, upon the request of the Required Lenders, by
notice to the Company, take one or more of the following actions:
(a) terminate the obligations of the Lenders to extend any further
credit hereunder on the date (which may be the date thereof) stated in
such notice;
(b) declare the principal of and the accrued interest on the Notes to
be forthwith due and payable and thereupon the Notes, including both
principal and interest and all fees, charges and other Obligations payable
hereunder and under the other Loan Documents, shall be and become
immediately due and payable without further demand, presentment, protest
or notice of any kind; and
(c) enforce any and all rights and remedies available to it under the
Loan Documents or applicable law.
Section 9.3. Bankruptcy Defaults. When any Event of Default described in
subsection (n) or (o) of Section 9.1 has occurred and is continuing, then the
Notes, including both principal and interest, and all fees, charges and other
Obligations payable hereunder and under the other Loan Documents, shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, and the obligations of the Lenders to extend further credit
pursuant to any of the terms hereof shall immediately terminate. In addition,
the Agent may exercise any and all remedies available to it under the Loan
Documents or applicable law.
-42-
<PAGE> 48
SECTION 10. THE AGENT
Section 10.1. Appointment and Authorization. Each Lender hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers hereunder and under the other Loan Documents as are
designated to the Agent by the terms hereof and thereof together with such
powers as are reasonably incidental thereto. The Lenders expressly agree that
the Agent is not acting as a fiduciary of the Lenders in respect of the Loan
Documents, the Company or otherwise, and nothing herein or in any of the other
Loan Documents shall result in any duties or obligations on the Agent or any of
the Lenders except as expressly set forth herein. The Agent may resign at any
time by sending 20 days prior written notice to the Company and the Lenders. In
the event of any such resignation, the Required Lenders may appoint a new agent
after consultation with the Company, which shall succeed to all the rights,
powers and duties of the Agent hereunder and under the other Loan Documents.
Any resigning Agent shall be entitled to the benefit of all the protective
provisions hereof with respect to its acts as an agent hereunder, but no
successor Agent shall in any event be liable or responsible for any actions of
its predecessor. If the Agent resigns and no successor is appointed, the rights
and obligations of such Agent shall be automatically assumed by the Required
Lenders and (i) the Company shall be directed to make all payments due each
Lender hereunder directly to such Lender and (ii) the Agent's rights in the
Collateral Documents shall be assigned without representation, recourse or
warranty to the Lenders as their interests may appear.
Section 10.2. Rights as a Lender. The Agent has and reserves all of the
rights, powers and duties hereunder and under the other Loan Documents as any
Lender may have and may exercise the same as though it were not the Agent and
the terms "Lender" or "Lenders" as used herein and in all of such documents
shall, unless the context otherwise expressly indicates, include the Agent in
its individual capacity as a Lender.
Section 10.3. Standard of Care. The Lenders acknowledge that they have
received and approved copies of the Loan Documents and such other information
and documents concerning the transactions contemplated and financed hereby as
they have requested to receive and/or review. The Agent makes no
representations or warranties of any kind or character to the Lenders with
respect to the validity, enforceability, genuineness, perfection, value, worth
or collectibility hereof or of the Notes or any of the other Obligations or of
any of the other Loan Documents or of the Liens provided for thereby or of any
other documents called for hereby or thereby or of the Collateral. The Agent
need not verify the worth or existence of the Collateral and may rely
exclusively on reports of the Company in computing the Term Credit Earnings
limit and Revolver Advance Limit. Neither the Agent nor any director, officer,
employee, agent or representative thereof (including any security trustee
therefor) shall in any event be liable for any clerical errors or errors in
judgment, inadvertence or oversight, or for action taken or omitted to be taken
by it or them hereunder or under the other Loan Documents or in connection
herewith or therewith except for its or their own gross negligence or willful
misconduct. The Agent shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, certificate,
warranty, instruction or statement (oral or written) of anyone (including
anyone in good faith believed by it to be authorized to act on
-43-
<PAGE> 49
behalf of the Company), unless it has actual knowledge of the untruthfulness of
same. The Agent may execute any of its duties hereunder by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders for the default or misconduct of any such agents or attorneys-in-fact
selected with reasonable care. The Agent shall be entitled to advice of counsel
concerning all matters pertaining to the agencies hereby created and its duties
hereunder, and shall incur no liability to anyone and be fully protected in
acting upon the advice of such counsel. The Agent shall be entitled to assume
that no Default or Event of Default exists unless notified to the contrary by a
Lender. The Agent shall in all events be fully protected in acting or failing
to act in accord with the instructions of the Required Lenders. Upon the
occurrence of an Event of Default hereunder, the Agent shall take such action
with respect to the enforcement of the Liens on the Collateral and the
preservation and protection thereof as it shall be directed to take by the
Required Lenders but unless and until the Required Lenders have given such
direction the Agent shall take or refrain from taking such actions as it deems
appropriate and in the best of interest of all Lenders. The Agent shall in all
cases be fully justified in failing or refusing to act hereunder unless it
shall be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by the Agent by reason of taking or
continuing to take any such action. The Agent may treat the owner of any Note
as the holder thereof until written notice of transfer shall have been filed
with the Agent signed by such owner in form satisfactory to the Agent. Each
Lender acknowledges that it has independently and without reliance on the Agent
or any other Lender and based upon such information, investigations and
inquiries as it deems appropriate made its own credit analysis and decision to
extend credit to the Company. It shall be the responsibility of each Lender to
keep itself informed as to the creditworthiness of the Company and the Agent
shall have no liability to any Lender with respect thereto.
Section 10.4. Costs and Expenses. Each Lender agrees to reimburse the
Agent for all costs and expenses suffered or incurred by the Agent or any
security trustee in performing its duties hereunder and under the other Loan
Documents, or in the exercise of any right or power imposed or conferred upon
the Agent hereby or thereby, to the extent that the Agent is not promptly
reimbursed for same by the Company or out of the Collateral, all such costs and
expenses to be borne by the Lenders ratably in accordance with the amounts of
their respective Commitments. If any Lender fails to reimburse the Agent for
such Lender's share of any such costs and expenses, such costs and expenses
shall be paid pro rata by the remaining Lenders, but without in any manner
releasing the defaulting Lender from its liability hereunder.
Section 10.5. Indemnity. The Lenders shall ratably indemnify and hold the
Agent, and its directors, officers, employees, agents and representatives
(including as such any security trustee therefor) harmless from and against any
liabilities, losses, costs and expenses suffered or incurred by them hereunder
or under the other Loan Documents or in connection with the transactions
contemplated hereby or thereby, regardless of when asserted or arising, except
to the extent they are promptly reimbursed for the same by the Company or out
of the Collateral and except to the extent that any event giving rise to a
claim was caused by the gross negligence or willful misconduct of the party
seeking to be indemnified. If any Lender defaults in its obligations hereunder,
its share of the obligations shall be paid pro rata by the remaining Lenders,
but without in any manner releasing the defaulting Lender from its liability
hereunder.
-44-
<PAGE> 50
SECTION 11. MISCELLANEOUS.
Section 11.1. Withholding Taxes. (a) Payments Free of Withholding. Except
as otherwise required by law and subject to Section 11.1(b) hereof, each
payment by the Company under this Agreement and under any other Loan Document
shall be made without withholding for or on account of any present or future
taxes (other than overall net income taxes on the recipient) imposed by or
within the jurisdiction in which the Company is domiciled, any jurisdiction
from which the Company makes any payment, or (in each case) any political
subdivision or taxing authority thereof or therein. If any such withholding is
so required, the Company shall make the withholding, pay the amount withheld to
the appropriate governmental authority before penalties attach thereto or
interest accrues thereon and forthwith pay such additional amount as may be
necessary to ensure that the net amount actually received by each Lender and
the Agent free and clear of such taxes (including such taxes on such additional
amount) is equal to the amount which that Lender or the Agent (as the case may
be) would have received had such withholding not been made. If the Agent or any
Lender pays any amount in respect of any such taxes, penalties or interest, the
Company shall reimburse the Agent or such Lender for that payment on demand in
the currency in which such payment was made. If the Company pays any such
taxes, penalties or interest, it shall deliver official tax receipts evidencing
that payment or certified copies thereof to the Lender or Agent on whose
account such withholding was made (with a copy to the Agent if not the
recipient of the original) on or before the thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
shall submit to the Company and the Agent on or before the earlier of the date
the initial Borrowing is made hereunder and 30 days after the date hereof, two
duly completed and signed copies of either Form 1001 (relating to such Lender
and entitling it to a complete exemption from withholding under the Code on all
amounts to be received by such Lender, including fees, pursuant to the Loan
Documents and the Loans) or Form 4224 (relating to all amounts to be received
by such Lender, including fees, pursuant to the Loan Documents and the Loans)
of the United States Internal Revenue Service. Thereafter and from time to
time, each Lender shall submit to the Company and the Agent such additional
duly completed and signed copies of one or the other of such Forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may be (i) requested by the Company in a written
notice, directly or through the Agent, to such Lender and (ii) required under
then-current United States law or regulations to avoid or reduce United States
withholding taxes on payments in respect of all amounts to be received by such
Lender, including fees, pursuant to the Loan Documents or the Loans.
(c) Inability of Bank to Submit Forms. If any Lender determines, as a
result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit to
the Company or the Agent any form or certificate that such Lender is obligated
to submit pursuant to subsection (b) of this Section 11.1 or that such Lender
is required to withdraw or cancel any such form or certificate previously
submitted or any such form or certificate otherwise becomes ineffective or
inaccurate, such Lender shall promptly notify the Company and Agent of such
fact and the Lender shall to that extent
-45-
<PAGE> 51
not be obligated to provide any such form or certificate and will be entitled
to withdraw or cancel any affected form or certificate, as applicable.
Section 11.2. Non-Business Days. If any payment hereunder becomes due and
payable on a day which is not a Business Day, the due date of such payment
shall be extended to the next succeeding Business Day on which date such
payment shall be due and payable. In the case of any payment of principal
falling due on a day which is not a Business Day, interest on such principal
amount shall continue to accrue during such extension at the rate per annum
then in effect, which accrued amount shall be due and payable on the next
scheduled date for the payment of interest.
Section 11.3. No Waiver, Cumulative Remedies. No delay or failure on the
part of any Lender or on the part of any holder of any of the Obligations in
the exercise of any power or right shall operate as a waiver thereof or as an
acquiescence in any default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof or the exercise
of any other power or right. The rights and remedies hereunder of the Lenders
and any of the holders of the Obligations are cumulative to, and not exclusive
of, any rights or remedies which any of them would otherwise have.
Section 11.4. Waivers, Modifications and Amendments. Any provision hereof
or of any of the other Loan Documents may be amended, modified, waived or
released and any Default or Event of Default and its consequences may be
rescinded and annulled upon the written consent of the Required Lenders;
provided, however, that without the consent of all Lenders no such amendment,
modification or waiver shall increase the amount or extend the term of any
Lender's Commitment or reduce the amount of any principal of or interest rate
applicable to, or extend the maturity of, any Obligation owed to it or reduce
the amount of the fees to which it is entitled hereunder or release any
substantial (in value) part of the collateral security afforded by the
Collateral Documents (except in connection with a sale or other disposition
required to be effected by the provisions hereof or of the Collateral
Documents) or change this Section or change the definition of "Required
Lenders" or change the number of Lenders required to take any action hereunder
or under any of the other Loan Documents. No amendment, modification or waiver
of the Agent's protective provisions shall be effective without the prior
written consent of the Agent.
Section 11.5. Costs and Expenses. The Company agrees to pay on demand the
reasonable costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of this Agreement, the other Loan Documents
and the other instruments and documents to be delivered hereunder or
thereunder, and in connection with the recording or filing of any of the
foregoing, and in connection with the transactions contemplated hereby or
thereby, and in connection with any consents hereunder or waivers or amendments
hereto or thereto, including the fees and expenses of Messrs. Chapman and
Cutler, counsel for the Agent, with respect to all of the foregoing (whether or
not the transactions contemplated hereby are consummated). The Company further
agrees to pay to Agent and the Lenders and any other holders of the Obligations
all reasonable costs and expenses (including court costs and attorneys' fees),
if any, incurred or paid by the Agent, the Lenders or any other holders of the
Obligations in connection with any Default or
-46-
<PAGE> 52
Event of Default or in connection with the enforcement of this Agreement or any
of the other Loan Documents or any other instrument or document delivered
hereunder or thereunder. The Company further agrees to indemnify and save the
Lenders, the Agent and any security trustee for the Lenders harmless from any
and all liabilities, losses, costs and expenses incurred by the Lenders or the
Agent in connection with any action, suit or proceeding brought against the
Agent, or any security trustee or any Lender by any Person (but excluding
attorneys' fees for litigation solely between the Lenders to which the Company
is not a party) which arises out of the transactions contemplated or financed
hereby or out of any action or inaction by the Agent, any security trustee or
any Lender hereunder or thereunder, except for such thereof as is caused by the
gross negligence or willful misconduct of the party seeking to be indemnified.
The provisions of this Section and the protective provisions of Section 2
hereof shall survive payment of the Obligations.
Section 11.6. Documentary Taxes. The Company agrees to pay on demand any
documentary, stamp or similar taxes payable in respect of this Agreement or any
other Loan Document, including interest and penalties, in the event any such
taxes are assessed, irrespective of when such assessment is made and whether or
not any credit is then in use or available hereunder.
Section 11.7. Survival of Representations. All representations and
warranties made herein or in any of the other Loan Documents or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 11.8. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Agent and the Lenders of amounts
sufficient to protect the yield of the Agent and the Lenders with respect to
the Loans, including, but not limited to, Sections 2.7, 2.8 and 2.9 hereof,
shall survive the termination of this Agreement and the payment of the
Obligations.
Section 11.9. Participations. Any Lender may grant participations in its
extensions of credit hereunder to any other Lender or other lending institution
(a "Participant"), provided that (i) no Participant shall thereby acquire any
direct rights under this Agreement, (ii) no Lender shall agree with a
Participant not to exercise any of such Lender's rights hereunder without the
consent of such Participant except for rights which under the terms hereof may
only be exercised by all Lenders and (iii) no sale of a participation in
extensions of credit shall in any manner relieve the selling Lender of its
obligations hereunder.
Section 11.10. Assignment Agreements. Each Lender may, from time to time
upon at least 5 Business Days' prior written notice to the Agent, assign to
other commercial lenders part of its rights and obligations under this
Agreement (including without limitation the indebtedness evidenced by the Notes
then owned by such assigning Lender, together with an equivalent proportion of
its Commitments to make Loans hereunder) pursuant to written agreements
executed by such assigning Lender, such assignee lender or lenders, the Company
and the Agent, which agreements shall specify in each instance the portion of
the
-47-
<PAGE> 53
indebtedness evidenced by the Notes which is to be assigned to each such
assignee lender and the portion of the Commitments of the assigning Lender to
be assumed by it (the "Assignment Agreements"); provided, however, that (i)
each such assignment shall be of a constant, and not a varying, percentage of
the assigning Lender's rights and obligations under this Agreement and the
assignment shall cover the same percentage of such Lender's Commitments, Loans
and Notes; (ii) unless the Agent otherwise consents, the aggregate amount of
the Commitments, Loans and Notes of the assigning Lender being assigned
pursuant to each such assignment (determined as of the effective date of the
relevant Assignment Agreement) shall in no event be less than $5,000,000 and
shall be an integral multiple of $1,000,000; (iii) the Agent and the Company
must each consent, which consent shall not be unreasonably withheld, to each
such assignment to a party which was not an original signatory of this
Agreement; and (iv) the assigning Lender must pay to the Agent a processing and
recordation fee of $2,500 and any out-of-pocket attorneys' fees and expenses
incurred by the Agent in connection with such Assignment Agreement. Upon the
execution of each Assignment Agreement by the assigning Lender thereunder, the
assignee lender thereunder, the Company and the Agent and payment to such
assigning Lender by such assignee lender of the purchase price for the portion
of the indebtedness of the Company being acquired by it, (i) such assignee
lender shall thereupon become a "Lender" for all purposes of this Agreement
with Commitments in the amounts set forth in such Assignment Agreement and with
all the rights, powers and obligations afforded a Lender hereunder, (ii) such
assigning Lender shall have no further liability for funding the portion of its
Commitments assumed by such other Lender and (iii) the address for notices to
such assignee Lender shall be as specified in the Assignment Agreement executed
by it. Concurrently with the execution and delivery of such Assignment
Agreement, the Company shall execute and deliver Notes to the assignee Lender
in the respective amounts of its Commitments under the Revolving Credit and the
Term Credit and new Notes to the assigning Lender in the respective amounts of
its Commitments under the Revolving Credit and the Term Credit after giving
effect to the reduction occasioned by such assignment, all such Notes to
constitute "Notes" for all purposes of this Agreement and of the other Loan
Documents.
Section 11.11. Notices. Except as otherwise specified herein, all notices
hereunder shall be in writing (including, without limitation, notice by
telecopy) and shall be given to the relevant party at its address or telecopier
number set forth below, in the case of the Company, or on the appropriate
signature page hereof, in the case of the Lenders and the Agent, or such other
address or telecopier number as such party may hereafter specify by notice to
the Agent and the Company given by United States certified or registered mail,
by telecopy or by other telecommunication device capable of creating a written
record of such notice and its receipt. Notices hereunder to the Company shall
be addressed to:
1522 Blake Street
Denver, Colorado 80202
Attention: Craig Zoellner
Telephone: (303) 620-9090
Telecopy: (303) 620-9016
-48-
<PAGE> 54
With a copy to (in case of notices of default):
R. Scott Pullara
Sherman and Howard, LLC
633 17th Street
Suite 3000
Denver, Colorado 80202
Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section; provided that any notice given
pursuant to Section 1 or Section 2 hereof shall be effective only upon receipt.
Section 11.12. Construction. The parties hereto acknowledge and agree that
this Agreement and the other Loan Documents shall not be construed more
favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties hereto contributed substantially
to the negotiation of this Agreement and the other Loan Documents. NOTHING
CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED TO PERMIT ANY ACT OR OMISSION
WHICH IS PROHIBITED BY THE TERMS OF ANY OF THE OTHER LOAN DOCUMENTS, THE
COVENANTS AND AGREEMENTS CONTAINED HEREIN BEING IN ADDITION TO AND NOT IN
SUBSTITUTION FOR THE COVENANTS AND AGREEMENTS CONTAINED IN THE OTHER LOAN
DOCUMENTS.
Section 11.13. Headings. Section headings used in this Agreement are for
convenience of reference only and are not a part of this Agreement for any
other purpose.
Section 11.14. Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. All rights, remedies and powers provided in this Agreement and
the other Loan Documents may be exercised only to the extent that the exercise
thereof does not violate any applicable mandatory provisions of law, and all
the provisions of this Agreement and the other Loan Documents are intended to
be subject to all applicable mandatory provisions of law which may be
controlling and to be limited to the extent necessary so that they will not
render this Agreement or the other Loan Documents invalid or unenforceable.
Section 11.15 Counterparts. This Agreement may be executed in any number
of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
-49-
<PAGE> 55
Section 11.16. Entire Understanding. This Agreement together with the
other Loan Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and any prior agreements, whether written
or oral, with respect thereto are superseded hereby except for prior
understandings related to fees payable to the Agent upon the initial closing of
the transactions contemplated hereby.
Section 11.17. Binding Nature, Governing Law, Etc. This Agreement shall be
binding upon the Company and its successors and assigns, and shall inure to the
benefit of the Agent and the Lenders and the benefit of their successors and
assigns, including any subsequent holder of an interest in the Obligations. The
Company may not assign its rights hereunder without the written consent of the
Lenders. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 11.18. Submission to Jurisdiction; Waiver of Jury Trial. The
Company hereby submits to the non-exclusive jurisdiction of the United States
District Court for the Northern District of Illinois and of any Illinois State
court sitting in the City of Chicago for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Company irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum. THE COMPANY, THE AGENT, AND EACH LENDER
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this 15th day of May, 1996.
RENTX INDUSTRIES, INC.
By /s/ CRAIG J. ZOELLNER
-----------------------------------
Name: Craig J. Zoellner
Title: Vice President
-50-
<PAGE> 56
Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
Each of the Lenders hereby agrees with each other Lender that if it should
receive or obtain any payment (whether by voluntary payment, by realization
upon collateral, by the exercise of rights of set-off or banker's lien, by
counterclaim or cross action, or by the enforcement of any rights under this
Agreement, any of the other Loan Documents or otherwise) in respect of the
Obligations in a greater amount than such Lender would have received had such
payment been made to the Agent and been distributed among the Lenders as
contemplated by Section 3.5 hereof then in that event the Lender receiving such
disproportionate payment shall purchase for cash without recourse from the
other Lenders an interest in the Obligations of the Company to such Lenders in
such amount as shall result in a distribution of such payment as contemplated
by Section 3.5 hereof. In the event any payment made to a Lender and shared
with the other Lenders pursuant to the provisions hereof is ever recovered from
such Lender, the Lenders receiving a portion of such payment hereunder shall
restore the same to the payor Lender, but without interest.
Amount and Percentage of Commitments:
Revolving Credit Term Loan
Commitment: Commitment:
$1,380,000 $7,620,000
HARRIS TRUST AND SAVINGS BANK
By /s/ BONNIE A. POLIC
----------------------------------
Name: Bonnie A. Polic
---------------------------------
Title: Vice President
--------------------------------
111 West Monroe Street
Chicago, Illinois 60603
Attention: Emerging Majors-West
Telephone: (312) 461-5415
Telecopy: (312) 461-2591
-51-
<PAGE> 57
Revolving Credit Term Loan
Commitment: Commitment:
$920,000 $5,080,000
LASALLE NATIONAL BANK
By /s/ CAROL MORSE
------------------------------------
Name: Carol Morse
---------------------------------
Title: Vice President
--------------------------------
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Carol Morse
Telephone: (312) 904-8128
Telecopy: (312) 904-6457
-52-
<PAGE> 58
EXHIBIT A
RENTX INDUSTRIES, INC.
REVOLVING CREDIT NOTE
Chicago, Illinois
$_______________ May __, 1996
On the Revolving Credit Termination Date, for value received, the
undersigned, RENTX INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby promises to pay to the order of _______________ (the "Lender"), at the
principal office of Harris Trust and Savings Bank in Chicago, Illinois, the
principal sum of (i) _______________________ and no/100 Dollars ($___________),
or (ii) such lesser amount as may at the time of the maturity hereof, whether
by acceleration or otherwise, be the aggregate unpaid principal amount of all
Revolving Credit Loans owing from the Company to the Lender under the Revolving
Credit provided for in the Credit Agreement hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate Portion"
and "LIBOR Portions" as such terms are defined in that certain Credit Agreement
dated as of May 15, 1996, between the Company, Harris Trust and Savings Bank,
individually and as Agent thereunder, and the other Lenders which are now or
may from time to time hereafter become parties thereto (said Credit Agreement,
as the same may be amended, modified or restated from time to time, being
referred to herein as the "Credit Agreement") made and to be made to the
Company by the Lender under the Revolving Credit provided for under the Credit
Agreement, and the Company hereby promises to pay interest at the office
described above on each loan evidenced hereby at the rates and at the times and
in the manner specified therefor in the Credit Agreement.
Each loan made under the Revolving Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto shall be endorsed by
the holder hereof on a schedule to this Note or recorded on the books and
records of the holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company agrees that
in any action or proceeding instituted to collect or enforce collection of this
Note, the entries so endorsed on a schedule to this Note or recorded on the
books and records of the holder hereof shall, absent manifest error, be prima
facie evidence of the unpaid principal balance of this Note, the status of each
such loan from time to time as part of the Domestic Rate Portion or a LIBOR
Portion, and, in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto.
<PAGE> 59
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary
prepayments may be made hereon, and certain prepayments are required to be made
hereon, all in the events, on the terms and with the effects provided in the
Credit Agreement. All capitalized terms used herein without definition shall
have the same meanings herein as such terms are defined in the Credit
Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof in
collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
RENTX INDUSTRIES, INC.
By
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-2-
<PAGE> 60
EXHIBIT B
RENTX INDUSTRIES, INC.
TERM NOTE
Chicago, Illinois
$_______________ May __, 1996
On the Term Credit Termination Date, for value received, the undersigned,
RENTX INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby promises
to pay to the order of _______________ (the "Lender"), at the principal office
of Harris Trust and Savings Bank in Chicago, Illinois, the principal sum of (i)
_______________________ and no/100 Dollars ($___________), or (ii) such lesser
amount as may at the time of the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of all Term Loans owing
from the Company to the Lender under the Term Credit provided for in the Credit
Agreement hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate Portion"
and "LIBOR Portions" as such terms are defined in that certain Credit Agreement
dated as of May 15, 1996, between the Company, Harris Trust and Savings Bank,
individually and as Agent thereunder, and the other Lenders which are now or
may from time to time hereafter become parties thereto (said Credit Agreement,
as the same may be amended, modified or restated from time to time, being
referred to herein as the "Credit Agreement") made and to be made to the
Company by the Lender under the Term Credit provided for under the Credit
Agreement, and the Company hereby promises to pay interest at the office
described above on each loan evidenced hereby at the rates and at the times and
in the manner specified therefor in the Credit Agreement.
Each loan made under the Term Credit provided for in the Credit Agreement
by the Lender to the Company against this Note, any repayment of principal
hereon, the status of each such loan from time to time as part of the Domestic
Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion, the
interest rate and Interest Period applicable thereto shall be endorsed by the
holder hereof on a schedule to this Note or recorded on the books and records
of the holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company agrees that
in any action or proceeding instituted to collect or enforce collection of this
Note, the entries so endorsed on a schedule to this Note or recorded on the
books and records of the holder hereof shall, absent manifest error, be prima
facie evidence of the unpaid principal balance of this Note, the status of each
such loan from time to time as part of the Domestic Rate Portion or a LIBOR
Portion, and, in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto.
<PAGE> 61
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary
prepayments may be made hereon, and certain prepayments are required to be made
hereon, all in the events, on the terms and with the effects provided in the
Credit Agreement. All capitalized terms used herein without definition shall
have the same meanings herein as such terms are defined in the Credit
Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof in
collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
RENTX INDUSTRIES, INC.
By
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-2-
<PAGE> 62
EXHIBIT C
COMPLIANCE CERTIFICATE
To: Harris Trust and Savings Bank, as
Agent under, and the Lenders party
to, the Credit Agreement described
below
This Compliance Certificate is furnished to the Agent and the Lenders
pursuant to that certain Credit Agreement dated as of May 15, 1996, by and
among RentX Industries, Inc. (the "Company") and you (the "Credit Agreement").
Unless otherwise defined herein, the terms used in this Compliance Certificate
have the meanings ascribed thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _________________________________ of the Company;
2. I have reviewed the terms of the Credit Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Company and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or the occurrence of any event
which constitutes a Default or Event of Default during or at the end of the
accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below;
4. The financial statements required by Section 8.5 of the Credit
Agreement and being furnished to you concurrently with this Certificate are
true, correct and complete as of the date and for the periods covered thereby;
and
5. The Attachment hereto sets forth financial data and computations
evidencing the Company's compliance with certain covenants of the Credit
Agreement, all of which data and computations are, to the best of my knowledge,
true, complete and correct and have been made in accordance with the relevant
Sections of the Credit Agreement.
<PAGE> 63
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Company has taken, is taking, or proposes to
take with respect to each such condition or event:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
The foregoing certifications, together with the computations set forth in
the Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _________ day of
__________________ 19___.
-----------------------------------
,
-------------------- --------------
(Print or Type Name) (Title)
-2-
<PAGE> 64
ATTACHMENT TO COMPLIANCE CERTIFICATE
RENTX INDUSTRIES, INC.
Compliance Calculations for Credit Agreement
Dated as of May 15, 1996
Calculations as of _____________, 19___
________________________________________________________________________________
A. Revolver Store Advance Limit (Section 1.1)
1. Aggregate principal of Revolving
Credit Loans $________
2. Cumulative amount expended
on rental inventory and equipment for
Acquired and Start-Up Stores $________
3. Line A2 multiplied by .60 $________
4. Sum of Line A3 and $200,000 $________
5. Per Section 1.1 Line A4 must
be less than Line A1
Company is in compliance? (Circle yes or no) Yes/No
=========
B. Term Credit Earnings Limit (Section 1.3)
1. Aggregate amount of Term Loans $________
2. Net Income as defined $________
3. Amounts deducted in arriving at
Net Income in respect of
(a) Interest Expense $________
(b) Taxes $________
(c) Depreciation and amortization $________
(d) Aggregate management fees,
non-operating expenses, excess
compensation and etc. $________
<PAGE> 65
4. Sum of Lines B2, B3(a), (b), (c)
and (d) ("EBITDA") $________
5. Pro forma adjustments in respect of:
(a) Actual EBITDA of Acquired Stores
determined in accordance with lines
B3 and B4 during the:
(i) period after the Permitted
Acquisition Closing $________
(ii) pre-acquisition period
(including expenditures for
rental inventory and equipment) $________
(b) For Start-Up Stores commencing
operations within 12 months of
close of relevant period: .25x
aggregate expended amount for
rental inventory and equipment $________
(c) For Start-Up Stores commencing
operations more than months but
less than 24 months of close of
relevant period:
(i) .25x the aggregate amount
expended prior to the 13th
calendar month to purchase
rental inventory and equipment
further multiplied by ___/12 $________
(ii) Actual EBITDA for Start-Up
Stores beginning with 13th
calendar month $________
(d) Actual EBITDA of Start-Up Stores
which commence operations 24
calendar months or more prior to
the close of the relevant period $________
6. Sum of Lines B4, B5(a)(i) and (ii),
B5(b), B5(c)(i) and (ii) and B5(d)
("Pro forma Adjusted Cash Flow") $________
-2-
<PAGE> 66
7. 3x Line B6 ("Term Credit Earnings Limit") $________
8. Per Section 1.3 Line B1 must not exceed
Line B7
Company is in compliance? (circle yes or no) Yes/No
=========
C. Inventory Leases (Section 8.7)
Per Section 8.7, the value of property leased
shall not exceed $1,500,000
Company is in compliance? (circle yes or no) Yes/No
=========
D. Store Leases (Section 8.8)
Per Section 8.8, the value of property leased
with a term greater than 5 years shall not be
greater than 10% of the value of all leased
property.
Company is in compliance? (circle yes or no) Yes/No
=========
E. Senior Funded Debt Ratio (Section 8.9)
1. Senior Funded Debt as defined $________
2. Pro forma Adjusted Cash Flow (Line B6) $________
3. Ratio of Line E1 to Line E2 :1.0
=========
4. Per Section 8.9 Line E3 may not be
greater than 3.0:1.0
=========
5. Company is in compliance? (circle yes or no) Yes/No
=========
F. Actual EBITDA (Section 8.10)
1. EBITDA of Acquired Stores owned for
duration of measurement period $________
2. EBITDA of Acquired Stores not owned for
duration of measurement period as
determined for quarters while owned $________
3. Corporate Overhead deducted in F1 and F2 $________
4. Sum of Lines F1, F2 and F3
("Adjusted Actual EBITDA:) $________
-3-
<PAGE> 67
5. EBITDA (Line B4) $________
6. EBITDA of Acquired Stores for
period as per definition
of "Adjusted Base EBITDA" $________
7. Ratio of Line F4 to Line F6
("Cash Flow Shrinkage Ratio") :1.0
=========
8. Per Section 8.10 Cash Flow Shrinkage
Ratio must not be less than .85:1.0
=========
9. Company is in compliance? (circle yes or no) Yes/No
=========
G. Overhead to Revenue Ratio (Section 8.11)
1. Aggregate Corporate Overhead as defined $________
2. For each Start-Up Store commencing
operations within 12 months prior to the
close of the relevant period: .80x aggregate
amount expended for rental inventory
and equipment $________
3. For each Start-Up Store commencing
operations within more than 12 months
but less than 24 months prior to the close
of the relevant period: gross revenues
for period up to 13th calendar month
plus .80x aggregate amount expended for
rental inventory and equipment $________
4. Gross revenues at each Start-Up Store
commencing operations more than 24
months prior to the close of the relevant
period $________
5. Sum of Line G2, G3 and G4 $________
6. Ratio of G1 to G5 ("Overhead Ratio") :1.0
=========
7. Per Section 8.11 Overhead Ratio shall not
be greater than :1.0
=========
-4-
<PAGE> 68
8. Company is in compliance (circle yes or no) Yes/No
=========
H. Store Openings (Section 8.12)
1. Number of Start-Up Stores _________
2. Number of all rental stores _________
3. Ratio of H1 to H2 :1.0
=========
4. Per Section 8.12, Company may not
commence the operations of a new
Start-Up Store if Line 3 exceeds .25 to 1
=========
-5-
<PAGE> 69
SCHEDULE 6.2
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF PERCENTAGE
NAME INCORPORATION OWNERSHIP
==== --------------- ----------
<S> <C> <C>
NONE
</TABLE>
<PAGE> 70
SCHEDULE 8.14
PERMITTED LIENS
<TABLE>
<CAPTION>
Secured Party Collateral
- ------------- ----------
<S> <C>
Makita U.S.A., Inc. Makita merchandise and parts which are purchased on
open account.
Rex Oil Company Oil storage and pumping equipment leased by Zodiac
Rentals.
Wacker Corporation Wacker merchandise and parts which are purchased on
open account.
Nagata America Corporation Consigned inventory from Nagata and maintenance
parts for such inventory.
</TABLE>
<PAGE> 71
RENTX INDUSTRIES, INC.
FIRST AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
LaSalle National Bank
Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of May
15, 1996 (the "Credit Agreement") currently in effect by and among, RentX
Industries, Inc., a Delaware corporation (the "Company"), and you (the
"Lenders"). All capitalized terms used herein without definition shall have
the same meanings herein as such terms have in the Credit Agreement.
The Company hereby applies to the Lenders to increase the amount of the
Revolving Credit Commitments, to increase the amount of the Term Loan
Commitments, to extend the Revolving Credit Termination Date, to extend the
Term Credit Termination Date, to amend certain of the financial covenants
contained therein, to add Bank One, Chicago, N.A. as a Lender under the Credit
Agreement and to make certain other amendments to the Credit Agreement, and the
Lenders are willing to do so under the terms and conditions set forth in this
Amendment.
1. INCREASE OF COMMITMENT AMOUNTS.
The amount of each Lender's Commitment set forth opposite its name on its
signature page to the Credit Agreement shall be amended and as so amended shall
be restated as follows:
<TABLE>
<S> <C> <C>
AMOUNT OF REVOLVING AMOUNT OF TERM
LENDER CREDIT COMMITMENT CREDIT COMMITMENT
Harris Trust and Savings Bank $2,142,857.14 $15,000,000.00
LaSalle National Bank $1,428,571.43 $10,000,000.00
</TABLE>
2. ADDITION OF NEW LENDER.
Upon the satisfaction of the conditions precedent set forth in Section 5
hereof, the Credit Agreement shall be and hereby is amended as follows:
2.01. Bank One, Chicago, N.A. (herein, the "New Lender") shall have all
the rights, benefits, duties and obligations of a Lender under the Credit
Agreement and the Collateral
<PAGE> 72
Documents. The New Lender agrees that it will perform all of the duties and
obligations which by the terms of the Credit Agreement and the Collateral
Documents are required to be performed by it as a Lender with Commitments as of
the date it first becomes a New Lender as follows:
Term Credit Commitment: $10,000,000.00
Revolving Credit Commitment: $ 1,428,571.43
Accordingly, all references in the Credit Agreement and the Collateral
Documents to the terms "Lender" and "Lenders" shall be deemed to include, and
be a reference to, the New Lender.
2.02. All references in the Credit Agreement and the Collateral Documents
to the Notes or any of them shall be deemed to include, and be a reference to,
the Revolving Credit Note and the Term Note issued pursuant hereto by the
Company to the New Lender.
2.03. The New Lender shall be deemed a Lender signatory to the Credit
Agreement and the following address and Commitments shall be deemed to appear
on the Lenders' signature page in the Credit Agreement as so amended for the
New Lender:
800 Davis Street
Evanston, Illinois 60201
Attention: Robert J. Buerger
Revolving Credit Commitment: $1,428,571.43
Term Loan Commitment: $10,000,000.00
3. AMENDMENTS.
3.01. The third sentence of Section 1.1 of the Credit Agreement is hereby
amended in its entirety and as so amended shall be restated to read as follows:
"The Revolving Credit may be utilized by the Company in
the form of Revolving Credit Loans, all as more fully
hereinafter set forth; provided, however, that the
aggregate principal amount of Revolving Credit Loans
outstanding at any one time shall not exceed the lesser of
(x) the Revolving Credit Commitments or (y) the Revolver
Advance Limit as then determined and computed or (z) the
excess (if any) of the Maximum Available Credit over the
aggregate cumulative principal amount of Term Loans
extended hereunder (whether or not subsequently repaid)."
3.02. The first sentence of Section 1.3(a) of the Credit Agreement is
hereby amended in its entirety and as so amended shall be restated to read as
follows:
"Subject to the terms and conditions hereof, each Lender
severally agrees to make loans (individually a "Term Loan"
and collectively the "Term Loans") to the Company in a
cumulative amount not
-2-
<PAGE> 73
exceeding such Lender's commitment set forth opposite such
Lender's signature hereto under the heading "Term Loan
Commitment" or as otherwise provided in Section 11.10
hereof, as such amount may be reduced pursuant hereto;
provided, however, that (i) the aggregate amount of Term
Loans outstanding at any one time shall not exceed the
Term Credit Earnings Limit as then determined and computed
and (ii) the aggregate cumulative amount of Term Loans
made on and after May 15, 1996 shall at no time exceed the
excess of the Term Loan Commitments over the principal
amount of Revolving Credit Loans then outstanding."
3.03. The third sentence of Section 1.3(a) of the Credit Agreement is
hereby amended in its entirety and as so amended shall be restated to read as
follows:
"Each Borrowing of Term Loans shall be in a minimum amount
of $250,000; provided, however, that a Borrowing of Term
Loans which bears interest with reference to the Adjusted
LIBOR shall be in such greater amount as is required by
Section 2 hereof."
3.04. Section 1 of the Credit Agreement is hereby amended by inserting
immediately at the end of Section 1.4 thereof, a new Section 1.5 which reads as
follows:
"Section 1.5. Maximum Available Credit. Notwithstanding
anything herein to the contrary, the maximum amount of
credit available under the Lenders' Commitments shall in
no event exceed the Maximum Available Credit. For the
purposes of calculating the amount of credit available in
accordance with the immediately preceding sentence, a Term
Loan shall be deemed outstanding even if such Term Loan
has been made and subsequently repaid. Accordingly, the
sum of (i) the principal amount of the Term Loans made on
and after May 15, 1996 (whether or not subsequently
repaid) and (ii) the principal amount of the Revolving
Credit Loans at any one time outstanding shall in no event
at any time exceed the Maximum Available Credit as then
determined and computed."
3.05. Sections 3.1(a) and 3.1(b) of the Credit Agreement are hereby
amended in their entireties and as so amended are restated to read as follows:
"Section 3.1. Fees. (a) Commitment Fee. For the period
from and including the date on which the First Amendment
hereto becomes effective to but not including the later of
the Revolving Credit Termination Date or the Term Credit
Termination Date, the Company shall pay to the Agent for
the account of the Lenders a commitment fee at the rate of
1/2 of 1% per annum (computed on the basis of a year of
360 days for the actual number of days elapsed) on the
average daily unused amount (the Maximum Available Credit
to be
-3-
<PAGE> 74
deemed used as of any day in an amount equal to the sum of
(i) the principal of each Term Loan made on or prior to
such date, whether or not subsequently repaid, and (ii)
the principal amount of Revolving Credit Loans outstanding
as of the close of such day) of the Maximum Available
Credit (whether or not available). Such commitment fee
shall be payable quarterly in arrears on the last day of
each June, September, December, and March in each year
(commencing December 31, 1996) and on the later of such
Termination Dates.
(b) [Intentionally Omitted]"
3.06. Sections 3.1(d) is hereby amended in its entirety and as so amended
is restated to read as follows:
(d) Closing Fee. The Company paid to the Agent as of the
date hereof a closing fee of $75,000 for the account of
the following Lenders and the following amounts: $45,000
to Harris Trust and Savings Bank ("Harris"); and $30,000
to LaSalle National Bank ("LaSalle"). On the date the
First Amendment to this Agreement becomes effective, the
Company shall pay an additional closing fee of $100,000 to
the Agent for the account of the following Lenders in the
following amounts: $30,000 to Harris; $20,000 to LaSalle;
and $50,000 to Bank One, Chicago, N.A. ("Bank One"). On
or before the earlier of (x) the maturity of the Revolving
Credit Notes (whether by lapse of time, acceleration or
otherwise) or (y) an initial public offering of debt or
equity securities issued by the Company or any Subsidiary,
the Company shall pay an additional closing fee equal to
$175,000 to the Agent for the account of the Lenders in
the following amounts: $75,000 to Harris; $50,000 to
LaSalle; and $50,000 to Bank One. Such closing fees shall
be deemed fully earned and nonrefundable upon the Lenders'
acceptance of the First Amendment to this Agreement."
3.07. Section 3.3(a) of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 3.3. Mandatory Prepayments. (a) Revolver
Advance Limit. The Company covenants and agrees that if
at any time the then unpaid principal balance of the
Revolving Credit Notes shall be in excess of the lesser of
(i) the Revolver Advance Limit as then determined and
computed or (ii) the Revolving Credit Commitments at such
time, the Company shall, within 2 Business Days after
demand from the Agent, pay the amount of such excess to
the Agent for the account of the Lenders as and for a
mandatory prepayment on such Obligations until payment in
full thereof."
-4-
<PAGE> 75
3.08. Section 3.4 of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 3.4. Terminations. (a) Voluntary. The Company
shall have the right at any time and from time to time,
upon 3 Business Days' prior notice to the Agent (which
shall promptly so notify the Lenders), to ratably
terminate without premium or penalty and in whole or in
part (but if in part, then in an aggregate amount not less
than $100,000 or such greater amount which is an integral
multiple of $100,000) either the Revolving Credit
Commitments or the Term Credit Commitments, provided that
the Commitments may not be reduced to an amount less than
the aggregate principal amount of the Loans then
outstanding thereunder.
(b) Mandatory. The Revolving Credit Commitments of the
Lenders shall be concurrently and ratably reduced, dollar
for dollar, by the aggregate cumulative principal amount
of Term Loans made on and after May 15, 1996 (whether or
not subsequently repaid) in excess of $30,000,000.
(c) Maximum Available Credit. Each reduction in any
Commitment, whether voluntary or mandatory, such that the
sum of the Commitments after giving effect to such
reduction is less than the Maximum Available Credit shall
effect a concurrent reduction in the Maximum Available
Credit so as to equal such sum of the Commitments.
(d) Generally. Any termination of the Commitments
pursuant to this Section may not be reinstated."
3.09. Section 5.1 of the Credit Agreement is hereby amended by adding
thereto the following new definition:
"'Eligible Account' means each account receivable of the
Company that:
(a) arises out of the sale or lease by the Company of
inventory delivered to and accepted by, or out of the
rendition of services fully performed by the Company and
accepted by, the account debtor on such account
receivable, and in each case such account receivable
otherwise represents a final sale;
(b) is an asset of the Company to which it has good and
marketable title, is freely assignable, is subject to a
perfected, first priority Lien in favor of the Agent, and
is free and clear of any other Lien other than Liens
permitted by Section 8.14 hereof;
-5-
<PAGE> 76
(c) the account debtor thereon is not a Subsidiary or
Affiliate of the Company;
(d) is not unpaid more than ninety (90) days after the
original due date of the applicable invoice; and
(e) neither the Agent nor the Required Lenders in the
reasonable exercise of their discretion have deemed such
account receivable ineligible due to uncertainty as to the
creditworthiness of the account debtor or because the
Agent or Required Lenders otherwise in the reasonable
exercise of their discretion have deemed the collateral
value to the Lenders of such account receivable to be
impaired or the Lenders' ability to realize such value to
be insecure."
3.10. Section 5.1 of the Credit Agreement is hereby amended by adding
thereto the following new definition:
"'Maximum Available Credit' shall mean $35,000,000 as
such amount may be reduced pursuant to Section 3.4
hereof."
3.11. The definition of "EBITDA" appearing in Section 5.1 of the Credit
Agreement is hereby amended by adding a new sentence at the end thereof which
reads as follows:
"Notwithstanding anything herein to the contrary, EBITDA
for any Person and with reference to any period, shall
exclude any gain to such Person from the sale of rental
inventory to the extent more than 20% of the EBITDA of
such Person over such period would otherwise be
attributable to such gains."
3.12. Subsections (b) and (c) of the definition of "Proforma Adjusted Cash
Flow" appearing in Section 5.1 of the Credit Agreement are hereby amended in
their entireties and as so amended are restated to read as follows:
"(b) The EBITDA attributable to each Start-Up Store
which commenced operations in a calendar month no more
than 12 calendar months prior to the close of the relevant
period shall be included in such Pro forma Adjusted Cash
Flow in an amount equal to the greater of (x) the actual
EBITDA attributable to such Start-Up Store during the
relevant period or (y) the product of (i) 25% and (ii) the
aggregate amount expended on a cumulative basis over the
period ending with the close of the relevant period to
purchase rental inventory and equipment for such Start-Up
Store (for such purposes, the amount so expended to mean
the hard invoiced costs of such inventory and equipment
and delivery costs and to exclude the cost of inventory
and equipment acquired as a result of a Permitted
Acquisition);
-6-
<PAGE> 77
(c) The EBITDA attributable to each Start-Up Store
which commenced operations in a calendar month greater
than 12 but no more than 24 calendar months prior to the
close of the relevant period shall be included in such Pro
forma Adjusted Cash Flow in an amount equal to the sum of
(i) the greater of (x) the actual EBITDA attributable to
such Start-Up Store over the period (the "initial period")
beginning on the date such Start-Up Store commenced
operations and ending immediately prior to the thirteenth
calendar month (the "13th calendar month") following the
calendar month in which such Start-Up Store commenced
operations or (y) the product of (1) 25% and (2) the
aggregate amount expended on a cumulative basis over the
same initial period to purchase rental inventory and
equipment for such Start-Up Store (for such purposes, the
amount so expended to mean the hard invoiced costs of such
inventory and equipment and delivery costs and to exclude
the cost of inventory and equipment acquired as a result
of a Permitted Acquisition) and (3) a fraction, the
numerator of which is the number of full calendar months
in the relevant period completed prior to such 13th
calendar month and the denominator of which is 12, and
(ii) the actual EBITDA attributable to such Start-Up Store
for a period commencing at the beginning of such 13th
calendar month and ending with the close of the relevant
period; and"
3.13. The definition of "Revolver Advance Limit" appearing in Section 5.1
of the Credit Agreement is hereby amended and as so amended shall be restated
in its entirety to read as follows:
"'Revolver Store Advance Limit' shall mean as of any
time, the sum of (i) 70% of the then unpaid amount of the
Company's Eligible Accounts and (ii) 60% of the aggregate
amount expended by the Company and its Subsidiaries during
the twelve most recently completed calendar months to
purchase rental inventory and equipment for Acquired and
Start-Up Stores (for such purposes, the amount expended to
mean the hard invoiced cost of such inventory and
equipment and delivery costs and to exclude the cost of
inventory and equipment acquired as a result of a
Permitted Acquisition).
3.14. The definition of "Revolving Credit Termination Date" appearing in
Section 5.1 of the Credit Agreement is hereby amended and as so amended shall
be restated in its entirety to read as follows:
"'Revolving Credit Termination Date' means May 31, 1999,
or such earlier date on which the Revolving Credit
Commitments are terminated in whole pursuant to Section
3.4, 9.2 or 9.3 hereof."
-7-
<PAGE> 78
3.15. The definition of "Term Credit Termination Date" appearing in
Section 5.1 of the Credit Agreement is hereby amended and as so amended shall
be restated in its entirety to read as follows:
"'Term Credit Termination Date' means May 31, 1999, or
such earlier date on which the Term Credit Commitments are
terminated in whole pursuant to Section 3.4, 9.2 or 9.3
hereof."
3.16. Sections 7.1(c) and 7.1(d) of the Credit Agreement are hereby
amended in their entireties and as so amended are restated to read as follows:
"(c) in the case of the extension of each Revolving Credit Loan,
after giving effect to such Loan, the aggregate principal amount of all
Revolving Credit Loans outstanding under this Agreement shall not exceed
the lesser of (i) the Revolving Credit Commitments and (ii) the Revolver
Advance Limit as then determined and computed and (iii) the excess (if
any) of the Maximum Available Credit over the aggregate cumulative
principal amount of Term Loans made on and after May 15, 1996 (whether or
not subsequently repaid);
(d) in the case of the extension of each Term Loan, after giving
effect to such Loan and any Permitted Acquisition to be financed thereby,
(i) the aggregate cumulative principal amount of all Term Loans made on
and after May 15, 1996 shall not exceed the Term Credit Commitments less
the principal amount of Revolving Credit Loans then outstanding and (ii)
the aggregate principal amount of Term Loans then outstanding at such time
shall not exceed the Term Credit Earnings Limit as then determined and
computed on a pro forma basis assuming the closing of such Permitted
Acquisition;"
3.17. Section 8.5(a) of the Credit Agreement is hereby amended by striking
the phrase "and in any event within 30 days" appearing in the first line
thereof and inserting therefor the phrase "and in any event within 45 days".
3.18. Section 8.7 of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 8.7. Rental Inventory Leases. The Company shall
not, nor shall it permit any Subsidiary to, acquire the
use or possession of any Property under a lease or similar
arrangement, whether or not the Company or any Subsidiary
has the express or implied right to acquire title to or
purchase such Property, at any time if, after giving
effect thereto, the aggregate value of such Property so
acquired (excluding real property used for retail rental
store locations) would, when taken together with the
amount then outstanding on the purchase money indebtedness
and Capitalized Lease Obligations in each case permitted
by Section 8.13(b) hereof, at any time aggregate more than
$5,000,000."
-8-
<PAGE> 79
3.19. Section 8.13(b) of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"(b) purchase money indebtedness and Capitalized
Lease Obligations secured by Liens permitted by Section
8.14(e) hereof in an amount which, when taken together
with the value of the property leased as permitted by
Section 8.7 hereof, would not aggregate more than
$5,000,000 at any one time outstanding;"
3.20. Section 8.16(b) of the Credit Agreement is hereby amended by
striking the phrase "no later than 30 days prior to the closing" appearing in
the fourth and fifth lines thereof and inserting therefor the phrase "no later
than 15 days prior to the closing".
3.21. Section 8.16(b) shall be amended by inserting the following
parenthetical immediately at the end thereof:
"(provided that no such proforma financial projections
shall be required for any Acquisition the total
consideration for which is less than or equal to
$2,000,000; further provided that the total consideration
for all Acquisitions since and including the last
Acquisition for which no such proforma financial
projections have been provided aggregates $5,000,000 or
less)".
3.22. Section 8.16(f) of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"(f) in the case of any Acquisition the total
consideration of which is greater than or equal to
$13,000,000, the Required Lenders in their sole discretion
shall have provided their written consent to such
Acquisition (for purposes of this subsection (f) and
subsection (b) above, "consideration" for an Acquisition
to have the same meaning as in subsection (c) hereof)."
3.23. Section 11.11 of the Credit Agreement is hereby amended by striking
the second sentence appearing therein and inserting therefor the following:
"Notices hereunder to the Company shall be addressed to:
1522 Blake Street
Denver, Colorado 80202
Attention: Craig Zoellner
Telephone: (303) 620-9090
Telecopy: (303) 620-9016
-9-
<PAGE> 80
With a copy to
Jeff MacDowell
BACE Industries LLC
7401 Vineyard Trail
Garland, Texas 75044-2144
Telephone: (214) 414-6767
Telecopy: (214) 414-6868
With a copy to (in case of notices of default):
B. Scott Pullara
Sherman and Howard, LLC
633 17th Street
Suite 3000
Denver, Colorado 80202"
Telephone: (303) 297-2900
Telecopy: (303) 298-0940
3.24. Schedule 8.14 to the Credit Agreement by adding the following to
such Schedule in the appropriate columns thereof:
<TABLE>
<CAPTION>
Secured Party Collateral
- ------------- ----------
<S> <C>
AEL Leasing Co., Inc. Specific equipment purchased through the use of AEL
financing
</TABLE>
3.25. Section 10.3 of the Credit Agreement is hereby amended by inserting
immediately following the sixth sentence thereof, the following text:
"Nothing contained in the immediately preceding sentence
shall in any way impair or otherwise affect any claim the
Agent or any Lender may have against any such agent or
attorney-in-fact for any such default or misconduct."
4. LOAN BY NEW LENDER.
If upon this Amendment becoming effective there are Loans outstanding
under the Credit Agreement, then in that event anything contained in the Credit
Agreement to the contrary notwithstanding, substantially concurrent with this
Amendment becoming effective there shall be such nonratable Borrowings and
repayments under the Credit Agreement, as amended hereby, so that, after giving
effect thereto, the percentages of all Lenders' Commitments in use are
identical; provided, however, that if there are LIBOR Portions outstanding on
such date which, if prepaid, would require the Company to make a payment under
Section 2.9 hereof, then in that event and to that extent the Company may defer
such adjusting refunding Borrowings until the end of the Interest Period
applicable to such LIBOR Portions and all LIBOR Loans made and repaid during
such deferral period shall be allocated in accordance with
-10-
<PAGE> 81
each Lender's percentage of the Commitments. The parties hereto understand and
acknowledge and agree that the percentage of the New Lender's Commitments in
use in the form of LIBOR Portions may, upon the effectiveness of this
Amendment, be less than the percentage of the other Lenders' Commitments in use
in the form of LIBOR Portions.
5. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
5.01. The Company, the Agent and the Lenders shall have executed and
delivered this Amendment.
5.02. The Company shall have executed Notes in favor of each Lender in the
forms attached hereto as Exhibits A and B, with each Note to a Lender to be
dated as of the date of its issuance and in a face amount equal to the relevant
Commitment of such Lender after giving effect to this Amendment.
5.03. The Company shall have obtained written commitments satisfactory to
the Lenders in their sole discretion from third parties committing them to make
or evidence that such third parties have previously made at least $15,000,000
in cash equity contributions to the Company.
5.04. No Default or Event of Default shall have occurred and be continuing
as of the date this Amendment would otherwise take effect.
5.05. Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Lenders and their counsel; and the
Lenders shall have received the favorable written opinion of counsel for the
Company in form and substance satisfactory to the Lenders and their counsel.
5.06. The Company shall have delivered to the Agent a copy of the
Company's Articles of Incorporation, as currently in effect, certified by the
Secretary or Assistant Secretary of the Company.
5.07. The Company shall have delivered to the Agent a letter from the
Secretary or Assistant Secretary of the Company, in form and substance
satisfactory to the Agent and the Lenders, stating the total number of
outstanding capital shares of every class of the Company which are issued and
outstanding before and after giving effect to the Acquisition of U-Rent.
Upon the effectiveness of this Amendment, each Lender (other than Bank One
Chicago, N.A.) shall promptly return to the Company the Notes issued to that
Lender which are being replaced by the Notes contemplated by this Amendment.
-11-
<PAGE> 82
6. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this Amendment, the
Company hereby represents to the Lenders that as of the date hereof, the
representations and warranties set forth in Section 6 of the Credit Agreement
are and shall be and remain true and correct (except that for purposes of this
paragraph, (i) the representations contained in Section 6.3 shall be deemed to
include this Amendment as and when it refers to Loan Documents and (ii) the
representations contained in Section 6.5 shall be deemed to refer to the most
recent financial statements of the Company delivered to the Lenders) and the
Company is in full compliance with all of the terms and conditions of the
Credit Agreement and no Default or Event of Default has occurred and is
continuing under the Credit Agreement or shall result after giving effect to
this Amendment.
7. MISCELLANEOUS.
7.01. The Company acknowledges and agrees that all of the Collateral
Documents to which it is a party remain in full force and effect for the
benefit and security of, among other things, the Revolving Credit Loans and
Term Loans as modified hereby. The Company further acknowledges and agrees
that all references in such Collateral Documents to the Revolving Credit Loans
and Term Loans shall be deemed a reference to the Revolving Credit Loans and
Term Loans as so modified. The Company further agrees to execute and deliver
any and all instruments or documents as may be required by the Agent or
Required Lenders to confirm any of the foregoing.
7.02. Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Notes, or any other instrument or document executed in connection
therewith, or in any certificate, letter or communication issued or made
pursuant to or with respect to the Credit Agreement, any reference in any of
such items to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.
7.03. This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
7.04. The Company agrees to pay all reasonable out-of-pocket costs and
expenses incurred by the Lenders in connection with the preparation, execution
and delivery of this Amendment and the documents and transactions contemplated
hereby, including the reasonable fees and expenses of counsel for the Lenders
with respect to the foregoing.
-12-
<PAGE> 83
Dated as of October 28, 1996.
RENTX INDUSTRIES, INC.
By /s/ RICHARD M. TYLER
----------------------------------
Its Pr. Sec.
------------------------------
Accepted and agreed to in Chicago, Illinois as of the date and year last
above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ B. A. NOLINE
----------------------------------
Its Vice President
------------------------------
LASALLE NATIONAL BANK
By /s/ CARROLL
----------------------------------
Its Vice President
------------------------------
BANK ONE, CHICAGO, N.A.
By /s/ ROBERT J. BURGER
----------------------------------
Its Vice President
------------------------------
-13-
<PAGE> 84
EXHIBIT A
RENTX INDUSTRIES, INC.
REVOLVING CREDIT NOTE
Chicago, Illinois
$_______________ ____________, 1996
On the Revolving Credit Termination Date, for value received, the
undersigned, RENTX INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby promises to pay to the order of _______________ (the "Lender"), at the
principal office of Harris Trust and Savings Bank in Chicago, Illinois, the
principal sum of (i) _______________________ and no/100 Dollars ($___________),
or (ii) such lesser amount as may at the time of the maturity hereof, whether
by acceleration or otherwise, be the aggregate unpaid principal amount of all
Revolving Credit Loans owing from the Company to the Lender under the Revolving
Credit provided for in the Credit Agreement hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate Portion"
and "LIBOR Portions" as such terms are defined in that certain Credit Agreement
dated as of May 15, 1996, between the Company, Harris Trust and Savings Bank,
individually and as Agent thereunder, and the other Lenders which are now or
may from time to time hereafter become parties thereto (said Credit Agreement,
as the same may be amended, modified or restated from time to time, being
referred to herein as the "Credit Agreement") made and to be made to the
Company by the Lender under the Revolving Credit provided for under the Credit
Agreement, and the Company hereby promises to pay interest at the office
described above on each loan evidenced hereby at the rates and at the times and
in the manner specified therefor in the Credit Agreement.
Each loan made under the Revolving Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto shall be endorsed by
the holder hereof on a schedule to this Note or recorded on the books and
records of the holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company agrees
that in any action or proceeding instituted to collect or enforce collection of
this Note, the entries so endorsed on a schedule to this Note or recorded on
the books and records of the holder hereof shall, absent manifest error, be
prima facie evidence of the unpaid principal balance of this Note, the status
of each such loan from time to time as part of the Domestic Rate Portion or a
LIBOR Portion, and, in the case of any LIBOR Portion, the interest rate and
Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred
<PAGE> 85
to therein, to which reference is hereby made for a statement thereof. This
Note may be declared to be, or be and become, due prior to its expressed
maturity, voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement. All capitalized terms used herein
without definition shall have the same meanings herein as such terms are
defined in the Credit Agreement.
This Note is issued in substitution for and in replacement of that certain
Revolving Credit Note of the Company dated May 15, 1996 payable to the order of
the Lender in the face principal amount of $______________.*
The Company hereby promises to pay all reasonable costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof in
collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
RENTX INDUSTRIES, INC.
By
------------------------------------
Name:
---------------------------------
Title:
--------------------------------
- ----------------------------
* Delete from Bank One Note.
-2-
<PAGE> 86
EXHIBIT B
RENTX INDUSTRIES, INC.
TERM NOTE
Chicago, Illinois
$_______________ ____________, 1996
On the Term Credit Termination Date, for value received, the undersigned,
RENTX INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby promises
to pay to the order of _______________ (the "Lender"), at the principal office
of Harris Trust and Savings Bank in Chicago, Illinois, the principal sum of (i)
_______________________ and no/100 Dollars ($___________), or (ii) such lesser
amount as may at the time of the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of all Term Loans owing
from the Company to the Lender under the Term Credit provided for in the Credit
Agreement hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate Portion"
and "LIBOR Portions" as such terms are defined in that certain Credit Agreement
dated as of May 15, 1996, between the Company, Harris Trust and Savings Bank,
individually and as Agent thereunder, and the other Lenders which are now or
may from time to time hereafter become parties thereto (said Credit Agreement,
as the same may be amended, modified or restated from time to time, being
referred to herein as the "Credit Agreement") made and to be made to the
Company by the Lender under the Term Credit provided for under the Credit
Agreement, and the Company hereby promises to pay interest at the office
described above on each loan evidenced hereby at the rates and at the times and
in the manner specified therefor in the Credit Agreement.
Each loan made under the Term Credit provided for in the Credit Agreement
by the Lender to the Company against this Note, any repayment of principal
hereon, the status of each such loan from time to time as part of the Domestic
Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion, the
interest rate and Interest Period applicable thereto shall be endorsed by the
holder hereof on a schedule to this Note or recorded on the books and records
of the holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company agrees
that in any action or proceeding instituted to collect or enforce collection of
this Note, the entries so endorsed on a schedule to this Note or recorded on
the books and records of the holder hereof shall, absent manifest error, be
prima facie evidence of the unpaid principal balance of this Note, the status
of each such loan from time to time as part of the Domestic Rate Portion or a
LIBOR Portion, and, in the case of any LIBOR Portion, the interest rate and
Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary
prepayments
<PAGE> 87
may be made hereon, and certain prepayments are required to be made hereon, all
in the events, on the terms and with the effects provided in the Credit
Agreement. All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit Agreement.
This Note is issued in substitution for and in replacement of that certain
Revolving Credit Note of the Company dated May 15, 1996 payable to the order of
the Lender in the face principal amount of $______________.*
The Company hereby promises to pay all reasonable costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof in
collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
RENTX INDUSTRIES, INC.
By
------------------------------------
Name:
---------------------------------
Title:
--------------------------------
- ----------------------------
* Delete from Bank One Note.
-2-
<PAGE> 88
RentX Industries, Inc.
Second Amendment To Credit Agreement
Harris Trust and Savings Bank Bank One, Chicago, N.A.
Chicago, Illinois Evanston, Illinois
LaSalle National Bank
Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
May 15, 1996 (as amended, the "Credit Agreement") currently in effect by and
among, RentX Industries, Inc., a Delaware corporation (the "Company"), and you
(the "Lenders"). All capitalized terms used herein without definition shall
have the same meanings herein as such terms have in the Credit Agreement.
The Company hereby applies to the Lenders to amend certain of the
financial covenants contained in the Credit Agreement and to make certain other
amendments to the Credit Agreement, and the Lenders are willing to do so under
the terms and conditions set forth in this Amendment.
1. Amendments.
Upon satisfaction of the conditions precedent set forth in Section 2
hereof, the Credit Agreement shall be and hereby is amended (effective as of
December 31, 1996) as follows:
1.01. Section 8.9 of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 8.9. Leverage Ratio. The Company shall, as
of the last day of each calendar month specified below,
maintain its Leverage Ratio as of such date at no greater than
(i) 3.75 to 1 as of the last day of each calendar month
occurring during the Company's fiscal quarters ending in
January, April and July of each year, commencing on January
31, 1997 and (ii) 3.25 to 1 as of the last day of each month
occurring during the fiscal quarter of the Company ending in
October of each year, commencing on October 31, 1997."
1.02. Subsection (b) of Section 8.16 of the Credit Agreement shall
be amended by inserting the phrase "except in connection with the the Company's
acquisition of substantially
<PAGE> 89
all of the assets of each of Hays Rental & Sales on February 14, 1997 and
Central Virginia, Inc. on March 14, 1997," at the beginning thereof.
1.03. Section 8.16(c) of the Credit Agreement is hereby amended in
its entirety and as so amended is restated to read as follows:
"(c) after giving effect to such Acquisition, at least the
Required Percentage (the term "Required Percentage" as used
herein shall mean (i) forty percent (40%) for each
Acquisitions occurring from and including May 15, 1996 through
and including February 14, 1997 and (ii) thirty-five percent
(35%) for each Acquisition occurring thereafter) of the
aggregate consideration paid by the Company and its
Subsidiaries for such Acquisition and all other Acquisitions
closed on and at any time after the date hereof on a
cumulative basis (including as such consideration, the
assumption by the Company or any Subsidiary of any
Indebtedness for Borrowed Money of each Person acquired) will
have been funded out of the proceeds of substantially
concurrent cash equity contributions to the Company, or to the
extent the Required Lenders in their sole discretion agree,
the proceeds of Subordinated Debt issued by the Company or any
Subsidiary;"
1.04. Section 8.5(a) of the Credit Agreement is hereby amended by
striking the phrase "and in any event within 45 days after the close of each
month" appearing therein and substituting therefor the phrase "and in any event
(i) for the month of January, 1997, within 75 days, (ii) for the months
February through October, 1997, within 60 days and (iii) for each month
thereafter, within 45 days after the close of each such month".
1.05. Section 8.5(b) of the Credit Agreement is hereby amended by
adding the phrase "(except and only for the annual accounting period ending in
January, 1997, for which the time period shall be 120 days)" immediately after
the phrase "and in any event within 90 days after the close of each annual
accounting period of the Company" appearing therein.
1.06. The second sentence of Section 8.5 of the Credit Agreement is
hereby amended in its entirety and as so amended is restated to read as
follows:
"Each of the financial statements furnished to the Lenders
pursuant to subsection (a) of this Section which are required
to be submitted at the end of each fiscal month of the Company
shall be accompanied by a written certificate in the form
attached hereto as Exhibit C-1 and each of the financial
statements furnished to the Lenders pursuant to subsections
(a) and (b) of this Section which are required to be submitted
at the end of each fiscal quarter or fiscal year of the
Company shall be accompanied by a written certificate in the
form attached hereto as Exhibit C-2. Each such certificate
shall be signed by the President, Executive Vice
-2-
<PAGE> 90
President or chief financial officer of the Company to the
effect that to the best of such officer's knowledge and belief
no Default or Event of Default has occurred during the period
covered by such statements or, if any such Default or Event of
Default has occurred during such period, setting forth a
description of such Default or Event of Default and specifying
the action, if any, taken by the Company to remedy the same."
1.07. Section 2.1(c) of the Credit Agreement is hereby amended by
striking the percentage "two and one-half percent (2-1/2%)" appearing in the
second and third lines thereof and inserting therefor "the LIBOR Margin".
1.08. Section 5.1 of the Credit Agreement is hereby amended by
adding thereto the following new definition:
"LIBOR Margin" shall mean the rate specified for
LIBOR Portions below at each Level of the Leverage Ratio
specified below:
<TABLE>
<CAPTION>
Level Level I Level II
<S> <C> <C>
Leverage Ratio Less than or equal to 3.0 to 1 Greater Than 3.0 to 1
LIBOR Margin 2.50% 2.75%
</TABLE>
Not later than ten (10) Business Days after the deadline for
receipt by the Lenders of the financial statements called for
by Section 8.5(a) hereof for October of each year (such date
which is ten Business Days after such deadline being
hereinafter referred to as the "Margin Adjustment Date"), the
Agent shall determine the Leverage Ratio as of October 31 of
such year and shall promptly notify the Company and the
Lenders of such determination and of any change in the LIBOR
Margin resulting therefrom. Each such change in the LIBOR
Margin shall be effective from (but not including) the related
Margin Adjustment Date with respect to all LIBOR Portions
outstanding on such date, and such new LIBOR Margin as
determined by the Agent in accordance with this Section shall
be conclusive and binding on the Company absent manifest
error. From the date the Second Amendment to this Agreement
becomes effective through and including the first Margin
Adjustment Date to occur thereafter, the Applicable Margin
shall be that set forth at Level II above. Anything contained
herein to the contrary notwithstanding, the LIBOR Margin shall
be the highest LIBOR Margin set forth herein during the
continuance of: (x) any Event of Default or (y) any Default
by the Company in
-3-
<PAGE> 91
supplying the financial statements required by Section 8.5
hereof by the deadlines expressed in such Section."
1.09. Section 8.7 of the Credit Agreement is hereby amended by
striking the amount "$5,000,000" appearing therein and inserting therefor the
amount $10,000,000".
1.10. Section 8.13(b) of the Credit Agreement is hereby amended by
striking the amount "$5,000,000" appearing therein and inserting therefor the
amount $10,000,000".
1.11. The following definitions appearing in Section 5.1 of the
Credit Agreement shall each be amended in their entirety and as so amended
shall be restated to read as follows:
"Adjusted Actual EBITDA" shall mean, with reference to any
period (the "measurement period"), the sum (without duplication) of
(i) the EBITDA of the Company and its Subsidiaries during the entire
measurement period on a consolidated basis to the extent attributable
to Acquired Stores owned by the Company for the entire measurement
period and (ii) in the case of each Acquired Store not owned by the
Company during the entire measurement period, the Adjusted Base EBITDA
of each such Acquired Store during each full calendar month within
such measurement period which commenced and was completed in each case
prior to the Company's acquisition of such Acquired Store and (iii)
the Corporate Overhead of the Company and its Subsidiaries to the
extent deducted in computing the EBITDA amount in clauses (i) or (ii)
above.
"Adjusted Base EBITDA" shall mean, in each comparison to
Adjusted Actual EBITDA for any measurement period (as "measurement
period" is defined with respect to such Adjusted Actual EBITDA), the
EBITDA of each Acquired Store which the Company owned as of the close
of such measurement period, but occurring in the twelve full calendar
months most recently completed prior to the Company's acquisition of
such Acquired Store.
"Term Credit Earnings Limit" shall mean as of any time, the
product of (x) Pro forma Adjusted Cash Flow for the twelve most
recently completed calendar months and (y) an amount equal to (i) 3.75
during the Company's fiscal quarters ending in January, April and July
of each year and (ii) 3.25 during the Company's fiscal quarters ending
in October of each year.
1.12. The following new definitions are inserted in Section 5.1 of
the Credit Agreement in the appropriate alphabetical locations:
"Excess Cash" means as of any time the same is to be
determined, (i) during the period from December 1, 1996 through
January 31, 1997, the aggregate amount of cash on hand of the Company
and its Subsidiaries as determined on a consolidated basis in
accordance with GAAP and (ii) at all other times, the amount (if any)
of
-4-
<PAGE> 92
which (a) the aggregate amount of cash on hand of the Company and its
Subsidiaries as determined on a consolidated basis in accordance with
GAAP exceeds (b) $250,000.
"Level I" means with respect to any Margin Adjustment Date,
the Company's Leverage Ratio as of the October 31 date most recently
preceding such Margin Adjustment Date, is less than or equal to 3.0 to
1.
"Level II" means with respect to any Margin Adjustment Date,
the Company's Leverage Ratio as of the October 31 date most recently
preceding such Margin Adjustment Date, is greater than 3.0 to 1.
"Leverage Ratio" means as of any time the same is to be
determined, the ratio of (x) the amount (if any) by which (i) Senior
Funded Debt on such date exceeds (ii) Excess Cash on such date to (y)
Pro forma Adjusted Cash Flow for the twelve calendar months then
ended.
1.13. Exhibit C to the Credit Agreement shall be amended in its
entirety and as so amended is restated to read as set forth on Schedule I
hereto.
2. Conditions Precedent.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
2.01. The Company, the Agent and the Lenders shall have executed and
delivered this Amendment.
2.02. No Default or Event of Default shall have occurred and be
continuing as of the date this Amendment would otherwise take effect.
2.03. Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Lenders and their counsel; and the
Lenders shall have received the favorable written opinion of counsel for the
Company in form and substance satisfactory to the Lenders and their counsel.
2.04. The Company shall have delivered to the Agent a Certificate of
the Secretary or Assistant Secretary of the Company containing resolutions of
the Company's Board of Directors authorizing the execution and delivery of this
amendment and certifying that there has been no amendment to the Company's
Certificate of Incorporation since May 29, 1996, other than the Amendments to
the Company's Certificate of Incorporation filed on December 18, 1996 and
January 30, 1997, respectively, with the Delaware Secretary of State, copies of
which are attached to such Certificate of the Secretary.
2.05. The Agent shall have received an amendment fee from the
Company in an aggregate amount equal to $30,000, payable to each Lender in an
amount equal to $10,000.
-5-
<PAGE> 93
Upon the satisfaction of all of the foregoing conditions precedent,
this Amendment shall take effect as of December 31, 1996.
3. Representations.
In order to induce the Lenders to execute and deliver this Amendment,
the Company hereby represents to the Lenders that as of the date hereof, the
representations and warranties set forth in Section 6 of the Credit Agreement
are and shall be and remain true and correct (except that for purposes of this
paragraph, (i) the representations contained in Section 6.3 shall be deemed to
include this Amendment as and when it refers to Loan Documents and (ii) the
representations contained in Section 6.5 shall be deemed to refer to the most
recent financial statements of the Company delivered to the Lenders) and the
Company is in full compliance with all of the terms and conditions of the
Credit Agreement and no Default or Event of Default has occurred and is
continuing under the Credit Agreement or shall result after giving effect to
this Amendment.
4. Miscellaneous.
4.01. The Company acknowledges and agrees that all of the Collateral
Documents to which it is a party remain in full force and effect for the
benefit and security of, among other things, the Revolving Credit Loans and
Term Loans as modified hereby. The Company further acknowledges and agrees
that all references in such Collateral Documents to the Revolving Credit Loans
and Term Loans shall be deemed a reference to the Revolving Credit Loans and
Term Loans as so modified. The Company further agrees to execute and deliver
any and all instruments or documents as may be required by the Agent or
Required Lenders to confirm any of the foregoing.
4.02. Except as specifically amended herein, the Credit Agreement
shall continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Notes, or any other instrument or document executed in connection
therewith, or in any certificate, letter or communication issued or made
pursuant to or with respect to the Credit Agreement, any reference in any of
such items to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.
4.03. This Amendment may be executed in any number of counterparts,
and by the different parties on different counterpart signature pages, all of
which taken together shall constitute one and the same agreement. Any of the
parties hereto may execute this Amendment by signing any such counterpart and
each of such counterparts shall for all purposes be deemed to be an original.
This Amendment shall be governed by the internal laws of the State of Illinois.
4.04. The Company agrees to pay all reasonable out-of-pocket costs
and expenses incurred by the Lenders in connection with the preparation,
execution and delivery of this Amendment and the documents and transactions
contemplated hereby, including the reasonable fees and expenses of counsel for
the Lenders with respect to the foregoing.
-6-
<PAGE> 94
Dated as of April 16, 1997, but effective as of December 31, 1996
RENTX INDUSTRIES, INC.
By /s/ JEFFREY N. MACDOWELL
--------------------------------------
Jeffrey N. Macdowell
Its Vice President
------------------------------
Accepted and agreed to in Chicago, Illinois as of the date and year
last above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ [ILLEGIBLE]
--------------------------------------
Its Vice President
------------------------------
LASALLE NATIONAL BANK
By /s/ [ILLEGIBLE]
--------------------------------------
Its Vice President
------------------------------
BANK ONE, CHICAGO, N.A.
By /s/ [ILLEGIBLE]
--------------------------------------
Its Vice President
------------------------------
-7-
<PAGE> 95
RENTX INDUSTRIES, INC.
THIRD AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank Bank One, Illinois, N.A.
Chicago, Illinois (formerly known as Bank One,
LaSalle National Bank Chicago, N.A.)
Chicago, Illinois Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
May 15, 1996 (the "Credit Agreement"), as amended and currently in effect by
and among, RentX Industries, Inc., a Delaware corporation (the "Company"), and
you (the "Lenders"). All capitalized terms used herein without definition shall
have the same meanings herein as such terms have in the Credit Agreement.
The Company hereby applies to the Lenders to increase the amount of
the Revolving Credit Commitments, to increase the amount of the Term Loan
Commitments, to amend certain of the financial covenants contained therein, and
to make certain other amendments to the Credit Agreement, and the Lenders are
willing to do so under the terms and conditions set forth in this Amendment.
1. INCREASE OF COMMITMENT AMOUNTS.
The amount of Harris Trust and Savings Bank's Commitment set forth
opposite its name on its signature page to the Credit Agreement shall be
amended and as so amended shall be restated as follows:
AMOUNT OF REVOLVING AMOUNT OF TERM
LENDER CREDIT COMMITMENT CREDIT COMMITMENT
Harris Trust and Savings Bank $2,763,265.29 $19,342,857.00
2. AMENDMENTS.
2.1 Section 3.4(b) of the Credit Agreement is hereby amended in
its entirety and as so amended is restated to read as follows:
"(b) Mandatory. The Revolving Credit Commitments of the
Lenders shall be concurrently and ratably reduced, dollar for
dollar, by the aggregate cumulative principal amount of Term
Loans made by the Lenders, taken together, on and after May
15, 1996 (whether or not subsequently repaid) in excess of
$33,722,448.85.
<PAGE> 96
2.2 Section 8.8 of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 8.8. Store Leases. The Company shall not,
and shall not permit any Subsidiary to, acquire the use of or
possession of any real property to be used as a retail rental
store location under any lease or similar arrangement which
has a term (excluding renewal terms exercisable at the
discretion of the lessee) that is over seven calendar years in
length; provided, however, that the foregoing shall not
restrict nor operate to prevent the Company from entering into
leases or similar arrangements for such real property each
with a term (excluding renewal terms exercisable at the
discretion of the lessee) not exceeding 15 calendar years in
length if, after giving effect thereto, the aggregate amount
of fixed rentals and other consideration payable by the
Company and its Subsidiaries during any calendar year by the
Company and its Subsidiaries under all such leases and similar
arrangements with terms (excluding such renewal terms) in
excess of seven calendar years would not exceed 15% of the
aggregate amount of fixed rentals and other consideration
payable by the Company under all such leases and similar
arrangements of whatever term."
2.3 Section 8.13 of the Credit Agreement is hereby amended (i) by
deleting the word "and" appearing at the end of Subsection (c) thereof, (ii) by
deleting the period appearing at Subsection (d) thereof and substituting
therefor "; and" and (iii) adding thereto a new Subsection (e) which reads as
follows:
"(e) the Investor Subordinated Debt if and so long as
the same constitutes Subordinated Debt."
2.4 Section 1.3(b) of the Credit Agreement is hereby amended in
its entirety and as so amended as restated to read as follows:
"(b) Use of Proceeds. After the effective date of the Third
Amendment to this Agreement the Company shall use the proceeds
of the Term Loan solely for Permitted Acquisitions and the
purchase of rental inventory for use by the Company or any of
its Subsidiaries in the ordinary course of business and the
payment of out-of-pocket costs of opening Start-Up Stores,
incurred by the Company and its Subsidiaries in the ordinary
course of business. After the effective date of the Third
Amendment to this Agreement, no borrowing of Term Loans used
to finance a Permitted Acquisition shall be permitted if after
giving effect thereto, the aggregate principal amount of Term
Loans made on a cumulative basis on and after the effective
date of
- 2 -
<PAGE> 97
the Third Amendment to this Agreement to fund Permitted
Acquisitions would exceed 65% of the aggregate cost to the
Company and its Subsidiaries, including closing costs, on a
cumulative basis of all the Permitted Acquisitions closed on
at any time after the date hereof. After the effective date of
the Third Amendment to this Agreement, no borrowing of Term
Loans to purchase such rental inventory or pay such costs of
opening Start-Up Stores shall be permitted if after giving
effect thereto, the aggregate principal amount of all Term
Loans used to purchase such rental inventory or pay such costs
would exceed 65% of the aggregate amount expended by the
Company and its Subsidiaries, on a cumulative basis on and at
any time after the date hereof, to purchase such rental
inventory or pay such costs of opening Start-Up Stores."
2.5 Section 3.3(b) of the Credit Agreements is hereby amended in
its entirety and as so amended as restated to read as follows:
"(b) Term Credit Earnings Limit. The Company covenants and
agrees that if at any time the sum of the then unpaid
principal balance of the Term Loans shall be in excess of the
sum of (i) the Term Credit Earnings Limit as then determined
and computed and (ii) the Term Start-Up Advance Limit as then
determined and computed, the Company shall, within 2 Business
Days after demand from the Agent, pay over the amount of such
excess to the Agent for the ratable account of the Lenders as
and for a mandatory prepayment on such Obligations until
payment in full thereof."
2.6 Section 5.1 of the Credit Agreement is hereby amended by
adding thereto the following new definitions in their appropriate alphabetical
locations:
"'Investor Subordinated Debt' means the Subordinated Debt
which may be issued by the Company following the effective
date of the Third Amendment to this Agreement on the terms or
substantially the terms contained in that certain term sheet
dated as of July 31, 1997 which has previously been forwarded
to the Lenders in an aggregate principal amount not exceeding
$3,000,000.
'Term Start-Up Advance Limit' shall mean as of any time, 65%
of the aggregate amount expended by the Company and its
Subsidiaries on a cumulative basis after the effective date of
the Third Amendment to this Agreement to purchase rental
inventory and equipment for Acquired and Start-Up Stores (for
such purposes, the amount expended to mean the hard invoice
cost of such inventory and
- 3 -
<PAGE> 98
equipment and the delivery cost thereof and to exclude the
amount expended to acquire rental inventory and equipment as
part of a Permitted Acquisition)."
2.7 The first sentence of Section 1.3(a) of the Credit Agreement
is hereby amended in its entirety and as so amended shall be restated to read
as follows:
"Subject to the terms and conditions hereof, each Lender
severally agrees to make loans (individually a "Term Loan" and
collectively the "Term Loans") to the Company in a cumulative
amount not exceeding such Lender's commitment set forth
opposite such Lender's signature hereto under the heading
"Term Loan Commitment" or as otherwise provided in Section
11.10 hereof, as such amount may be reduced pursuant hereto;
provided, however, that (i) the aggregate amount of Term Loans
outstanding at any one time shall not exceed the sum of (x)
the Term Credit Earnings Limit as then determined and
computed, plus (y) the Term Start-Up Advance Limit as then
determined and computed and (ii) the aggregate cumulative
amount of Term Loans made on and after May 15, 1996 shall at
no time exceed the excess of the Term Loan Commitments over
the principal amount of Revolving Credit Loans then
outstanding."
2.8 Section 7.1(d) of the Credit Agreement is hereby amended in
its entirety and as so amended is restated to read as follows:
(d) in the case of the extension of each Term
Loan, after giving effect to such Loan and any Permitted
Acquisition or purchase of rental inventory or payment of
costs of opening of a Start-Up Store, as the case may be, to
be financed thereby, (i) the aggregate cumulative principal
amount of all Term Loans made on and after May 15, 1996 shall
not exceed the Term Credit Commitments less the principal
amount of Revolving Credit Loans then outstanding and (ii) the
aggregate principal amount of Term Loans then outstanding at
such time shall not exceed the sum of (x) the Term Credit
Earnings Limit as then determined and computed on a pro forma
basis after giving effect to any Permitted Acquisition
financed thereby, if appropriate, plus (y) the Term Start-Up
Advance Limit as then determined and computed on a pro forma
basis after giving effect to any purchase of rental inventory
or equipment financed thereby, as appropriate;"
2.9 The following definitions appearing in Section 5.1 of the
Credit Agreement shall each be amended in their entirety and as so amended
shall be restated to read as follows:
- 4 -
<PAGE> 99
"'Maximum Available Credit' shall mean $39,342,857 as such
amount may be reduced pursuant to Section 3.4 hereof.
'Revolver Store Advance Limit' shall mean as of any time, the
sum of (i) 70% of the then unpaid amount of the Company's Eligible
Accounts and (ii) 65% of the aggregate amount expended by the Company
and its Subsidiaries during the twelve most recently completed
calendar months to purchase rental inventory and equipment for
Acquired and Start-Up Stores (for such purposes, the amount expended
to mean the hard invoiced cost of such inventory and equipment and the
delivery cost thereof and to exclude the amount expended to acquire
rental inventory and equipment as part of a Permitted Acquisition).
'Term Credit Earnings Limit' shall mean as of any time, the
product of (x) Pro forma Adjusted Cash Flow for the twelve most
recently completed calendar months and (y) an amount equal to (i) 4.40
during the Company's fiscal quarters ending July 31, 1997 and October
31, 1997 and (ii) thereafter (commencing with the Company's fiscal
quarter ending on January 31, 1998) (a) 3.75 during each of the
Company's fiscal quarters ending January 31, 1998 and April 30, 1998,
and (b) 3.00 during each of the Company's fiscal quarters ending
thereafter (commencing with the Company's fiscal quarter ending on
July 31, 1998)."
2.10 Section 8.9 of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 8.9. Leverage Ratio. The Company shall, as of the
last day of each fiscal quarter of the Company specified below,
maintain its Leverage Ratio as of such date at no greater than (i)
4.40 to 1 as of the last day of each of the Company's fiscal quarters
ending on July 31, 1997 and October 31, 1997 and (ii) thereafter
(commencing with the Company's fiscal quarter ending on January 31,
1998) (a) 3.75 to 1 as of the last day of each of the Company's fiscal
quarters ending on January 31, 1998 and April 30, 1998 of each year
and (b) 3.00 to 1 as of the last day of each fiscal quarter of the
Company ending thereafter (commencing with the Company's fiscal
quarter ending on July 31, 1998)."
2.11 Section 8.11 of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 8.11. Overhead to Revenue Ratio. The Company shall,
as of the last day of each July, October, January and April of each
calendar year (commencing with the calendar month ending July 31,
1997), maintain the ratio (the "Overhead Ratio") of (x) the aggregate
amount expended by the Company and its Subsidiaries for Corporate
Overhead during the twelve calendar months then ended to (y) Pro forma
- 5 -
<PAGE> 100
Adjusted Revenues for the same period of twelve calendar months in an
amount not greater than 0.0525 to 1."
2.12 The introductory clause of Section 8.16 of the Credit
Agreement is hereby amended in its entirety and as so amended is restated to
read as follows:
"Section 8.16. Acquisitions. The Company will not, nor will
it permit any Subsidiary to, make or commit to make any Acquisition;
provided, however, that the Company may make one or more Acquisitions
of a retail rental business (and Acquisitions of the capital stock of
any corporation, or the equity interests in any partnership or other
firm, in each case engaged primarily in the retail rental business)
if:"
2.13 Section 3.1(d) is hereby amended in its entirety and as so
amended is restated to read as follows:
"(d) Closing Fee. The Company paid to the Agent as of the date
hereof a closing fee of $75,000 for the account of the following
Lenders in the following amounts: $45,000 to Harris Trust and Savings
Bank ("Harris"); and $30,000 to LaSalle National Bank ("LaSalle"). On
the date the First Amendment to this Agreement became effective, the
Company paid an additional closing fee of $100,000 to the Agent for
the account of the following Lenders in the following amounts:
$30,000 to Harris; $20,000 to LaSalle; and $50,000 to Bank One,
Chicago, N.A. ("Bank One"). On or before the earlier of (x) the
maturity of the Revolving Credit Notes (whether by lapse of time,
acceleration or otherwise) or (y) an initial public offering of debt
or equity securities issued by the Company or any Subsidiary, the
Company shall pay an additional closing fee equal to $175,000 to the
Agent for the account of the Lenders in the following amounts: $75,000
to Harris; $50,000 to LaSalle; and $50,000 to Bank One. Such aforesaid
closing fees were deemed fully earned and nonrefundable upon the
Lenders' acceptance of the First Amendment to this Agreement. On the
date the Third Amendment to this Agreement becomes effective, the
Company shall pay an additional closing fee of $21,714.29 to the Agent
for the account of Harris. On or before the earlier of (x) the
maturity of the Revolving Credit Notes (whether by lapse of time,
acceleration or otherwise) or (y) an initial public offering of debt
or equity securities issued by the Company or any Subsidiary, the
Company shall pay an additional closing fee equal to $21,714.29 to the
Agent for the account of Harris. The additional closing fee due by
virtue of the immediately preceding sentence shall be deemed fully
earned and nonrefundable upon the Lenders' acceptance of the Third
Amendment to this Agreement."
2.14 Section 8. 16(c) of the Credit Agreement is hereby amended in
its entirety and as so amended is restated to read as follows:
"(c) after giving effect to such Acquisition, at least the
Required Percentage (the term "Required Percentage" as used
herein shall mean (i) forty percent (40%) for each
Acquisitions occurring from and
- 6 -
<PAGE> 101
including May 15, 1996 through and including February 14, 1997
and (ii) thirty-five percent (35%) for each Acquisition
occurring thereafter) of the aggregate consideration paid by
the Company and its Subsidiaries for such Acquisition and all
other Acquisitions closed on and at any time after the date
hereof on a cumulative basis (including as such consideration,
the assumption by the Company or any Subsidiary of any
Indebtedness for Borrowed Money of each Person acquired) will
have been funded out of the proceeds of cash equity
contributions to the Company or proceeds from the Investor
Subordinated Debt, or to the extent the Required Lenders in
their sole discretion agree, the proceeds of other
Subordinated Debt issued by the Company or any Subsidiary;"
2.15 Section 8.5(b) of the Credit Agreement is hereby amended by
adding the phrase "(except and only for the annual accounting period ending in
January, 1997, for which the time period shall be 220 days)" immediately after
the phrase "and in any event within 90 days after the close of each annual
accounting period of the Company" appearing therein.
2.16 Section 4.1 of the Credit Agreement is hereby amended by
adding the following proviso immediately preceding the period appearing at the
end of such Section:
"; provided, however, that clause (b) above shall be of no
force or effect after the closing of any initial public
offering by the Company of its equity securities so long as
the cash proceeds received by the Company from such initial
public offering are an amount greater than or equal to
$20,000,000 (net of (x) the aggregate amount expended by the
Company and its Subsidiaries directly out of the proceeds of
such offering for the redemption or other repurchase of their
capital stock and (y) reasonable fees, commissions and
underwriting discounts directly incurred and payable by the
Company or any Subsidiary as a result of such initial public
offering)"
2.17 Section 9.1(e) of the Credit Agreement is hereby amended by
inserting the phrase ", prior to the closing of any initial public offering by
the Company of its equity securities from which the cash proceeds received by
the Company from such initial public offering are an amount greater than or
equal to $20,000,000 (net of (x) the aggregate amount expended by the Company
and its Subsidiaries directly out of the proceeds of such offering for the
redemption or other repurchase of their capital stock and (y) reasonable fees,
commissions and underwriting discounts directly incurred and payable by the
Company or any Subsidiary as a result of such initial public offering)," after
the word "or" and before the word "the" appearing in the eighth line thereof.
2.18 Section 9.1(m) of the Credit Agreement is hereby amended by
inserting the phrase "prior to the closing of any initial public offering by
the Company of its equity securities from which
- 7 -
<PAGE> 102
the cash proceeds received by the Company from such initial public offering are
in an amount greater than or equal to $20,000,000 (net of (x) the aggregate
amount expended by the Company and its Subsidiaries directly out of the
proceeds of such offering for the redemption or other repurchase of their
capital stock and (y) reasonable fees, commissions and underwriting discounts
directly incurred and payable by the Company or any Subsidiary as a result of
such initial public offering)," at the beginning thereof.
2.19 The definition of "BACE Management Agreement" appearing in
Section 5.1 of the Credit Agreement is hereby amended by adding the phrase ",
as amended by the First Amendment to Consulting Agreement dated as of August 1,
1997 by and between BACE Industries and the Company" immediately preceding the
period appearing at the end of such Section.
2.20. Section 8.1 of the Credit Agreement is amended by striking the
phrase "to effect a Permitted Acquisition" appearing in the sixth and seventh
lines thereof.
2.21 Sections 8.5(a), (b) and (e) of the Credit Agreement are
hereby amended by striking the phrase "and consolidating" wherever it appears
therein.
2.22 Section 8.17 of the Credit Agreement is hereby amended by
striking the phrase "to effect a Permitted Acquisition" appearing in the eighth
line thereof.
2.23 Section 9.1(k) of the Credit Agreement is hereby amended and
as so amended shall be restated in its entirety to read as follows:
"(k) dissolution or termination of the existence of the
Company or any Subsidiary (except for the merger or
liquidation of a Subsidiary into the Company permitted by
Section 8.1 hereof); or"
2.24 Section 8.7 of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 8.7. Rental Inventory Leases. The Company shall not,
nor shall it permit any Subsidiary to, acquire the use or
possession of any Property under a lease or similar
arrangement, whether or not the Company or any Subsidiary has
the express or implied right to acquire title to or purchase
such Property, at any time if, after giving effect thereto,
the aggregate value of such Property so acquired (excluding
real property used for retail rental store locations and the
Company's offices and rental equipment to the extent held
under consignment, split rental or similar arrangements)
would, when taken together with the amount then outstanding on
the purchase money indebtedness and Capitalized Lease
Obligations in each case permitted by Section 8.13(b) hereof,
at any time aggregate more than $10,000,000."
- 8 -
<PAGE> 103
2.25 Section 11.11 of the Credit Agreement is hereby amended by
striking the second sentence appearing therein and inserting therefor the
following:
"Notices hereunder to the Company shall be addressed to:
6000 East Evans, Suite 2-300
Denver, Colorado 80222
Attention: Chief Financial Officer
Telephone: (303) 512-2000
Telecopy: (303) 692-0188
With a copy to:
BACE Industries, L.L.C.
1522 Blake Street
Denver, Colorado 80202
Attention: Craig Zoellner
Telephone: (303) 620-9090
Telecopy: (303) 620-9016
With a copy to:
Jeff MacDowell
BACE Industries LLC
7401 Vineyard Trail
Garland, Texas 75044-2144
Telephone: (972) 414-6767
Telecopy: (972) 414-6868
With a copy to (in case of notices of default):
Kurt A. Kaufmann
Sherman and Howard, LLC
633 17th Street
Suite 3000
Denver, Colorado 80202
Telephone: (303) 297-2900
Telecopy: (303) 298-0940
2.26 Schedule 8.14 to the Credit Agreement by adding the following
to such Schedule in the appropriate columns thereof:
- 9 -
<PAGE> 104
<TABLE>
<CAPTION>
SECURED PARTY COLLATERAL
<S> <C>
General Electric Capital Corporation Specific equipment purchased through
("GECC") the use of GECC financing
Colorado Business Leasing, Inc. ("CBL") Specific equipment purchased through
the use of CBL financing
Issuers of Subordinated Debt contemplated All assets of the Company (junior to the Banks
by Section 8.13(e) and the equipment lenders)
</TABLE>
2.27 Section 8.20 of the Credit Agreement is hereby amended in its
entirety and as so amended is restated to read as follows:
"Section 8.20. Subordinated Debt. (a) The Company
will not, and will not permit any Subsidiary to, amend or
modify the terms and conditions applicable to any Subordinated
Debt, except that the Company may agree to a decrease in the
interest rate or premium applicable thereto or to a deferral
of repayment of any of principal of or interest or premium on
any Subordinated Debt beyond the due date applicable thereto
as of the date such indebtedness is initially approved by the
Required Lenders. The Company will not, and will not permit
any Subsidiary to, make any payment of principal, interest or
premium, if any, on or in respect of any Subordinated Debt or
otherwise acquire, prepay or retire any such Subordinated Debt
prior to the maturities thereof or prior to any other times
required for payment thereof as are in force and effect as of
the date such indebtedness is initially approved by the
Required Lenders.
(b) Notwithstanding anything contained herein to
the contrary, the Company may: (i) issue the Investor
Subordinated Debt; (ii) pay interest as the same becomes due
and payable on the Investor Subordinated Debt in the form and
only in the form of Series C Preferred Stock of the Company;
(iii) permit the conversion of the Investor Subordinated Debt
into Series C Preferred Stock of the Company on the basis of
one (1) share of Series C Preferred Stock of the Company for
each $1,000 of the then outstanding principal amount of the
Investor Subordinated Debt and (iv) in the event and only in
the event that the Company consummates its proposed initial
public offering of equity securities and the cash proceeds
received by the Company from such initial public offering are
an amount greater
- 10 -
<PAGE> 105
than or equal to $20,000,000 (net of (x) the aggregate amount
expended by the Company and its Subsidiaries for the
redemption or other repurchase of their capital stock and (y)
reasonable fees, commissions and underwriting discounts
directly incurred and payable by the Company or any Subsidiary
as a result of such initial public offering), use a portion of
the cash proceeds thereof to repay the then outstanding
principal amount of the Investor Subordinated Debt."
3. NEW SUBORDINATED DEBT.
3.1 The Company has informed the Lenders pursuant to that certain
term sheet dated as of July 31, 1997 (the "term sheet") that the Company is
contemplating the issuance of Subordinated Debt following the effective date of
this Amendment in an aggregate principal amount not to exceed $3,000,000 (the
"Investor Subordinated Debt"). The Company has requested that the Lenders waive
compliance with certain Sections of the Credit Agreement in order to permit the
Company to issue the Investor Subordinated Debt. Section 6.12 of the Credit
Agreement requires the Company to represent that none of the contracts or
agreements between the Company and any of its Affiliates contain terms and
conditions which are less favorable to the Company than would be usual and
customary in similar contracts or agreements between non- affiliated Persons.
The Company has requested that the Lenders waive compliance with Section 6.12
of the Credit Agreement to the extent that the Investor Subordinated Debt
represents a contract or agreement which is prohibited thereby. In addition,
Section 8.23 of the Credit Agreement prohibits the Company from entering into
any contract, agreement or business arrangement with any Affiliate on terms or
conditions which are less favorable to the Company than would be usual and
customary in similar contracts, agreements or business arrangements between
non-affiliated Persons. The Company has requested that the Lenders waive
compliance with Section 8.23 to the extent that the issuance of the Investor
Subordinated Debt would constitute a contract, agreement or business
arrangement with an Affiliate which is prohibited thereby. Accordingly,
provided the Investor Subordinated Debt is issued substantially upon the terms
set forth in the term sheet, the Lenders hereby waive compliance with Sections
6.12 and 8.23 of the Credit Agreement to the extent and only to the extent that
the issuance of Investor Subordinated Debt would otherwise be prohibited
thereby. Except as indicated herein, the Company must comply with all of the
terms and conditions of the Credit Agreement as currently in effect as amended
by this amendment.
4. REPLACEMENT OF NOTES.
4.1 New Revolving Credit Notes. In replacement for the outstanding
Revolving Credit Note dated October 28, 1996 payable to the order of Harris
Trust and Savings Bank ("Harris") in the aggregate face principal amount of
$2,142,857.14 (the "Existing Revolving Credit Note") now outstanding for
Revolving Loans made by Harris to the Company pursuant to the Credit Agreement
and the other changes made hereby, the Company shall execute and deliver to
Harris a new revolving credit note in the amount of Harris' Revolving Credit
Commitment and otherwise in the form (with
- 11 -
<PAGE> 106
appropriate insertions) annexed hereto as Exhibit A (the "New Revolving Credit
Note") which shall substitute for the Existing Revolving Credit Note issued to
Harris and shall evidence all Revolving Loans now or hereafter outstanding from
Harris under the Revolving Credit. All references in the Credit Agreement or in
any other instrument or document referring to the Existing Revolving Credit
Note shall be deemed references to the New Revolving Credit Note.
4.2 New Term Credit Notes. In replacement for the Term Credit
Note dated October 28, 1996 payable to the order of Harris in the original
principal amount of $15,000,000 (the "Existing Term Credit Note") now
outstanding for Term Loans by Harris to the Company pursuant to the Credit
Agreement and the other changes made hereby, the Company shall execute and
deliver to Harris a new term credit note in the amount of Harris' Term Credit
Commitment in the form (with appropriate insertions) annexed hereto as Exhibit
B (the "New Term Credit Note") which shall substitute for the Existing Term
Credit Note issued to Harris and shall evidence all Term Loans now or hereafter
outstanding from Harris under the Term Credit. All references in the Credit
Agreement or in any other instrument or document referring to the Existing Term
Credit Notes shall be deemed references to the New Term Credit Notes.
5. INITIAL PUBLIC OFFERING - WAIVERS.
The Company has informed the Lenders that it is currently preparing to
make an initial public offering of its equity securities (the "IPO"). The
Company has requested that the Lenders waive compliance with certain Sections
of the Credit Agreement in order to permit the Company to consummate the IPO.
The Lenders have informed the Company that the Company plans to convert, upon
the consummation of the IPO, the then issued and outstanding classes of its
preferred stock into common capital stock of the Company without any
consideration from the Company or any Subsidiary other than the Company's
issuance to its preferred stockholders of the common capital stock into which
their preferred stock shall be converted. Section 8.19 of the Credit Agreement
prohibits among other things the direct or indirect purchase, redemption, other
acquisition or retirement by the Company of any of its capital stock. The
Company has requested that the Lenders waive compliance with Section 8.19 of
the Credit Agreement to the extent and only to the extent that the provisions
thereof would otherwise prohibit such conversion of its issued and outstanding
classes of preferred stock into common capital stock of the Company.
Accordingly, the Lenders hereby waive compliance with Section 8.19 of the
Credit Agreement to the extent and only to the extent required to permit the
Company's conversion of its issued and outstanding classes of preferred stock
into common capital stock of the Company. Except as indicated herein, the
Company must comply with all of the terms and conditions of the Credit
Agreement as currently in effect as amended by this Amendment.
6. BACE MANAGEMENT AGREEMENT.
The Company has informed the Lenders that it has modified the terms of
the BACE Management Agreement relating to among other things the compensation
payable to BACE and/or an Affiliate of BACE pursuant to the First Amendment to
Consulting Agreement dated as of
- 12 -
<PAGE> 107
August 1, 1997 (the "Management Amendment"). Section 8.27 of the Credit
Agreement prohibits the amendment or modification by the Company or any
Subsidiary of any provision of the BACE Management Agreement relating to the
compensation payable to BACE and any of its Affiliates. The Company has
requested that the Lenders waive compliance with Section 8.27 of the Credit
Agreement to the extent and only to the extent that the provisions thereof
would otherwise prohibit the Company's execution and delivery of the Management
Amendment. Accordingly, the Lenders hereby waive compliance with Section 8.27
of the Credit Agreement to the extent and only to the extent required to permit
the Company's execution and delivery of the Management Amendment. Except as
indicated herein, the Company must comply with all of the terms and conditions
of the Credit Agreement as currently in effect as amended by this Amendment.
7. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
7.1 The Company, Newmanco, Inc., a New Mexico corporation
("Newmanco"), Titus Rental Service, a Michigan corporation ("Titus") the Agent
and the Lenders shall have executed and delivered this Amendment.
7.2 The Company shall have executed Notes in favor of each Lender
in the forms attached hereto as Exhibits A and B, with each Note to a Lender to
be dated as of the date of its issuance and in a face amount equal to the
relevant Commitment of such Lender after giving effect to this Amendment.
7.3 No Default or Event of Default shall have occurred and be
continuing as of the date this Amendment would otherwise take effect.
7.4 Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Lenders and their counsel; and the
Lenders shall have received the favorable written opinion of counsel for the
Company in form and substance satisfactory to the Lenders and their counsel.
7.5 The Company shall have delivered to the Agent a copy of the
Company's Articles of Incorporation, as currently in effect, certified by the
Secretary or Assistant Secretary of the Company.
7.6 The Agent shall have received for the account of the Lenders the
closing fees required to be paid by the Company under Section 3.1(d) of the
Credit Agreement as amended hereby.
Upon the effectiveness of this Amendment, each Lender shall promptly
return to the Company the Notes issued to that Lender which are being replaced
by the Notes contemplated by this Amendment.
- 13 -
<PAGE> 108
8. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this Amendment,
the Company hereby represents to the Lenders that as of the date hereof, the
representations and warranties set forth in Section 6 of the Credit Agreement
are and shall be and remain true and correct (except that for purposes of this
paragraph, (i) the representations contained in Section 6.3 shall be deemed to
include this Amendment as and when it refers to Loan Documents and (ii) the
representations contained in Section 6.5 shall be deemed to refer to the most
recent financial statements of the Company delivered to the Lenders) and the
Company is in full compliance with all of the terms and conditions of the
Credit Agreement and no Default or Event of Default has occurred and is
continuing under the Credit Agreement or shall result after giving effect to
this Amendment.
9. MISCELLANEOUS.
9.1 Each of the Company, Newmanco and Titus acknowledges and
agrees that all of the Collateral Documents to which it is a party remain in
full force and effect for the benefit and security of, among other things, the
Revolving Credit Loans and Term Loans as modified hereby. Each of the Company,
Newmanco and Titus further acknowledges and agrees that all references in such
Collateral Documents to the Revolving Credit Loans and Term Loans shall be
deemed a reference to the Revolving Credit Loans and Term Loans as so modified.
Each of the Company, Newmanco and Titus further agrees to execute and deliver
any and all instruments or documents as may be required by the Agent or
Required Lenders to confirm any of the foregoing.
9.2 Except as specifically amended herein or waived hereby, the
Credit Agreement shall continue in full force and effect in accordance with its
original terms. Reference to this specific Amendment need not be made in the
Credit Agreement, the Notes, or any other instrument or document executed in
connection therewith, or in any certificate, letter or communication issued or
made pursuant to or with respect to the Credit Agreement, any reference in any
of such items to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.
9.3 This Amendment may be executed in any number of counterparts,
and by the different parties on different counterpart signature pages, all of
which taken together shall constitute one and the same agreement. Any of the
parties hereto may execute this Amendment by signing any such counterpart and
each of such counterparts shall for all purposes be deemed to be an original.
This Amendment shall be governed by the internal laws of the State of Illinois.
- 14 -
<PAGE> 109
9.4 The Company agrees to pay all reasonable out-of-pocket costs
and expenses incurred by the Lenders in connection with the preparation,
execution and delivery of this Amendment and the documents and transactions
contemplated hereby, including the reasonable fees and expenses of counsel for
the Lenders with respect to the foregoing.
Dated as of August 25, 1997.
RENTX INDUSTRIES, INC.
By /s/ Thomas D. Nugent
----------------------------------
Its Executive Vice President
----------------------------------
NEWMANCO, INC.
By /s/ Thomas D. Nugent
----------------------------------
Its Executive Vice President
----------------------------------
TITUS RENTAL SERVICE COMPANIES, INC.
By /s/ Thomas D. Nugent
----------------------------------
Its Executive Vice President
----------------------------------
Accepted and agreed to in Chicago, Illinois as of the date and year
last above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ ILLEGIBLE
----------------------------------
Its Vice President
LASALLE NATIONAL BANK
By /s/ ILLEGIBLE
----------------------------------
Its Vice President
- 15 -
<PAGE> 110
BANK ONE, ILLINOIS, N.A. (formerly
known as Bank One, Chicago, N.A.)
By /s/ Stanton H. Barnett
----------------------------------
Its Regional Vice President
----------------------------------
- 16 -
<PAGE> 111
EXHIBIT A
RENTX INDUSTRIES, INC.
REVOLVING CREDIT NOTE
Chicago, Illinois
$2,763,265.29 August _____, 1997
On the Revolving Credit Termination Date, for value received, the
undersigned, RENTX INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby promises to pay to the order of Harris Trust and Savings Bank (the
"Lender"), at the principal office of Harris Trust and Savings Bank in Chicago,
Illinois, the principal sum of (i) Two Million Seven Hundred Sixty Three
Thousand Two Hundred Sixty Five and 29/100 Dollars ($2,763,265.29), or (ii)
such lesser amount as may at the time of the maturity hereof, whether by
acceleration or otherwise, be the aggregate unpaid principal amount of all
Revolving Credit Loans owing from the Company to the Lender under the Revolving
Credit provided for in the Credit Agreement hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain Credit
Agreement dated as of May 15, 1996, between the Company, Harris Trust and
Savings Bank, individually and as Agent thereunder, and the other Lenders which
are now or may from time to time hereafter become parties thereto (said Credit
Agreement, as the same may be amended, modified or restated from time to time,
being referred to herein as the "Credit Agreement") made and to be made to the
Company by the Lender under the Revolving Credit provided for under the Credit
Agreement, and the Company hereby promises to pay interest at the office
described above on each loan evidenced hereby at the rates and at the times and
in the manner specified therefor in the Credit Agreement.
Each loan made under the Revolving Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto shall be endorsed by
the holder hereof on a schedule to this Note or recorded on the books and
records of the holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company agrees that
in any action or proceeding instituted to collect or enforce collection of this
Note, the entries so endorsed on a schedule to this Note or recorded on the
books and records of the holder hereof shall, absent manifest error, be prima
facie evidence of the unpaid principal balance of this Note, the status of each
such loan from time to time as part of the Domestic Rate Portion or a LIBOR
Portion, and, in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto.
<PAGE> 112
This Note is issued by the Company under the terms and provisions of
the Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary
prepayments may be made hereon, and certain prepayments are required to be made
hereon, all in the events, on the terms and with the effects provided in the
Credit Agreement. All capitalized terms used herein without definition shall
have the same meanings herein as such terms are defined in the Credit
Agreement.
This Note is issued in substitution for and in replacement of that
certain Revolving Credit Note of the Company dated October 28, 1996 payable to
the order of the Lender in the face principal amount of $2,142,857.14.
The Company hereby promises to pay all reasonable costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof in
collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
RENTX INDUSTRIES, INC.
By
------------------------------------
Name:
----------------------------------
Title:
--------------------------------
- 2 -
<PAGE> 113
EXHIBIT B
RENTX INDUSTRIES, INC.
TERM NOTE
Chicago, Illinois
$19,342,857 August___, 1997
On the Term Credit Termination Date, for value received, the
undersigned, RENTX INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby promises to pay to the order of Harris Trust and Savings Bank (the
"Lender"), at the principal office of Harris Trust and Savings Bank in Chicago,
Illinois, the principal sum of (i) Nineteen Million Three Hundred Forty-two
Thousand Eight Hundred Fifty-Seven and no/100 Dollars ($19,342,857), or (ii)
such lesser amount as may at the time of the maturity hereof, whether by
acceleration or otherwise, be the aggregate unpaid principal amount of all Term
Loans owing from the Company to the Lender under the Term Credit provided for
in the Credit Agreement hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain Credit
Agreement dated as of May 15, 1996, between the Company, Harris Trust and
Savings Bank, individually and as Agent thereunder, and the other Lenders which
are now or may from time to time hereafter become parties thereto (said Credit
Agreement, as the same may be amended, modified or restated from time to time,
being referred to herein as the "Credit Agreement") made and to be made to the
Company by the Lender under the Term Credit provided for under the Credit
Agreement, and the Company hereby promises to pay interest at the office
described above on each loan evidenced hereby at the rates and at the times and
in the manner specified therefor in the Credit Agreement.
Each loan made under the Term Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto shall be endorsed by
the holder hereof on a schedule to this Note or recorded on the books and
records of the holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company agrees
that in any action or proceeding instituted to collect or enforce collection of
this Note, the entries so endorsed on a schedule to this Note or recorded on
the books and records of the holder hereof shall, absent manifest error, be
prima facie evidence of the unpaid principal balance of this Note, the status
of each such loan from time to time as part of the Domestic Rate Portion or a
LIBOR Portion, and, in the case of any LIBOR Portion, the interest rate and
Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of
the Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary
prepayments may be made hereon, and certain
<PAGE> 114
prepayments are required to be made hereon, all in the events, on the terms and
with the effects provided in the Credit Agreement. All capitalized terms used
herein without definition shall have the same meanings herein as such terms are
defined in the Credit Agreement.
This Note is issued in substitution for and in replacement of that
certain Revolving Credit Note of the Company dated October 28, 1996 payable to
the order of the Lender in the face principal amount of $15,000,000.
The Company hereby promises to pay all reasonable costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof in
collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
RENTX INDUSTRIES, INC.
By
------------------------------------
Name:
----------------------------------
Title:
--------------------------------
- 2 -
<PAGE> 1
EXHIBIT 10.2
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made effective as of
May 1, 1996, regardless of its date of execution, between BACE Industries, LLC,
a Colorado limited liability company ("BI"), and RentX Industries, Inc., a
Delaware corporation (the "Company").
RECITALS
The Company was formed to acquire, own and operate various rental
businesses previously acquired and other assets which it may acquire in the
future. BI and the Company have agreed that BI's business expertise will be
valuable to the Company in managing its business, and that such expertise is
important to the Company's success. BI and the Company desire to set forth
their understanding pursuant to which BI has agreed to provide certain
management services to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
I. DEFINITIONS
For purposes of this Agreement, the following terms shall be defined
as follows:
1.1 Adjusted Income means the consolidated net income of
the Company for any fiscal year, as reflected on the audited financial
statements of the Company for such fiscal year, increased by (i) non-recurring
or extraordinary expenses, including, without limitation, for acquisitions,
mergers, financings (including, without limitation, public debt or stock
offerings), casualty losses (net of insurance proceeds) and facility moves,
(ii) taxes, (iii) amortization (other than amortization relating to debt), (iv)
expenses in excess of the fair market value of services actually rendered paid
by the Company to selling shareholders of entities acquired by, or whose assets
are acquired by, the Company in the future, (v) all payments by the Company to
BI for Fixed Management Fees or expense reimbursements, (vi) in the first 12
months after the date of this Agreement only, all compensation expense for the
Chief Executive Officer and Chief Financial Officer/Executive Vice President of
the Company and (vii) losses on dispositions of assets outside of the ordinary
course of business, and reduced by (x) non-recurring or extraordinary income
(including, without limitation, such income arising from the items specified in
clause (i) above) and (y) gains on dispositions of assets outside of the
ordinary course of business.
1.2 Affiliate means a person or entity which controls, is
controlled by, or is under common control with another person or entity.
<PAGE> 2
1.3 Fixed Management Fee means an annual amount based on
the Company's sales run rate determined per the following table (subject to
annual adjustment as provided below):
<TABLE>
<CAPTION>
Sales Fixed
Run Rate Management Fee
------------ --------------
<S> <C>
Less than $15 million $150,000
15 Million 175,000
20 Million 200,000
50 Million 250,000
75 Million 300,000
</TABLE>
The Company's sales run rate means the Company's sales for the 12-month period
ending with the month preceding the month for which a payment of Fixed
Management Fee is being calculated. For that purpose, the Company's sales
shall be deemed to include the sales of all entities acquired, or whose assets
are acquired, by the Company prior to the date of acquisition (excluding any
sales relating to portions of such entities or their assets which are not so
acquired), even though the Company was not in existence or did not own the
acquired entity when those sales occurred. If the Company opens a new start-up
store, for purposes of computing the Company's sales run rate as of the end of
any month during the first 12 months after the opening of the new store, the
new store shall be deemed to have had sales during the 12-month period ending
with that month equal to 80% of the cumulative cost of all rental equipment
acquired by, transferred to or utilized by the new store as of the last day of
that month, notwithstanding the level of actual sales. For purposes of
computing the Company's sales run rate as of the end of the 13th through the
23rd month after the opening of the new store, the new store shall be deemed to
have had sales during each of the first 12 months after opening equal to 80% of
the cumulative cost of all rental equipment acquired by, transferred to or
utilized by the new store as of the last day of the 12th month after opening,
divided by 12, notwithstanding the actual level of sales. Sales for the 13th
and each subsequent month shall be actual sales of the new store in such month.
The month in which a new store is opened shall be treated as a full month after
opening.
In January 1997, the annual amounts of the Fixed Management
Fee reflected in the foregoing table should be increased by a proportion equal
to the proportionate increase in the Index released in January 1997 over the
Index released in January 1996. In January of each succeeding year during the
term of this Agreement, the annual amounts of the Fixed Management Fee
established in January of the preceding year shall be increased by a proportion
equal to the proportionate increase in the Index released in January of that
year over the Index released in January of the preceding year. If the Index
shall have decreased, the Fixed Management Fee shall not decrease.
-2-
<PAGE> 3
1.4 Variable Fee means 50% of the amount by which the
Adjusted Income for any fiscal year exceeds the Minimum Hurdle for that fiscal
year; provided, however, that the Variable Fee for any fiscal year shall not
exceed the amount of the Fixed Management Fee paid for that fiscal year.
1.5 Index means the Consumer Price Index - All Urban
Consumers, All Items for the Denver-Boulder metropolitan area, as released from
time to time.
1.6 Minimum Hurdle for each fiscal year means 25% of the
average equity capital that has been invested in the Company during that fiscal
year. For example, if $5,000,000 had been invested in the Company prior to the
beginning of a particular fiscal year and an additional $2,000,000 was invested
half-way through that year, the average equity capital for the year would be
$5,000,000 + ($2,000,000 / 2) = $6,000,000 and the Minimum Hurdle would be
$1,500,000. For that purpose, the first fiscal year of the Company shall be
deemed to include the 12-month period ending with the last day of such fiscal
year, even though the Company was not in existence throughout that period.
II. MANAGEMENT SERVICES
BI shall provide management level consulting services
concerning business planning, acquisitions, financing and other management
matters to the Company consistent with policies established by the Company's
Board of Directors (the "Board"), and shall report to the Board. BI and its
partners, employees and agents who provide services to the Company pursuant to
this Agreement shall be independent contractors as to the Company, and not its
employees. As independent contractors, neither BI nor its partners, agents or
employees shall, unless otherwise expressly granted by the Company's Board of
Directors, have the right or authority to execute documents in the name of the
Company or to otherwise bind the Company; provided, however, that nothing
contained in this Article II shall limit or diminish any rights or powers which
any such partners, employees or agents may have as directors or officers of the
Company.
III. COMPENSATION
3.1 Compensation. BI shall be entitled to receive from
the Company on the first day of each calendar month a payment of the Fixed
Management Fee equal to 1/12th of the annual amount thereof then in effect
based on the Company's sales run rate for the 12-month period ending with the
preceding month. Within 90 days after the end of each fiscal year, BI shall be
entitled to receive the Variable Fee, if any, for that fiscal year. If the
Company does not have aggregate debt financing and debt financing commitments
totaling $35 million on or before May 1, 1997, the structure and amounts of
BI's compensation hereunder will be renegotiated to the mutual satisfaction of
the Board of Directors of the Company and BI. The Company's obligation to make
payment of the Variable Fee to BI shall be suspended during any period during
which there exists an Event of
-3-
<PAGE> 4
Default pursuant to Section 6.1(a) or (b) of the Investment Agreement dated as
of May 15, 1996 between the Company and the investors named therein, as amended
from time to time (the "Investment Agreement"), or a failure by the Company,
following demand given pursuant to Section 6.1 of the Investment Agreement, to
redeem the preferred stock of the Company; provided, however, that the
Company's obligation with respect to such compensation shall accrue during such
suspension and be payable immediately upon termination of such suspension.
3.2 Benefits and Expense Reimbursement. The Company
shall reimburse BI and its members and employees who perform services for or on
behalf of the Company hereunder for all reasonable out-of-pocket costs incurred
by them, including out-of-pocket costs incurred prior to the date hereof. The
Company shall provide health, medical, dental, disability and other similar
insurance benefits for up to four members or employees of BI who are providing
services for the Company hereunder on the same basis as provided to Company
officers.
IV. TERM
4.1 Term. Unless previously terminated by mutual
agreement of the parties or unless terminated by the Company for cause pursuant
to Section 4.2, this Agreement shall continue until the earliest to occur of
the following events: (i) if Richard M. Tyler ("Tyler") and Craig J. Zoellner
("Zoellner"), or their respective Affiliates, spouses, children and trusts, do
not own a number of shares of the Company's stock equal to at least one-third
of the number of shares owned by BACE Investments, LLC ("Investments") as of
the date hereof; (ii) the Company sells all or substantially all of its assets
on a consolidated basis in any single transaction or series of related
transactions for cash to a person or entity that is not an Affiliate; (iii) the
Company is acquired for cash by a person or entity that is not an Affiliate of
BI, including without limitation, through the purchase for cash of all or
substantially all of the Company's outstanding stock or through a cash merger
or consolidation; or (iv) the Company files, or there is filed against the
Company, a proceeding under Chapter 11 of the Federal Bankruptcy Code.
4.2 Termination for Cause. The Company may terminate
this Agreement for cause if (i) BI or any member, employee or authorized agent
of BI commits gross negligence in the performance of BI's duties hereunder,
(ii) BI or any member, employee or authorized agent of BI willfully engages in
any improper activity which is contrary to the best interests of the Company,
(iii) BI or any member, employee or authorized agent of BI willfully violates
or disregards written instructions from the Board with respect to BI's duties
hereunder, (iv) BI or any member, employee or authorized agent of BI engages in
any activity which has a material adverse effect upon the Company or its
business, (v) if BI commits a material breach of a material provision of this
Agreement, or (vi) if Tyler and Zoellner both cease to be members in, or
otherwise own equity in, BI. BI shall be given 10 days' notice of any action
which the Company deems to be cause for termination hereunder and BI shall be
terminated only if BI fails to cure such action or offense within such 10-day
period or repeats or continues the action or offense after such notice. If the
action or offense was
-4-
<PAGE> 5
taken or committed by an employee or authorized agent of BI without BI's
express authorization or actual prior knowledge, solely for the purpose of
determining the Company's right to terminate this Agreement under this Section
4.2, BI shall be deemed to have cured the action or offense if it replaces the
employee or agent within the 10-day period.
V. NONCOMPETITION
BI expressly covenants and agrees that, during the term of
this Agreement and for one year thereafter, neither BI nor any member of BI
will, directly or indirectly, as an officer, agent, principal, employee,
consultant, or otherwise, engage in any activity which, at that time, competes
to a material extent with the Company. Nothing herein will preclude BI or any
member from acquiring or holding securities representing less than 5% of the
outstanding securities of any class of equity security registered under the
Securities Exchange Act of 1934, as amended, or from engaging in any Non-RentX
Activities (as defined in the Stockholders Agreement dated as of May 15, 1996,
as amended from time to time, among the Company and the other parties named
therein) unless the consent of Investments, Tyler, Zoellner or at least one
director designated by Investments pursuant to such Stockholders Agreement, so
long as Investments is permitted to make such designation, has been given in
connection with the determination by the Company to engage in such activities.
VI. CONFIDENTIALITY AND NON-DISCLOSURE
BI acknowledges that information, observations and data
obtained by BI and its partners and other personnel during the term of this
Agreement concerning the business or affairs of the Company (the "Confidential
Information") are the property of the Company. BI will not disclose to any
person or use for its own account any Confidential Information without the
written consent of the Board. Nothing herein shall prevent the disclosure of
Confidential Information (i) which becomes generally known to and available for
use by the public other than as a result of a disclosure by BI, (ii) with
respect to which BI's duty of confidentiality is waived by the Company, (iii)
if required by applicable law, regulation or order of any governmental agency
or court of competent jurisdiction, (iv) which was known to the public when
received by BI or (v) which is lawfully obtained by BI from other sources. BI
agrees that upon termination of this Agreement, it will deliver to the Company
all memoranda, notes, plans, records, reports and other documents containing
Confidential Information, and all copies thereof, that BI may then possess or
have under its control. The obligations set forth in this Article VI shall
continue for a period of two years following the termination of this Agreement.
VII. GENERAL PROVISIONS
7.1 Successors and Assigns. This Agreement is intended
to bind and inure to the benefit of and be enforceable by the parties hereto
and their respective permitted successors and assigns. BI may not assign any
of its rights or obligations hereunder, except to an Affiliate.
-5-
<PAGE> 6
7.2 Notices. All notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered in person, upon
confirmation of receipt if given by telecopier, or three days after being
deposited in the United States mail, certified mail, return receipt requested,
postage prepaid, as follows:
To the Company:
---------------
RentX Industries, Inc.
1522 Blake Street
Denver, Colorado 80202
Attn: Gary Kulesza
Telecopier: (303) 620-9016
To BI:
------
BACE Industries, LLC
1522 Blake Street
Denver, CO 80202
Attn: Richard M. Tyler
Telecopier: (303) 620-9016
or to such other address as either party shall have specified by notice in
writing to the other party.
7.3 Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
7.4 Complete Agreement. This Agreement embodies the
complete Agreement and understanding between the parties and supersedes and
preempts any prior understandings, agreements or representations by or between
the parties, written or oral, which relate to the subject matter hereof.
7.5 CHOICE OF LAW. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY
THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF COLORADO.
7.6 Remedies. Each of the parties to this Agreement will
be entitled to enforce its rights under this Agreement specifically, to recover
damages by reason of any breach of the
-6-
<PAGE> 7
provisions of this Agreement and to exercise all other rights in its favor at
law or in equity. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of Articles V
and VI of this Agreement and that any party may in its sole discretion apply
for specific performance and injunctive relief in order to enforce or prevent
any violations of the provisions of Article V or VI.
7.7 Amendments and Waivers. This Agreement may be
amended only pursuant to a duly authorized written agreement signed by all of
the parties hereto. No waiver of rights hereunder shall be effective unless
such waiver is set forth in writing signed by the party whose rights are being
waived.
7.8 Arbitration. Any disputes arising under this
Agreement, including, without limitation, those involving claims for specific
performance or injunctive relief, shall be submitted to binding arbitration
under the Commercial Arbitration Rules of the American Arbitration Association.
The arbitration shall be conducted in Denver, Colorado, before a single
arbitrator selected by BI and the Company, or, if they are unable to agree on
an arbitrator, before a panel of three arbitrators, one selected by BI, one
selected by the Company and the third selected by the two arbitrators. Failing
the selection of any required arbitrator, the selection shall be made by the
American Arbitration Association. The award of the arbitrators shall be final
and binding and judgment on the award may be entered by any court of competent
jurisdiction. This submission and agreement to arbitrate shall be specifically
enforceable.
7.9 Attorneys' Fees. The prevailing party or parties in
any arbitration or in any action to enforce or interpret this Agreement shall
be entitled to all reasonable out-of-pocket costs and expenses, including fees
of the arbitrators and reasonable attorneys' fees, incurred in connection
therewith.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
RENTX INDUSTRIES, INC.
By: /s/ CRAIG J. ZOELLNER
---------------------------------------------
Its Vice President
------------------------------------------
Date: May 15 , 1996
---------------------------------
BACE INDUSTRIES, LLC
By: /s/ CRAIG J. ZOELLNER
---------------------------------------------
Craig J. Zoellner, Member
Date: May 15 , 1996
--------------------------------
By: /s/ RICHARD M. TYLER
---------------------------------------------
Richard M. Tyler, Member
Date: May 15 , 1996
---------------------------------
-8-
<PAGE> 9
FIRST AMENDMENT
TO
CONSULTING AGREEMENT
This First Amendment is made effective as of the 1st day of
August, 1997 (the "Effective Date"), regardless of the actual date of
execution, by and between BACE Industries, LLC, a Colorado limited liability
company ("BI"), and RentX Industries, Inc. a Delaware corporation (the
"Company").
RECITALS
A. BI and the Company are party to a Management Agreement dated as of May
1, 1996 (the "Agreement"), whereunder BI provides consulting services
to the Company for a fee consisting of a Fixed Management Fee and a
Variable Fee (terms capitalized but not defined herein are used as
defined in the Agreement). The Variable Fee for each year is
currently based on the relationship between the Company's Adjusted
Income and a specified Minimum Hurdle return on the amount of equity
capital invested in the Company.
B. Because BI has little or no involvement in ongoing operations of the
Company, and to more closely align BI's incentive Variable Fee with
those matters more directly subject to BI's influence and
responsibilities (i.e. acquisitions), the parties wish to modify the
formula for computing the Variable Fee under the Agreement.
AGREEMENT
In consideration of the premises, and the mutual covenants
contained herein, the parties agree as follows effective as of the Effective
Date:
1. CONSULTING AGREEMENT. The name of the Agreement is changed from
"Management Agreement" to "Consulting Agreement" and all references in
the Agreement to "management services" and "Fixed Management Fee" are
changed to "consulting services" and "Fixed Consulting Fee."
2. VARIABLE FEE FOR SUBSEQUENT YEARS. The Agreement is hereby amended as
follows:
a. Definition of Acquired Business. Section 1 of the Agreement
is amended by adding thereto the following new Section 1.7:
1.7 Acquired Business means any business which is
acquired (whether by acquisition of stock or assets,
by merger or otherwise) by the Company.
b. Definition of Cumulative Adjusted EBITDA. Section 1 of the
Agreement is amended by adding thereto the following new
Section 1.8:
1.8 Cumulative Adjusted EBITDA means the sum of the
Adjusted EBITDA for all Acquired Businesses which are
acquired
<PAGE> 10
during the period in respect of which the Variable
Fee is being determined; provided, however, that for
purposes of calculating the Variable Fee payable in
respect of the fiscal year ending January 31, 1998
the Cumulative Adjusted EBITDA shall be the sum of
the Adjusted EBITDA for all Acquired Businesses
acquired by the Company from August 1, 1997 through
January 31, 1998, not to include A-1 Rent All, Inc.,
A-1 Rent All of Marshall, Inc. (Tyler), Mer-Cal
Enterprises, Inc. (Duncan) or Pullman Rentals, Inc.
(Sun).
c. Definition of Adjusted EBITDA. Section 1.1 of the Agreement
is amended to read in its entirety as follows:
1.1 Adjusted EBITDA means the Adjusted EBITDA of the
Acquired Business for the trailing 12 months prior to
the Company's decision to acquire the Acquired
Businesses, as reflected on the Comparison of
Target's Historical Performance to Projected Single
Store Analysis of the Acquired Business prepared in
connection with the acquisition of such Acquired
Business (which shall be in substantially the form of
Exhibit A), as reasonably determined by management of
the Company on a basis consistent with practice prior
to the Effective Date.
d. Definition of Variable Fee. Section 1.4 of the Agreement is
amended to read in its entirety as follows:
1.4 Variable Fee for any fiscal year means an amount
equal to the Fixed Management Fee payable in that
fiscal year if the Cumulative Adjusted EBITDA for
that fiscal year equals or exceeds the applicable
Target Adjusted EBITDA. If the Cumulative Adjusted
EBITDA for that fiscal year is less than or equal to
85% of the applicable Target Adjusted EBITDA the
Variable Fee shall be zero. If the Cumulative
Adjusted EBITDA for that fiscal year is between 85%
and 100% of the applicable Target Adjusted EBITDA,
the Variable Fee shall be a portion of the Fixed
Management Fee payable to BI for that year which is
linearly proportional to the amount by which such
percentage of the Target Adjusted EBITDA exceeds 85%.
For example, if the Cumulative Adjusted EBITDA for a
fiscal year were 86% of the Target Adjusted EBITDA,
the Variable Fee would equal 1/15th of the Fixed
Management Fee payable in that fiscal year.
- 2 -
<PAGE> 11
e. Definition of Target Adjusted EBITDA. Section 1.6 of the
Agreement is amended to read in its entirety as follows:
1.6 Target Adjusted EBITDA means $5,572,672 for fiscal
year ending January 31, 1998. The Target Adjusted
EBITDA for subsequent fiscal years shall be
reasonably determined in good faith by the Company,
subject to approval by the Board of Directors, at
least 45 days prior to the start of each such fiscal
year. The Target Adjusted EBITDA for each subsequent
fiscal year shall be consistent with the budget for
that fiscal year approved and adopted by the Board of
Directors. The Company shall also base bonuses for
its management in meaningful part on the Target
Adjusted EBITDA.
3. BENEFITS AND EXPENSE REIMBURSEMENT. The last sentence of Section 3.2
of the Agreement is hereby amended to read in its entirety as follows:
The Company shall provide health, medical, dental, disability
and other similar insurance benefits for four members or
employees of BI who are providing services for the Company
hereunder on the same basis as provided to Company officers
and shall provide such benefits to such additional members or
employees of BI who provide services for the Company hereunder
as may be approved by Company management, such approval not to
be unreasonably withheld.
4. ADDRESS FOR NOTICE. Until subsequently changed as provided in this
Agreement, the Company's address for purposes of Section 7.2 of the
Agreement shall be:
RentX Industries, Inc.
6000 East Evans Avenue, Suite 2-300
Denver, Colorado 80222
Attention: Arnold A. Bernstein
Facsimile: (303) 782-5470
5. NO OTHER AMENDMENT. Except as specifically amended hereby, the
Agreement shall remain in full force and effect in accordance with its
terms.
- 3 -
<PAGE> 12
IN WITNESS WHEREOF, the parties have entered into this First Amendment
effective as of the Effective Date regardless of the actual date of execution.
RENTX INDUSTRIES, INC.
July 30 , 1997 By:/s/ Arnold A. Bernstein
- ----------------- ---------------------------------
Its: President-CEO
--------------------------------
BACE INDUSTRIES, LLC
July 30 , 1997 By:/s/ Craig J. Zoellner
- ----------------- ---------------------------------
Its: Member
--------------------------------
- 4 -
<PAGE> 13
Exhibit A
RentX Industries, Inc.
Proposed Acquisition of ______________
Comparison of Target's Performance to Project Single Store Analysis
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Twelve Months Ended
--------------------------------------------------------------------
_____ _____ _____ Adjusted Projected
Actual Adjusted Adjusted (__stores) Single
(__stores) Adjustments (stores) (__(%) Per Store Store
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Rental Revenue 0.00 0.00 0.00 0.00% 0.00 562,145
Sale of Merchandise 0.00 0.00 0.00 0.00% 0.00 108,910
Delivery Revenues 0.00 0.00 0.00 0.00% 0.00 30,690
Equipment Sales & Miscellaneous Revenues 0.00 0.00 0.00 0.00% 0.00 53,571
Damage Waiver, Labor, Etc. 0.00 0.00 0.00 0.00% 0.00 47,782
---- ---- ---- ----- ---- -------
Total Revenues 0.00 0.00 0.00 0.00% 0.00 803,098
Cost of Rentals & Sales
Cost of Equipment Sold 0.00 0.00 0.00 0.00% 0.00 35,714
Cost of Merchandise 0.00 0.00 0.00 0.00% 0.00 65,346
Cost of Expensed Rental Equipment 0.00 0.00 0.00 0.00% 0.00 o
Commission Rentals 0.00 0.00 0.00 0.00% 0.00 6,746
Depreciation 0.00 0.00 0.00 0.00% 0.00 74,813
Equipment Repair & Maintenance 0.00 0.00 0.00 0.00% 0.00 50,595
Equipment Licensing: 0.00 0.00 0.00 0.00% 0.00 6,000
Store Labor, burdened 0.00 0.00 0.00 0.00% 0.00 214,384
Employee Benefits & Training 0.00 0.00 0.00 0.00% 0.00 o
Shop Supplies & Uniforms 0.00 0.00 0.00 0.00% 0.00 8,031
Freight & Delivery: 0.00 0.00 0.00 0.00% 0.00 7,495
Facility: 0.00 0.00 0.00 0.00% 0.00 75,000
---- ---- ---- ----- ---- -------
Total Cost of Rentals & Sales 0.00 0.00 0.00 0.00% 0.00 544,123
Store Contribution 0.00 0.00 0.00 0.00% 0.00 258,974
Store Contribution % 0.00 0.00 0.00 0.00% 0.00 32.25%
Store Contribution % before depreciation,
leasing & small tools 0.00 0.00 0.00 0.00% 0.00 41.56%
Operating Expenses
Selling, Marketing & Advertising 0.00 0.00 0.00 0.00% 0.00 16,062
General & Administrative Expenses
Salaries, burdened: 0.00 0.00 0.00 0.00% 0.00 30,000
Employee Benefits & Training: 0.00 0.00 0.00 0.00% 0.00 -
Professional Fees 0.00 0.00 0.00 0.00% 0.00 3,000
Insurance: 0.00 0.00 0.00 0.00% 0.00 16,062
Office Expense: 0.00 0.00 0.00 0.00% 0.00 18,964
Credit Card Fees 0.00 0.00 0.00 0.00% 0.00 -
Travel: 0.00 0.00 0.00 0.00% 0.00 8,031
Bad Debts 0.00 0.00 0.00 0.00% 0.00 6,023
Profit Sharing & Bonus 0.00 0.00 0.00 0.00% 0.00 -
---- ---- ---- ----- ---- -------
Total Operating Expenses 0.00 0.00 0.00 0.00% 0.00 98,142
Operating Income 0.00 0.00 0.00 0.00% 0.00 160,833
Operating Income % 0.00% 0.00% 0.00% 20.03%
EBITDA 0.00 0.00 0.00 0.00 235,645
EBITDA % 0.00% 0.00% 0.00% 29.34%
- ---------------------------------------------------------------------------------------------------------------------------
Adjusted EBITDA 0.00 0.00 235,645
Adjusted EBIT: 0.00 0.00 187,500
Purchase Price 0.00 0.00 843,750
---- ---- -------
Multiple over Adjusted EBIT 0.00 0.00 4,500
Multiple over Adjusted EBITDA 0.00 0.00 3,581
- ---------------------------------------------------------------------------- ------------- -------
</TABLE>
- 5 -
<PAGE> 1
EXHIBIT 10.3
- --------------------------------------------------------------------------------
RENTX INDUSTRIES, INC.
INVESTMENT AGREEMENT
DATED AS OF
MAY 15, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
INVESTMENT AGREEMENT
This Investment Agreement (this "Agreement") dated as of May 15,
1996 is by and among RentX Industries, Inc., a Delaware corporation ("RentX" or
the "Corporation"), Mesirow Capital Partners VI, an Illinois limited
partnership ("Mesirow"), The Edgewater Private Equity Fund II, L.P., a Delaware
limited partnership ("Edgewater"), and any other persons who purchase Preferred
Shares (as defined below) pursuant to the terms hereof (Mesirow, Edgewater and
any other persons who purchase shares of stock pursuant to the terms hereof
being collectively referred to as the "Purchasers"), and BACE Investments, LLC,
a Colorado limited liability company ("Bace").
RECITALS
WHEREAS, the Corporation has entered into that certain Asset
Purchase Agreement dated as of April 3, 1996 (the "Zodiac Agreement") among the
Corporation, Zodiac Rentals, Inc., a Colorado corporation ("Zodiac One"),
Zodiac Rentals, Inc. III, a Colorado corporation ("Zodiac Three," Zodiac One
and Zodiac Three being collectively referred to as "Zodiac"), George A. Evans,
Marilyn J. Evans, Maureen C. Davidson and Larry W. Davidson (collectively, the
"Zodiac Selling Shareholders"), providing for the acquisition by the
Corporation from Zodiac of substantially all of the assets of Zodiac
(collectively, the "Zodiac Assets"); and
WHEREAS, the Corporation has entered into a letter of intent
dated February 1, 1996, and expects to enter into a Stock Purchase Agreement
(the "A to Z Agreement," the Zodiac Agreement and the A to Z Agreement being
collectively referred to as the "Acquisition Agreements") among the Corporation
and the shareholders of A to Z Rentals and Sales, Inc., a Washington
corporation ("A to Z") (collectively, the "A to Z Selling Shareholders," the
Zodiac Selling Shareholders and the A to Z Selling Shareholders being
collectively referred to as the "Selling Shareholders"), providing for the
acquisition by the Corporation from the A to Z Selling Shareholders of all of
the capital stock of A to Z (the "A to Z Stock"); and
WHEREAS, prior to or concurrently with the First Closing (as
defined below) Bace will contribute to the Corporation $200,000 in exchange for
200 shares (the "Bace Shares") of Series B Preferred Stock, $1.00 par value, of
the Corporation (the "Series B Preferred") and the 100 shares of common stock
of the Corporation acquired by Bace in connection with the formation of the
Corporation (the "Original Common Shares") will be reclassified and changed
into 10 shares of Class A Common Stock (as defined below); and
WHEREAS, in order to finance a portion of the purchase price
pursuant to the Acquisition Agreements and to fund the future growth of the
Corporation, the Corporation desires to issue and sell to the Purchasers, and
the Purchasers desire to purchase from the Corporation, 15,000 shares of the
authorized but unissued shares of Series A Preferred Stock, $1.00 par value, of
the Corporation (the "Preferred Stock," and the shares of Preferred Stock being
purchased by the Purchasers being referred to as the "Preferred Shares") which
are convertible into shares of Class A Common Stock, par value $.01 per share,
of the Corporation (the "Class A Common Stock"), with the Preferred Shares and
the shares of Class A Common
<PAGE> 3
Stock into which the Preferred Shares are convertible (the "Underlying Common
Shares," the Preferred Shares and the Underlying Common Shares being
collectively referred to as the "Shares") and the Bace Shares and the shares of
Class A Common Stock into which the Bace Shares are convertible (the
"Underlying Bace Shares," the Bace Shares and the Underlying Bace Shares being
collectively referred to as the "Bace Securities") to have the respective
rights specified in the Corporation's Certificate of Incorporation, as amended
to the date hereof (the "Charter"), a copy of which is attached as Exhibit A
hereto, all on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
Sale of Preferred Shares
Section 1.1. Sales of Preferred Shares. Subject to the terms
and conditions herein set forth and in reliance upon the representations and
warranties of the Corporation set forth herein or in certificates delivered
pursuant hereto, the Corporation agrees to issue, sell and deliver to each
Purchaser, free and clear of any liens, claims, charges and encumbrances
whatsoever, except as set forth in the Registration Rights Agreement and the
Stockholders Agreement (in each case as defined below), the provisions of this
Section 1.1 and any pledge required under the Loan Documents (as defined
below), and each Purchaser agrees, severally and not jointly, to purchase from
the Corporation (i) at the First Closing (as defined below), for $1,000 per
share, the respective numbers of Preferred Shares so specified on Schedule II,
(ii) at the Second Closing (as defined below), for $1,000 per share, the
respective numbers of Preferred Shares so specified on Schedule II and (iii) at
each Additional Closing (as defined below) for $1,000 per share, the respective
numbers of Preferred Shares in accordance with Schedule II (it being understood
that Mesirow and Edgewater expect that some other person or persons they
determine will purchase all or a portion of the Preferred Shares to be
purchased at the Second Closing and a portion of the Preferred Shares to be
purchased at any Additional Closing and that each such person shall, upon such
determination by Mesirow and Edgewater and the execution by such person of
counterparts of this Agreement, the Registration Rights Agreement and the
Stockholders Agreement shall become a Purchaser hereunder and Schedule II will
be appropriately modified to reflect such new Purchaser and the changes in the
numbers of Preferred Shares being purchased by the affected Purchasers);
provided that the purchases by Mesirow and Edgewater, taken together, shall
account for more than 50% of the Preferred Shares purchased pursuant to this
Agreement. Bace agrees that, not later than the First Closing, it will
purchase the Bace Shares.
-2-
<PAGE> 4
Section 1.2. Closings. (a) The sale and purchase of the
Preferred Shares shall be consummated in separate closings (collectively, the
"Closings").
(b) The First Closing shall be held at the offices of Chapman
and Cutler, Chicago, Illinois, at 10:00 a.m., local time, on May 15, 1996, or
such other time, date and place as may be agreed to in writing by the
Corporation and the Purchasers (such time and date are herein called the "First
Closing Date"). The Second Closing shall take place at the same time, date and
place as the closing pursuant to the A to Z Agreement or at such time, date and
place as may be agreed to in writing by the Corporation and the Purchasers (the
time and place of the Second Closing being referred to as the "Second Closing
Date"). All Additional Closings shall take place at such time, date and place,
which may be before or after the Second Closing, as may be agreed to in writing
by the Corporation and the Purchasers (the time and place of any Additional
Closing being referred to as an "Additional Closing Date"). Notwithstanding
the foregoing, no Additional Closing shall take place unless such Additional
Closing is consummated on or before the third anniversary of the First Closing.
Section 1.3. Delivery. At each Closing, the Corporation will
issue and deliver to each Purchaser, against the payment by such Purchaser of
the purchase price therefor by wire transfer of immediately available funds to
an account which has been designated in writing by the Corporation, the
Preferred Shares being purchased by such Purchaser at such Closing as set forth
in Schedule II (as such schedule may be modified from time to time) in each
case duly executed by the Corporation and registered in the name of such
Purchaser.
ARTICLE II
Representations and Warranties of the Corporation
The Corporation hereby represents and warrants to the
Purchasers that, except as set forth in the Disclosure Schedule attached as
Schedule I (which Disclosure Schedule makes explicit reference to the
particular representation or warranty as to which exception is taken, which in
each case shall constitute the sole representation and warranty as to which
such exception shall apply), it being understood that no such representation or
warranty with respect to A to Z shall be made until the Second Closing:
Section 2.1. Organization, Qualifications and Corporate
Power.
(a) The Corporation is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
A to Z is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Washington, each subsidiary of the
Corporation is duly organized, validly existing and in good standing under the
laws of its jurisdiction of its organization and each of the Corporation, A to
Z and each
-3-
<PAGE> 5
subsidiary of the Corporation is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business transacted by it or proposed to be
transacted by it or the character of the properties owned or leased by it or
proposed to be owned or leased by it requires such licensing or qualification,
except where the failure to be so licensed or qualified could not reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), results of operations or business, prospects or property of the
Corporation, Zodiac One, Zodiac Three, A to Z and any subsidiaries of the
Corporation, taken as a whole (a "Material Adverse Effect").
Each of the Corporation, A to Z and each subsidiary of the
Corporation has the power and authority to own and hold its properties and to
carry on its business as now conducted and as proposed to be conducted, with
respect to the Corporation. The Corporation has the corporate power and
authority to execute, deliver and perform this Agreement, the Registration
Rights Agreement between the Corporation and the Purchasers in the form of
Exhibit B hereto (the "Registration Rights Agreement") and the Stockholders
Agreement in the form of Exhibit C hereto (the "Stockholders Agreement"), and
to issue, sell, perform and deliver the Preferred Shares and the Underlying
Common Shares (collectively, the "Shares"). The Corporation is in full
compliance with all of the terms and provisions of the Charter and the
Corporation's By-laws (the "By-laws").
(b) None of the Corporation, Zodiac One, Zodiac Three, A to Z
or any subsidiary of the Corporation (i) owns of record or beneficially,
directly or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any other corporation or (B) any
participating interest in any partnership, limited liability company, joint
venture or other non-corporate business enterprise or (ii) controls, directly
or indirectly, any other entity, except that the Corporation on and as of the
Second Closing, will own the A to Z Stock, which capital stock is listed on the
attached Schedule II. As of the First Closing, the Corporation will own all of
the Zodiac Assets free and clear of any Encumbrances (as defined in the Zodiac
Agreement), except for Permitted Liens. All of the outstanding shares of
capital stock of A to Z on and as of the Second Closing (i) will be owned
beneficially and of record by the Corporation, free and clear of any liens,
charges, restrictions, claims or encumbrances of any nature whatsoever, except
for Permitted Liens and (ii) are validly issued and outstanding, fully paid and
non-assessable with no liability attaching to the ownership thereof; and there
are no outstanding subscriptions, warrants, options, convertible securities, or
other rights (contingent or other) pursuant to which A to Z is or may become
obligated to issue any shares of its capital stock to any person other than the
Corporation. As used in Sections 2.7 through 2.28, inclusive, of this
Agreement, the term "Corporation" (but not the term "RentX") shall mean the
Corporation, Zodiac One, Zodiac Three, A to Z and each subsidiary of the
Corporation (but only in the case of a subsidiary with respect to matters
occurring at or after the date of its formation by, or acquisition by, the
Corporation), individually and taken as a whole; provided, that with respect to
any subsidiary directly or indirectly acquired by the Corporation (other than A
to Z) or any business acquired by the Corporation (other than Zodiac), such
subsidiary or
-4-
<PAGE> 6
business and its or their operations shall be deemed to be included in the term
"Corporation" only with respect to periods after the date such subsidiary or
business is directly or indirectly acquired by the Corporation.
(c) Small Business Stock. (i) The Corporation is a C
corporation under the Internal Revenue Code of 1986, as amended (the "Code").
(ii) The aggregate gross assets (as defined
in Section 1202(d)(2) of the Code) of the Corporate Group (as defined
in paragraph (vii) below) (or any predecessor of any member thereof)
at all times on or after August 10, 1993 and before the issuance of
the Preferred Shares on the First Closing did and will not exceed
$50,000,000.
(iii) The aggregate gross assets (as defined
in Section 1202(d)(2) of the Code) of the Corporate Group immediately
after the issuance of the Preferred Shares on the First Closing
(determined by taking into account amounts received in the issuance of
the Preferred Shares) will not exceed $50,000,000.
(iv) The Corporation has complied (and will
comply) with the reporting requirements of Section 1202(d)(1)(C) of
the Code.
(v) The Corporate Group will meet the Active
Business Requirement of Section 1202(e) of the Code on the First
Closing Date and the Second Closing Date.
(vi) There have been no significant
redemptions (as defined in Section 1202(c)(3)(B) of the Code) by any
member of the Corporate Group during the 2-year period beginning on
the date 1 year before the First Closing.
(vii) For purposes of this Section 2.1(c),
the term "Corporate Group" shall mean the Corporation, Zodiac One,
Zodiac Three and A to Z and any other corporation which is a member of
the same Parent-Subsidiary Controlled Group (as defined in Section
1202(d)(3)(B) of the Code).
Section 2.2. Authorization of Agreements, Etc. (a) The
execution, delivery and performance by the Corporation of this Agreement, the
Registration Rights Agreement, the Stockholders Agreement and the Acquisition
Agreements and the issuance, sale and delivery of the Preferred Shares, the
Underlying Common Shares and the Bace Shares, and the consummation of the
transactions contemplated thereby, (i) have been duly authorized by all
requisite corporate action, (ii) will not violate any provision of law, any
order of any court or other agency of government, the Charter or the By-laws,
the charter or by-laws of Zodiac One, Zodiac Three or A to Z, and (iii) will
not violate any provision of any indenture, agreement or
-5-
<PAGE> 7
other instrument to which the Corporation, Zodiac One, Zodiac Three or A to Z
or any of their respective properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both)
a default under any such order, indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of
the Corporation, Zodiac One, Zodiac Three or A to Z other than a Permitted Lien
(in each case as to Zodiac One, Zodiac Three or A to Z to the best knowledge of
the Corporation).
(b) The Preferred Shares, the Underlying Common Shares, the
Bace Shares and the Underlying Bace Shares have been duly authorized and, when
issued in accordance with this Agreement (and in the case of the Underlying
Common Shares and the Underlying Bace Shares, the provisions of the Preferred
Shares and the Series B Preferred, respectively), will be validly issued, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions, claims
and encumbrances, except as set forth in the Registration Rights Agreement and
the Stockholders Agreement or the pledge under the Loan Documents. The
issuance, sale or delivery of the Preferred Shares, the Underlying Common
Shares, the Bace Shares and the Underlying Bace Shares is not subject to any
preemptive right of stockholders of the Corporation or to any right of first
refusal or other right in favor of any person.
Section 2.3. Validity. This Agreement has been duly executed
and delivered by the Corporation and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms. The Registration Rights
Agreement and the Stockholders Agreement, when executed and delivered in
accordance with this Agreement, will constitute legal, valid and binding
obligations of the Corporation, enforceable in accordance with their respective
terms.
Section 2.4. Authorized Capital Stock. The authorized
capital stock of the Corporation consists of 233,900 shares of Class A Common
Stock, 12,350 shares of nonvoting Class B Common Stock, $.01 par value ("Class
B Common Stock") and 15,000 shares of Preferred Stock and 200 shares of Series
B Preferred. At the time of the First Closing, 5,020 shares of Preferred
Stock, 200 shares of Series B Preferred, 10 shares of Class A Common Stock and
no shares of Class B Common Stock of the Corporation will be validly issued and
outstanding, fully paid and nonassessable with no personal liability attaching
to the ownership thereof. The stockholders of record and holders of
subscriptions, warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire equity securities of the
Corporation, and the number of shares of capital stock and the number of such
subscriptions, warrants, options (expressed in terms of numbers of shares
subject thereto or as a percentage of shares to be outstanding on a fully
diluted basis giving effect to the conversion of all Preferred Stock and the
Bace Shares), convertible securities, and other such rights held by each, are
as set forth in the attached Schedule II. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
each class and series of authorized capital stock of the Corporation are as set
forth in the Charter, and all such designations,
-6-
<PAGE> 8
powers, preferences, rights, qualifications, limitations and restrictions are
valid, binding and enforceable and in accordance with all applicable laws.
Except as set forth in the attached Schedule II, (i) no person owns of record
or is known to the Corporation to own beneficially any share of capital stock,
(ii) no subscription, warrant, option, convertible security, or other right
(contingent or other) to purchase or otherwise acquire equity securities of
the Corporation is authorized or outstanding and (iii) there is no commitment
by the Corporation to issue shares, subscriptions, warrants, options,
convertible securities, or other such rights or to distribute to holders of any
of its equity securities any evidence of indebtedness or asset. Except as
provided for in the Charter or as set forth in the attached Schedule II, the
Corporation has no obligation (contingent or other) to purchase, redeem or
otherwise acquire any of its equity securities or any interest therein or to
pay any dividend or make any other distribution in respect thereof. There are
no voting trusts or agreements, stockholders' agreements, pledge agreements,
buy-sell agreements, rights of first refusal, preemptive rights or proxies
relating to any securities of the Corporation or any of its subsidiaries
(whether or not any of them is a party thereto), except for this Agreement, the
Stockholders Agreement and the pledge agreements in favor of Harris Trust and
Savings Bank ("HTSB"), as agent for itself and the other lenders, to secure the
Loans required under the Loan Documents. All of the outstanding securities of
the Corporation have been issued in compliance with all applicable Federal and
state securities laws.
Section 2.5. Financial Statements. The Corporation has
furnished to the Purchasers the combined balance sheets of Zodiac as of March
31, 1996, December 31, 1995 and 1994, and in each case, the related combined
statements of income and cash flows for the three months and years then ended,
and the combined statement of shareholders' equity for the year ended December
31, 1995 and the combined statement of retained earnings for the year ended
December 31, 1994 (such balance sheet as of March 31, 1996 being referred to
as the "Zodiac Balance Sheet" and the Zodiac Balance Sheet and such other
related statements being collectively referred to as the "Zodiac Financial
Statements"). The Corporation also has furnished to the Purchasers the
statements of assets, liabilities and equity of A to Z as of December 31, 1995
and 1994, and in each case, the related statements of revenues and expenses and
retained earnings for the years then ended (such statement of assets,
liabilities and equity as of December 31, 1995 being referred to as the "A to Z
Balance Sheet" and the A to Z Balance Sheet and such related statements being
collectively referred to as the "A to Z Financial Statements"). To the best
knowledge of the Corporation, all such financial statements of Zodiac and A to
Z fairly present the financial position of Zodiac or A to Z, as the case may
be, as of their respective dates, and, the respective results, as applicable,
of their income, revenues and expenses, retained earnings, shareholders' equity
and cash flows for the respective periods indicated thereon. To the best
knowledge of the Corporation, since the respective dates of the Zodiac Balance
Sheet and the A to Z Balance Sheet (collectively, the "Balance Sheets"), (i)
there has been no change in the assets, liabilities or financial condition of
Zodiac or A to Z, as the case may be, from that reflected in the Zodiac Balance
Sheet and the A to Z Balance Sheet, respectively, except for changes in the
ordinary course of business which individually or in the aggregate have not
been materially adverse and (ii) none of the business, condition (financial or
-7-
<PAGE> 9
otherwise), operations, property or prospects of Zodiac or A to Z has been
materially adversely affected by any occurrence, state of facts or development,
individually or in the aggregate, whether or not insured against. Except for
the execution and delivery of this Agreement and the Acquisition Agreements by
the Corporation and the execution and the consummation of the transactions
contemplated hereby and thereby, the Corporation has not engaged in any
business or activities since the date of its incorporation.
Section 2.6. Events Subsequent to the Date of the Balance
Sheet. Since the date of the Zodiac Balance Sheet (in the case of Zodiac, to
the best knowledge of the Corporation), the A to Z Balance Sheet (in the case
of A to Z, to the best knowledge of the Corporation) and the date of its
incorporation (in the case of the Corporation), each of Zodiac, A to Z and the
Corporation has not (i) issued any stock, bond or other corporate security
except for the issuance of the Original Common Shares, the 10 shares of Class A
Common Stock in lieu of the Original Common Shares, the Preferred Shares and
the Bace Shares, (ii) borrowed any amount or incurred or become subject to any
liability (absolute, accrued or contingent), except (x) with respect to Zodiac
and A to Z, current liabilities incurred in the ordinary course of business and
liabilities under contracts entered into in the ordinary course of business and
(y) pursuant to the Loan Documents (as defined below), (iii) discharged or
satisfied any lien or encumbrance or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than, with respect to Zodiac
or A to Z, current liabilities shown on the Zodiac Balance Sheet or A to Z
Balance Sheet, as the case may be, and current liabilities incurred since the
date of such Balance Sheet in the ordinary course of business, (iv) declared or
made any payment or distribution to stockholders or purchased or redeemed any
share of its capital stock or other security, (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than, with
respect to Zodiac or A to Z, liens of current real property taxes not yet due
and payable and, with respect to the Corporation, liens pursuant to the Loan
Documents (as defined in Section 3.1(m)) and other Permitted Liens, (vi) sold,
assigned or transferred any of its tangible assets except, with respect to
Zodiac or A to Z, in the ordinary course of business, or canceled any debt or
claim, (vii) sold, assigned, transferred or granted any license with respect to
any patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset, (viii) suffered any material loss of property or waived
any right of substantial value whether or not in the ordinary course of
business, (ix) made any change in officer compensation except, with respect to
Zodiac or A to Z, in the ordinary course of business and consistent with past
practice, (x) made any material change in the manner of business or operations
of Zodiac or A to Z, (xi) accelerated the payment terms of any note or account
receivable or delayed payment of any account payable or other liability (except
for such payables and other liabilities which individually and in the aggregate
are not material) for more than 15 days beyond its due date, (xii) instituted,
amended or terminated any employee benefit plan, contract or understanding any
agreement or contract, (xiii) with respect to Zodiac or A to Z, made any
material change in the accounting policies applied in the preparation of the
financial statements referred to in Section 2.5, (xiv) entered into any
transaction except, with respect to Zodiac or A to Z, in the ordinary
-8-
<PAGE> 10
course of business or as otherwise contemplated hereby or (xv) entered into any
commitment (contingent or otherwise) to do any of the foregoing.
Section 2.7. Litigation; Compliance with Law. There is no
(i) action, suit, claim, proceeding or investigation pending or, to the best of
the Corporation's knowledge, threatened against or affecting the Corporation,
at law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, (ii) arbitration proceeding relating to the Corporation or
(iii) governmental inquiry pending or, to the best of the Corporation's
knowledge, threatened against or affecting the Corporation (including without
limitation any inquiry as to the qualification of the Corporation to hold or
receive any license or permit), and there is no reasonable basis for any of the
foregoing (in the case of Zodiac and A to Z only with respect to clauses (i),
(ii) and (iii), to the best knowledge of the Corporation). The Corporation is
not in default with respect to any order, writ, injunction or decree known to
or served upon the Corporation of any court or of any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (in the case of Zodiac and A to Z only, to
the best knowledge of the Corporation). There is no action or suit by the
Corporation pending or threatened against others (in the case of Zodiac and A
to Z only, to the best knowledge of the Corporation). The Corporation has
complied in all respects with all laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services (in the case of Zodiac and A to Z only, to the best knowledge of the
Corporation), except for such failures to comply which individually and in the
aggregate could not be reasonably be expected to have a Material Adverse
Effect, and each of the Corporation has all necessary permits, licenses and
other authorizations required to conduct its business in all respects as
conducted and as proposed to be conducted (in the case of Zodiac and A to Z
only, to the best knowledge of the Corporation). There is no existing law,
rule, regulation or order, and the Corporation after due inquiry is not aware
of any proposed law, rule, regulation or order, whether Federal or state, which
would prohibit or restrict the Corporation from, or otherwise materially
adversely affect the Corporation in, conducting its business in any
jurisdiction in which it is now conducting business or in which it proposes to
conduct business (in the case of Zodiac and A to Z only, to the best knowledge
of the Corporation).
Section 2.8. Proprietary Information of Third Parties;
Intellectual Property. (a) No third party has claimed or has (in the case of
Zodiac and A to Z only, to the best knowledge of the Corporation) valid reason
to claim that any person employed by or affiliated with the Corporation has (i)
violated or may be violating any of the terms or conditions of his employment,
non-competition or nondisclosure agreement with such third party, (ii)
disclosed or may be disclosing or utilized or may be utilizing any trade secret
or proprietary information or documentation of such third party or (iii)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Corporation which suggests that such a claim
might be contemplated. No person employed by or affiliated with the
Corporation (in the case of Zodiac
-9-
<PAGE> 11
and A to Z only, to the best knowledge of the Corporation) has employed or, to
the Corporation's knowledge proposes to employ, any trade secret or any
information or documentation in violation of the proprietary rights of any
former employer, and no person employed by or affiliated with the Corporation
has violated (in the case of Zodiac and A to Z only, to the best knowledge of
the Corporation) any confidential relationship which such person may have had
with any third party, in connection with the development, manufacture or sale
of any product or proposed product or the development or sale of any service or
proposed service of the Corporation and the Corporation has no reason to
believe there will be any such employment or violation. None of the execution
or delivery of this Agreement, or the carrying on of the business of the
Corporation as officers, employees or agents by any officer, director or key
employee of the Corporation or the conduct or proposed conduct of the business
of the Corporation will (in the case of Zodiac and A to Z only, to the best
knowledge of the Corporation) conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such person is obligated (except for
such breaches which individually and in the aggregate could not reasonably be
expected to have a Material Adverse Effect).
(b) The Corporation owns or possesses adequate licenses or
other rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets and know how
(collectively, "Intellectual Property") necessary to the conduct of its
business as conducted and as proposed to be conducted, and no claim is pending
or, to the best of the Corporation's knowledge, threatened to the effect that
the operations of the Corporation infringe upon or conflict with the asserted
rights of any other person under any Intellectual Property, and there is no
reasonable basis for any such claim, whether or not pending or threatened (in
the case of each matter referred to in this sentence, in the case of Zodiac and
A to Z only, to the best knowledge of the Corporation). No claim is pending
or, to the best of the Corporation's knowledge, threatened to the effect that
any such Intellectual Property owned or licensed by the Corporation, or which
the Corporation otherwise has the right to use, is invalid or unenforceable by
the Corporation, and there is no valid basis for any such claim, whether or not
pending or threatened (in the case of each matter referred to in this sentence,
in the case of Zodiac and A to Z only, to the best knowledge of the
Corporation). The Corporation has not granted or assigned to any other person
or entity any right to sell the products or proposed products or to provide the
services or proposed services of the Corporation.
Section 2.9. Title to Properties. The Corporation has good
and marketable title to its properties and assets reflected on the Balance
Sheets or acquired since the respective dates of the Balance Sheets (other than
properties and assets disposed of in the ordinary course of business or as
permitted by the Acquisition Agreements without any waiver or amendment thereof
since the respective dates of the Balance Sheets), and upon consummation of the
transactions contemplated by the Acquisition Agreements, the Corporation will
continue to have good and marketable title to such properties and assets and to
all other properties and assets of
-10-
<PAGE> 12
the Corporation, and all such properties and assets of the Corporation are, and
upon such consummation will be, free and clear of mortgages, pledges, security
interests, liens, charges, claims, restrictions and other encumbrances, except
for Permitted Liens. The representations and warranties set forth in this
section, in the case of Zodiac and A to Z only, are being made to the best
knowledge of the Corporation.
Section 2.10. Leasehold Interests. Each lease or agreement
to which the Corporation is a party under which it is a lessee of any property,
real or personal, is a valid and subsisting agreement without any default of
the Corporation thereunder and, to the best of the Corporation's knowledge,
without any default thereunder of any other party thereto (except for such
defaults that individually and in the aggregate could not reasonably be
expected to have a Material Adverse Effect). No event has occurred and is
continuing which, with due notice or lapse of time or both, would constitute a
default or event of default by the Corporation under any such lease or
agreement or, to the best of the Corporation's knowledge, by any other party
thereto. The possession by the Corporation, as the case may be, of such
property has not been disturbed and, to the best of the Corporation's
knowledge, no claim has been asserted against the Corporation adverse to its
rights in such leasehold interests. The representations and warranties set
forth in this section in the case of Zodiac and A to Z, only are being made to
the best knowledge of the Corporation.
Section 2.11. Insurance. The Corporation holds valid
policies covering all of the insurance required to be maintained by it under
Section 5.1. The Corporation has complied in all material respects with each
insurance policy held by it and the Corporation has not failed to give any
notice or present any claim thereunder in a due and timely manner. Each such
policy is listed and described on the attached Schedule IV.
Section 2.12. Taxes. The Corporation has timely filed all
tax returns, Federal, state, county, local and foreign, required to be filed by
it (in the case of Zodiac and A to Z only, to the best knowledge of the
Corporation) and the Corporation has paid all taxes shown to be due by such
returns as well as all other taxes, assessments and governmental charges which
have become due or payable (in the case of Zodiac and A to Z only, to the best
knowledge of the Corporation) including without limitation all taxes which the
Corporation is obligated to withhold from amounts owing to employees, creditors
and third parties. All such taxes with respect to which the Corporation has
become obligated pursuant to elections made by the Corporation in accordance
with generally accepted practice have been paid and adequate reserves have been
established for all taxes accrued but not yet payable (in the case of Zodiac
and A to Z only, to the best knowledge of the Corporation). The tax returns of
the Corporation (in the case of Zodiac and A to Z only, to the best knowledge
of the Corporation) have never been audited by the Internal Revenue Service or
any other appropriate governmental authority. No deficiency assessment with
respect to or proposed adjustment of the Corporation's Federal, state, county,
local or foreign taxes is pending (in the case of Zodiac and A to Z only, to
the best knowledge of the Corporation) or, to the best of the Corporation's
knowledge, threatened.
-11-
<PAGE> 13
There is no tax lien, whether imposed by any Federal, state, county, local or
foreign taxing authority, outstanding against the assets, properties or
business of the Corporation (in the case of Zodiac and A to Z only, to the best
knowledge of the Corporation). None of RentX, A to Z or any of their
stockholders has ever filed (a) an election pursuant to Section 1362 of the
Code, that the Corporation be taxed as an S corporation or (b) a consent
pursuant to Section 341(f) of the Code, relating to collapsible corporations.
Section 2.13. Other Agreements. (a) Except as set forth in
the attached Schedule IV (or as approved after the First Closing Date by the
Board of Directors of RentX), the Corporation (in the case of Zodiac and A to Z
only, to the best knowledge of the Corporation) is not a party to or otherwise
bound by any agreement, contract, commitment or arrangement (collectively,
"Commitments"), written or oral, to be completely performed after one year from
the date hereof and involving a commitment of more than $50,000 per annum, or
to be performed in less than one year and involving a commitment of more than
$50,000, in each case other than Commitments expressly assumed by RentX
pursuant to the requirements of an acquisition agreement as to which
representations and warranties are being made pursuant to Section 2.14.
(b) The Corporation and, to the best of the Corporation's
knowledge, each other party thereto have in all material respects performed all
the obligations required to be performed by them to date, have received no
notice of default and are not in default (with due notice or lapse of time or
both) under any lease, agreement or contract now in effect to which the
Corporation is a party or by which it or its property may be bound nor is there
or is there alleged to be any basis for termination thereof (except in each
case for such nonperformances, defaults and the bases therefor which
individually and in the aggregate could not reasonably be expected to have a
Material Adverse Effect) (in the case of Zodiac and A to Z only, to the best
knowledge of the Corporation). The Corporation (in the case of Zodiac and A to
Z only, to the best knowledge of the Corporation) has no present expectation or
intention of not fully performing all its obligations under each such lease,
contract or other agreement, and the Corporation has no knowledge of any breach
or anticipated breach by the other party to any contract or commitment to which
the Corporation is a party (except in each case for such nonperformances and
breaches which individually and in the aggregate could not reasonably be
expected to have a Material Adverse Effect).
Section 2.14. Acquisition Agreements. Each of the
representations and warranties of the parties to the Acquisition Agreements and
any acquisition agreements relating to any other acquisitions being consummated
from any proceeds of the issuance of Preferred Shares (in each case other than
RentX) or any agreement, instrument or certificate delivered pursuant thereto
is to the best knowledge of the Corporation true, correct and complete in all
material respects; all covenants and agreements required to be performed or
complied with in the Acquisition Agreements have been performed or complied
with in all material respects and
-12-
<PAGE> 14
all conditions to the closing specified therein shall have been met or
fulfilled, in each case without waiver except as consented to by the Majority
Holders.
Section 2.15. Loans and Advances. The Corporation has no
outstanding loans, advances or extensions of credit to any person (other than
extensions of credit to customers in the ordinary course of business consistent
with past practice) and is not obligated to make any such loans, advances or
extensions of credit (in each case with respect to Zodiac and A to Z only, to
the best knowledge of the Corporation).
Section 2.16. Assumptions, Guaranties, Etc. of Indebtedness
of Other Persons. The Corporation has not assumed, guaranteed, endorsed or
otherwise become directly or contingently liable (in each case with respect to
Zodiac and A to Z only, to the best knowledge of the Corporation) on any
indebtedness of any other person (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor, or otherwise to
assure the creditor against loss), except for guaranties by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.
Section 2.17. Significant Customers and Suppliers. To the
knowledge of the Corporation no customer or supplier which was significant to
Zodiac or A to Z during the period covered by the Zodiac Financial Statements
or the A to Z Financial Statements, as the case may be, or which has been
significant to either of them thereafter, has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from or provision of
products or services to Zodiac or A to Z, as the case may be.
Section 2.18. Governmental Approvals. Subject to the
accuracy of the representations and warranties of the Purchasers set forth in
Section 7.9, no registration or filing with, or consent or approval of or other
action by, any Federal, state or other governmental agency or instrumentality
is or will be necessary for the valid execution, delivery and performance by
the Corporation of this Agreement, the Registration Rights Agreement, the
Stockholders Agreement or the issuance, sale and delivery of the Preferred
Shares and the Underlying Common Shares, other than with respect to the
Registration Rights Agreement, the registration of the shares covered thereby
with the Securities and Exchange Commission (the "Commission") and filings
pursuant to state securities laws provided therein.
Section 2.19. Disclosure. This Agreement does not contain
any untrue statement of a material fact or omit (in the case of Zodiac and A to
Z only, to the best knowledge of the Corporation) a material fact necessary to
make the statements contained herein or therein not misleading. None of the
statements, documents, certificates or other items prepared or supplied by the
Corporation with respect to the transactions contemplated hereby contains, and
no statement, document, certificates or other items to be prepared or supplied
by the Corporation pursuant to this Agreement will contain, an untrue statement
of a material fact or omits a
-13-
<PAGE> 15
material fact necessary to make the statements contained therein not misleading
(in each case with respect to Zodiac and A to Z only, to the best knowledge of
the Corporation). The projections which have been provided to the Purchasers
and which are attached hereto as Schedule V (the "Projections") were prepared
by the Corporation based on assumptions of fact and opinion as to future events
which the Corporation, at the date of the Projections, believed to be
reasonable. As of May 15, 1996 no facts have come to the attention of the
Corporation (in the case of facts relating to Zodiac and A to Z only, to the
best knowledge of the Corporation) which would, in its opinion, require the
Corporation to revise or amplify in any material respect the assumptions
underlying the Projections and other estimates or the conclusions derived
therefrom.
Section 2.20. Offering of the Preferred Shares. Neither
RentX nor any person authorized or employed by RentX as agent, broker, dealer
or otherwise in connection with the offering or sale of the Preferred Shares or
any security of RentX similar to the Preferred Shares has offered the Preferred
Shares or any such similar security for sale to, or solicited any offer to buy
the Preferred Shares or any such similar security from, or otherwise approached
or negotiated with respect thereto with, any person or persons, and neither
RentX nor any person acting on its behalf has taken or will take any other
action (including, without limitation, any offer, issuance or sale of any
security of RentX under circumstances which might require the integration of
such security with the Preferred Shares under the Securities Act of 1933, as
amended (the "Securities Act") or the rules and regulations of the Commission
thereunder), in any such case so as to subject the offering, issuance or sale
of the Preferred Shares to the registration provisions of the Securities Act.
Section 2.21. Brokers. RentX has no contract, obligation,
arrangement or understanding with any broker, finder or similar agent with
respect to the transactions contemplated by this Agreement for which RentX
shall have any liability or responsibility.
Section 2.22. Officers. Set forth in Schedule III is a list
of the names of the executive officers of RentX, together with the title or job
classification of each such person and the total compensation anticipated to be
paid to each such person by RentX and its subsidiaries in the 12 months ending
May 31, 1997. None of such persons has an employment agreement or
understanding, whether oral or written, with RentX or any of its subsidiaries,
which is not terminable on notice by RentX or such subsidiary without cost or
other liability to RentX or such subsidiary.
Section 2.23. Transactions With Affiliates. No director,
officer, employee or stockholder of the Corporation (in the case of Zodiac and
A to Z only, to the best knowledge of the Corporation), or member of the family
of any such person, or any corporation, partnership, trust or other entity in
which any such person, or any member of the family of any such person, has a
substantial interest or is an officer, director, trustee, partner or holder of
more than 5% of the outstanding capital stock thereof, is a party to any
transaction with the
-14-
<PAGE> 16
Corporation (in the case of Zodiac and A to Z only, to the best knowledge of
the Corporation), including any contract, agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from or otherwise requiring payments to any such person or
firm (except for the transactions contemplated by the Acquisition Agreements
and the issuance of shares and options set forth in the attached Schedule II).
Section 2.24. Employees. No officer or key employee of the
Corporation has advised the Corporation, orally or in writing, that he or she
intends to terminate employment with the Corporation (it being understood that
no representation is made hereby that Mr. George A. Evans and Mr. Larry W.
Davidson will continue their employment with RentX or any subsidiary past the
date of their respective employment agreements, each to be entered into in
connection with the Zodiac Agreement or that any other person who enters into
an employment agreement with RentX pursuant to any other acquisition agreement
as to which representations and warranties are being made pursuant to Section
2.14 will continue employment with RentX past the date of such employment
agreement). The Corporation has complied in all material respects with all
applicable laws relating to the employment of labor, including provisions
relating to wages, hours, equal opportunity, collective bargaining and the
payment of Social Security and other taxes, and with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Set forth on the attached
Schedule IV is a listing of all employee benefit plans as defined in Section
3(3) of ERISA ("Employee Benefit Plans") maintained by the Corporation
currently or at any time during the past six years, or as to which the
Corporation or any member of the ERISA Controlled Group (as defined in Section
4.2(i)) is required to make contributions or has been required to make
contributions during the past six years. Neither the Corporation nor any
member of the ERISA Controlled Group has ever been required to contribute to
any multi-employer plan (within the meaning of ERISA). Neither the Corporation
nor member of the ERISA Controlled Group has ever maintained or been required
to contribute to any employee pension benefit plan as defined in Section 3(2)
of ERISA (an "Employee Pension Benefit Plan"). The representations and
warranties set forth in this section, in the case of Zodiac and A and Z only,
are being made to the best knowledge of the Corporation.
Section 2.25. No Undisclosed Liabilities. The Corporation
(in the case of Zodiac and A to Z only, to the best knowledge of the
Corporation) is not subject to any material liability (including, without
limitation, unasserted claims), whether absolute, contingent, accrued or
otherwise, which is not shown or which is in excess of amounts shown or
reserved for in the Zodiac Balance Sheet and the A to Z Balance Sheet, other
than (i) liabilities of the same nature as those set forth in the Balance
Sheets and reasonably incurred in the ordinary course of business after the
respective dates thereof and (ii) liabilities of Zodiac or A to Z as to which
the Corporation does not have knowledge.
Section 2.26. Accounts Receivable. All accounts receivable
of the Corporation are valid, genuine and subsisting and have arisen from bona
fide transactions in the ordinary course of business or other arm's-length
transactions (in the case of Zodiac and A to Z only, to
-15-
<PAGE> 17
the best knowledge of the Corporation). All of the accounts receivable of the
Corporation arising from the operations of (i) Zodiac shall be collectible in
full (except to the extent of $40,092 in the aggregate) by the Corporation (at
no expense payable to attorneys or other collection agents) within 180 days of
the First Closing Date and (ii) A to Z shall be collectible in full (except to
the extent of $65,524 in the aggregate) by the Corporation (at no expense
payable to attorneys or other collection agents) within 180 days of the Second
Closing Date.
Section 2.27. Inventory; Tangible Property. (a) The
inventories (including, without limitation, raw materials, supplies, work in
process, finished goods and other materials) of the Corporation (i) are
reflected in the Balance Sheets in accordance with generally accepted
accounting principles consistently applied and (ii) consist of a quality and
quantity usable and salable in the ordinary course of business, except for
items of obsolete materials and materials of below standard quality, all of
which have been written down in the Balance Sheets to the lower of cost or
realizable market value (in the case of Zodiac and A to Z only, to the best
knowledge of the Corporation). The inventory obsolescence policies of the
Corporation (other than those of Zodiac and A to Z) and, to the best of the
Corporation's knowledge, of Zodiac and A to Z are appropriate to the nature of
the products sold and marketing methods used by the Corporation and the
reserves for excess and obsolete inventory contained in the Balance Sheets of
the Corporation (other than those of Zodiac and A to Z) and, to the best of
the Corporation's knowledge, of Zodiac and A to Z fairly reflect the amounts of
excess and obsolete inventory as of the respective dates thereof.
(b) All of the machinery, equipment and other tangible
personal and real property of the Corporation, all equipment being acquired
from Zodiac or owned by A to Z has been adequately maintained, its operating
condition is adequate for its current use and it is suitable for the purposes
for which it is presently used and is sufficient for the conduct of the
Corporation's business as currently conducted by Zodiac and A to Z (in the case
of Zodiac and A to Z only, to the best knowledge of the Corporation); provided,
that it is hereby acknowledged that at any particular time an immaterial amount
of such assets is in need of repair or is being repaired; provided, further,
that the dollar amount of such assets which is in need of repair or is being
repaired as of the First Closing Date, with respect to the Zodiac Assets, and
the Second Closing Date, with respect to the assets owned by A to Z, will not
be greater than that amount which customarily is in need of repair or is being
repaired in the case of similarly situated companies. The Corporation has not
(in the case of Zodiac and A to Z only, to the best knowledge of the
Corporation) experienced material problems or deficiencies with respect to such
machinery, equipment and other tangible property, and to the best knowledge of
the Corporation, there is no basis to anticipate any such problems or
deficiencies.
Section 2.28. Environmental Matters. All real and personal
property of the Corporation (including plant, buildings, fixtures or other
assets presently or in the past owned, leased or operated by the Corporation or
by its business) and all operations of the Corporation are (i) in compliance in
all material respects with all federal, state and local laws, regulations
-16-
<PAGE> 18
and administrative orders or judicial orders and decrees relating to human
safety, solid waste and hazardous waste treatment, storage, disposal,
generation and transportation, air, water and noise pollution, soil or ground
or water contamination or the handling, storage, release into the environment
or transportation of Hazardous Substances (as hereinafter defined)
("Environmental Laws"), and (ii) free from all toxic or hazardous wastes,
pollutants or substances, including, without limitation, asbestos, PCBs,
petroleum products and by-products, substances defined or listed as "hazardous
wastes", "hazardous substances" or "toxic substances" or similarly identified
in or pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., hazardous
materials identified in or pursuant to the Hazardous Materials Transportation
Act, 42 U.S.C. Section 1802 et seq., hazardous wastes identified in or pursuant
to the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., any chemical substance or mixture regulation under the Toxic Substance
Control Act of 1976, as amended, 15 U.S.C. Section 2601 et seq., any "toxic
pollutant" under the Federal Water Pollution Control Act, 33 U.S.C. Section
1521 et seq., as amended, any hazardous air pollutant under the Clean Air Act,
42 U.S.C. Section 7401 et seq., and any hazardous or toxic substance or
pollutant regulated under any other applicable Environmental Laws ("Hazardous
Substances"). There is not nor has there ever been on or in such property, any
generation, treatment, recycling, storage (except in compliance with applicable
law) or disposal of any Hazardous Substance, or any PCBs, underground storage
tanks or asbestos or asbestos-containing materials. Neither the Corporation
nor any of their respective past or present operations are or have been (a)
subject to any order from or agreement with any governmental authority or other
person respecting any Environmental Law or any action to clean up, remove,
treat or in any other way address any Hazardous Waste or (b) in communication
or agreement with any governmental authority or other person relating to the
generation, treatment, recycling, storage, disposal, presence, release or
threatened release of any Hazardous Substance. The representations and
warranties set forth in this section, in the case of Zodiac and A to Z only,
are being made to the best knowledge of the Corporation.
ARTICLE III
Conditions to Closings by each Purchaser
Section 3.1. Conditions to First Closing. The obligation of
each Purchaser to purchase Preferred Shares at the First Closing is subject to
the fulfillment to the reasonable satisfaction of the Majority Holders at or
prior to the First Closing of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Corporation and the Purchasers contained
in this Agreement or any agreement, instrument or certificate delivered
pursuant hereto shall be true, correct and complete in all material respects on
and as of the First Closing Date, and the Corporation, with respect to the
-17-
<PAGE> 19
representations and warranties of the Corporation, shall have delivered to the
Purchasers a certificate of the President, Executive Vice President, Chief
Financial Officer or, if such vice president is Richard M. Tyler ("Tyler") or
Craig J. Zoellner ("Zoellner"), a Vice President (such a Vice President being
referred to as a "Specified Vice President") of the Corporation, dated the
First Closing Date, to that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Corporation
on or prior to the First Closing Date shall have been performed or complied
with in all material respects and the Corporation shall have delivered to the
Purchasers a certificate of the President, Executive Vice President, Chief
Financial Officer of the Corporation or a Specified Vice President, dated the
First Closing Date, to that effect.
(c) Qualifications. On or prior to the First Closing Date,
all authorizations, approvals or permits of, or filings with, any governmental
authority that are required prior to the First Closing (i) in connection with
the issuance of the Preferred Shares and (ii) the consummation of the
transactions contemplated by this Agreement (other than such authorizations,
approvals, permits and filings referred to in clause (ii) above only which,
individually and in the aggregate, could not reasonably be expected to have a
Material Adverse Effect) shall have been duly obtained and shall be effective
on and as of the First Closing Date.
(d) Board of Directors. Effective as of the First Closing,
the number of directors constituting the entire Board of Directors of the
Corporation shall have been fixed at five and Thomas E. Galuhn, William P.
Sutter, Jr., James A. Gordon, Tyler and Zoellner shall be elected to such Board
of Directors.
(e) Secretary's Certificates. At the First Closing, the
Corporation shall have delivered to the Purchasers copies of the charter of the
Corporation certified by the Secretary of State of the State of Delaware and
copies of each of the following, in each case certified as of the First Closing
Date by the Secretary of the Corporation:
(i) the by-laws of the Corporation which shall be in form
acceptable to the Purchasers;
(ii) resolutions of the Board of Directors of the
Corporation, authorizing and approving, as appropriate, this Agreement
and the transactions contemplated hereby, the execution, issuance,
sale, delivery and performance of the Preferred Shares and the
Underlying Common Shares, and the execution, delivery and performance
of the Registration Rights Agreement, the Stockholders Agreement and
the transactions contemplated hereby and thereby; and
-18-
<PAGE> 20
(iii) the signatures and incumbency of the officers of the
Corporation authorized to execute and deliver the documents to which
the Corporation is a party.
(f) Good Standing Certificates. At the First Closing, the
Corporation shall have delivered to the Purchasers good standing certificates
dated not more than five business days prior to the First Closing Date relating
to the Corporation, Zodiac One and Zodiac Three from the Secretaries of State
of their respective jurisdictions of incorporation.
(g) Consents. At the First Closing, the Corporation shall
have delivered to the Purchasers copies of all consents and approvals of third
parties required under any licenses or agreements or otherwise in connection
with the execution, delivery or performance by the Corporation of this
Agreement or any of the other agreements or documents contemplated hereby or
otherwise in connection with the transactions contemplated by the Zodiac
Agreement (except for such consents and approvals relating to the transactions
contemplated by the Zodiac Agreement the failure to have, individually and in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect).
(h) Zodiac Agreement. As of the First Closing, the
transactions contemplated by the Zodiac Agreement shall have been consummated
in accordance with the terms of the Zodiac Agreement, without waiver or
amendment.
(i) Registration Rights Agreement. At the First Closing, the
Corporation shall have executed and delivered to the Purchasers the
Registration Rights Agreement.
(j) Stockholders Agreement. At the First Closing, the
Corporation and the other parties thereto (other than the Purchasers) shall
have executed and delivered to the Purchasers the Stockholders Agreement.
(k) Legal Opinion. At the First Closing, Sherman & Howard,
L.L.C. and Finke & Associates, P.C. shall have delivered to the Purchasers
opinions, dated the First Closing Date, addressed to the Purchasers and in the
respective forms attached hereto as Exhibits D-1 and D-2.
(l) Capitalization of the Corporation. At the First Closing,
the Corporation shall have been capitalized with $200,000 in cash from Bace for
its purchase of the Bace Shares as well as the payment for the Preferred Shares
being purchased on the First Closing Date.
(m) Loans. Concurrently with or prior to the First
Closing, the Corporation, HTSB and LaSalle National Bank (HTSB and such other
lender being collectively referred to as the "Lenders") shall have duly
executed and delivered the Credit Agreement dated as of May 15, 1996 (the
"Credit Agreement") providing for an aggregate of up to $15,000,000 in
borrowings and all notes, security agreements, pledge agreements, and other
documents,
-19-
<PAGE> 21
agreements or instruments delivered pursuant thereto (collectively, the "Loan
Documents"), and pursuant thereto the Lenders shall have made available to the
Corporation the loans arrangements contemplated therein (all such loans
arrangements may collectively be referred to as the "Loans"). The terms and
provisions of the Loan Documents as executed shall be satisfactory in form and
substance to the Purchasers. At the First Closing, all conditions precedent to
the funding of the Loans shall have been satisfied and the Lenders shall have
disbursed or agreed to disburse to the Corporation an amount sufficient,
together with other funds available to the Corporation, including amounts made
available hereunder, to consummate the transactions contemplated under the
Zodiac Agreement. At or prior to the First Closing, the Corporation shall have
delivered to the Purchasers true and complete copies of the Loan Documents.
(n) Additional Documents. The Purchasers shall have received
such other documents, instruments, approvals or opinions as the Purchasers may
reasonably request.
Section 3.2. Conditions to Second Closing. The obligation of
each Purchaser to purchase Preferred Shares at the Second Closing is subject to
the fulfillment to the reasonable satisfaction of the Majority Holders at or
prior to the Second Closing of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Corporation and the Purchasers contained
in this Agreement or any agreement, instrument or certificate delivered
pursuant hereto shall be true, correct and complete in all material respects on
and as of the Second Closing Date (except for those representations and
warranties that refer to specified dates), it being understood that all
representations and warranties of the Corporation (except as aforesaid) shall
be deemed to be remade as of the Second Closing Date (but (i) with the term
"Corporation" for purposes of Sections 2.7 through 2.28, inclusive, being
deemed to include all subsidiaries of the Corporation at that time and (ii) the
Disclosure Schedule being supplemented to the extent mutually agreed by the
Corporation and the Majority Holders), and with respect to the representations
and warranties of the Corporation and each subsidiary at that time, the
Corporation shall have delivered to the Purchasers a certificate of the
President, Executive Vice President, Chief Financial Officer or a Specified
Vice President of the Corporation, dated the Second Closing Date, to that
effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Corporation
on or prior to the Second Closing Date shall have been performed or complied
with in all material respects and no Event of Default (as defined below) or
event or condition which, with notice or lapse of time or both, would
constitute an Event of Default shall have occurred and be continuing, and the
Corporation shall have delivered to the Purchasers a certificate of the
President, Executive Vice President, Chief Financial Officer or a Specified
Vice President of the Corporation, dated the Second Closing Date, to that
effect.
-20-
<PAGE> 22
(c) Qualifications. On or prior to the Second Closing Date,
all authorizations, approvals or permits of, or filings with, any governmental
authority that are required prior to the Second Closing (i) in connection with
the issuance of the Preferred Shares (ii) and the consummation of the
transactions contemplated by this Agreement (other than such authorizations,
approvals, permits and filings referred to in clause (ii) above only which,
individually and in the aggregate, could not reasonably be expected to have a
Material Adverse Effect) shall have been duly obtained and shall be effective
on and as of the Second Closing Date.
(d) Certificates. The Corporation shall have delivered to
the Purchasers the certificates of the type specified in Sections 3.1(e) and
3.1(f) (but with the relevant dates and references being the Second Closing
Date).
(e) Legal Opinion. At the Second Closing, Sherman & Howard
L.L.C. and Paine, Hamblen, Coffin, Brooke & Miller LLP shall have delivered to
the Purchasers an opinion, dated the Second Closing Date, addressed to the
Purchasers and in substantially the respective forms attached hereto as
Exhibits E-1 and E-2.
(f) Availability of Loans. At the Second Closing, the loans
necessary to consummate the transactions under the A to Z Agreement shall be
available to the Corporation under the Loan Documents.
(g) A to Z Agreement. The A to Z Agreement shall have been
executed and delivered in form acceptable to the Majority Holders and the
transactions contemplated by the A to Z Agreement shall have been consummated
in accordance with the terms of the A to Z Agreement without waiver or
amendment, and the Majority Holders shall not be dissatisfied with the results
of their investigation of A to Z.
(h) Consents. At the Second Closing, the Corporation shall
have delivered to the Purchasers copies of all consents and approvals of third
parties required under any licenses or agreements or otherwise in connection
with the execution, delivery or performance by the Corporation of this
Agreement or the other agreements or documents contemplated hereby or otherwise
in connection with the transactions contemplated by the A to Z Agreement
(except for such consents and approvals relating to the transactions
contemplated by the A to Z Agreement the failure to have, individually and in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect).
(i) Additional Documents. The Purchasers shall have received
such other documents, instruments, approvals or opinions as the Majority
Holders may reasonably request.
Section 3.3. Conditions to Additional Closings. The
obligation of each Purchaser to purchase Preferred Shares at any Additional
Closing is subject to the fulfillment to the
-21-
<PAGE> 23
reasonable satisfaction of the Majority Holders at or prior to each Additional
Closing of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Corporation and the Purchasers contained
in this Agreement or any agreement, instrument or certificate delivered
pursuant hereto shall be true, correct and complete in all material respects on
and as such Additional Closing Date (except for those representations and
warranties that refer to specified dates), it being understood that all
representations and warranties of the Corporation (except as aforesaid) shall
be deemed to be remade as of such Additional Closing Date (but (i) with the
term "Corporation" for purposes of Sections 2.7 through 2.28, inclusive, being
deemed to include all subsidiaries of the Corporation at that time, (ii) the
Disclosure Schedule being supplemented to the extent mutually agreed by the
Corporation and the Majority Holders and (iii) with the term "Acquisition
Agreement" in the representations and warranties in Section 2.14 being deemed
to include any acquisition agreements relating to any acquisition being
consummated with the proceeds of such Additional Closing), and with respect to
the representations and warranties of the Corporation, the Corporation shall
have delivered to the Purchasers a certificate of the President, Executive Vice
President, Chief Financial Officer or a Specified Vice President of the
Corporation, dated such Additional Closing Date, to that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Corporation
on or prior to such Additional Closing Date shall have been performed or
complied with in all material respects and no Event of Default (as defined
below) or event or condition which, with notice or lapse of time or both, would
constitute an Event of Default shall have occurred and be continuing, and the
Corporation shall have delivered to the Purchasers a certificate of the
President, Executive Vice President, Chief Financial Officer or a Specified
Vice President of the Corporation, dated the such Additional Closing Date, to
that effect.
(c) Qualifications. On or prior to such Additional Closing
Date, all authorizations, approvals or permits of, or filings with, any
governmental authority that are required prior to the such Additional Closing
(i) in connection with the issuance of the Preferred Shares and (ii) the
consummation of the transactions contemplated by this Agreement (other than
such authorizations, approvals, permits and filings referred to in clause (ii)
above only which, individually and in the aggregate, could not reasonably be
expected to have a Material Adverse Effect) shall have been duly obtained and
shall be effective on and as of such Additional Closing Date.
(d) Board of Directors' Approval; Other Acquisition
Agreements. The Corporation's Board of Directors and the Majority Holders
shall have approved such Additional Closing and the acquisition agreements
relating to any acquisitions then known as being financed from the proceeds of
the issuance of the Preferred Shares being issued at such Additional
-22-
<PAGE> 24
Closing shall have been executed and delivered in form acceptable to the
Majority Holders, any such acquisitions being consummated not later than such
Additional Closing shall have been consummated in accordance with the terms of
such acquisition agreements, without material waiver or amendment, and the
Majority Holders shall not be dissatisfied with the results of their
investigation of the businesses, assets and companies being so acquired.
(e) Consents. At such Additional Closing, the Corporation
shall have delivered to the Purchasers copies of all consents and approvals of
third parties required under any licenses or agreements or otherwise in
connection with the execution, delivery or performance by the Corporation of
this Agreement or other agreements or documents contemplated hereby or
otherwise in connection with the acquisition agreements referred to in Section
3.3(d) (except for such consents and approvals relating to the transactions
contemplated by such acquisition agreements the failure to have, individually
and in the aggregate, could not reasonably be expected to have a Material
Adverse Effect).
(f) Certificates. The Corporation shall have delivered to
the Purchasers the certificates of the type specified in Sections 3.1(e) and
3.1(f) (but with the relevant dates and references being such Additional
Closing Date).
(g) Legal Opinion. At such Additional Closing, Sherman &
Howard, L.L.C. shall have delivered to the Purchasers an opinion, dated such
Additional Closing Date, addressed to the Purchasers and in substantially the
form attached hereto as Exhibit E-1 and the counsel to the seller or sellers
with respect to any acquisition being consummated with proceeds of such
Additional Closing shall have delivered to the Purchasers the same opinion it
is delivering to the Corporation relating to such acquisition.
(h) Additional Documents. The Purchasers shall have received
such other documents, instruments, approvals or opinions as the Majority
Holders may reasonably request.
(i) Time Period. The time of such Additional Closing must
be no later than May 15, 1999.
ARTICLE IV
Reporting and Inspection
The Corporation hereby covenants and agrees:
Section 4.1. Accounting. The Corporation will maintain and
will cause each of its subsidiaries to maintain a system of accounting
established and administered in accordance
-23-
<PAGE> 25
with generally accepted accounting principles, and all financial statements or
information delivered under Section 4.2 shall be prepared in accordance with
generally accepted accounting principles, except for those changes from time to
time as are required by generally accepted accounting principles.
Section 4.2. Financial Statements and Other Information. The
Corporation will deliver to the Purchasers, Bace and any subsequent holder of
Shares or Bace Securities:
(a) as soon as available after the end of each fiscal month
of the Corporation, and in any event within 30 days thereafter, (i) an
unaudited consolidated balance sheet of the Corporation and its
subsidiaries as at the end of such month; (ii) an unaudited
consolidated statement of income of the Corporation and its
subsidiaries for such month and for the fiscal year of the Corporation
to the end of such month; and (iii) an unaudited consolidated
statement of cash flows of the Corporation and its subsidiaries for
such month and for the fiscal year to the end of such month, all in
reasonable detail, subject to changes resulting from normal year-end
audit adjustments, certified by the principal financial officer of the
Corporation (the "Principal Financial Officer") and a comparison
between the actual financial figures for such monthly accounting
period, the comparable figures for the prior fiscal year (if any, it
being understood that there are no comparable figures prior to May
1996) and the comparable figures included, as applicable, in the
Projections or in the Plan (as defined in subparagraph (c) hereof) for
such monthly accounting period (together with financial information
excluding any acquisitions made less than twelve months prior to the
beginning of such month), with an explanation of any material
differences between them;
(b) as soon as available after the end of each fiscal year of
the Corporation, and in any event within 90 days thereafter, an
audited consolidated balance sheet of the Corporation and its
subsidiaries, and the related audited consolidated statements of
income, stockholders' equity and cash flows of the Corporation and its
subsidiaries for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year (if any, it
being understood that there are no comparable figures prior to May
1996), all in reasonable detail, accompanied by (i) an unqualified
opinion on such financial statements of Ernst & Young, LLP or such
other firm of independent public accountants of nationally recognized
standing selected by the Board of Directors of the Corporation and
acceptable to the Purchasers (which acceptance may not be unreasonably
withheld) that such financial statements fairly present the financial
position of the companies being reported upon at the end of such
fiscal year and the results of their operations and cash flows for
such fiscal year in conformity with generally accepted accounting
principles; (ii) a letter of such accountants stating whether in the
course of their audit any event or circumstance
-24-
<PAGE> 26
has come to their attention which would constitute an Event of Default
under Section 6.1 (or which, with notice or lapse of time, or both,
would become such an Event of Default) under this Agreement or the
Loan Documents and, if such has come to their attention, a statement
of the nature thereof; (iii) a written acknowledgment by such
accountants that the Purchasers are relying on the opinion referred to
in clause (i) of this Section 4.2(b); and (iv) a comparison by the
Corporation between the actual financial figures for such fiscal year,
the comparable figures for the prior fiscal year, it being understood
that there are no comparable figures prior to May 1996, and the
comparable figures included, as applicable, in the Projections or in
the Plan for such fiscal year, with an explanation of any material
differences between them;
(c) as soon as available for each fiscal year of the
Corporation (beginning with the fiscal year commencing February 1,
1997), and in any event not later than 31 days before the beginning of
each such fiscal year, earnings and cash flow projections for the
Corporation and its subsidiaries for such fiscal year, including
projected estimates (on a monthly basis) of income, cash flow and
corporate overhead of the Corporation and its subsidiaries in each
case prepared in reasonable detail by the Principal Financial Officer,
and the Corporation shall submit each plan concurrently to the Board
of Directors of the Corporation, such plan to be prepared on a basis
consistent with the Projections and shall be accepted as the plan for
such fiscal year if and when approved by a majority of the entire
Board of Directors of the Corporation (such plan, as so approved,
being referred to herein as the "Plan") but with such Plan being
updated promptly to incorporate the budget for each acquisition after
such budget has been approved by the Board of Directors, it being
understood that a budget for each acquisition shall be submitted to
the Board of Directors in connection with its consideration of any
acquisition;
(d) as soon as available all monthly, quarterly, annual and
other statements, certificates or notices to the Lenders or other
lenders;
(e) promptly upon receipt of a written request from a
Purchaser or Bace therefor, copies of all other reports, if any,
submitted to the Corporation by independent public accountants in
connection with any annual or interim audit of the books of the
Corporation and its subsidiaries made by such accountants;
(f) promptly upon receipt of a written request from a
Purchaser or Bace therefor, a copy of each financial statement, report
and return that the Corporation or any of its subsidiaries shall file
with the Commission or (if requested by a Purchaser or other such
holder) with any other governmental
-25-
<PAGE> 27
department, bureau, commission or agency and each such report that the
Corporation or any of its subsidiaries shall file with any stock
exchange;
(g) promptly upon the occurrence thereof, notice of any
material disputes with any customer or the occurrence of any other
event which has had, or could reasonably be expected to have, a
Material Adverse Effect;
(h) promptly upon the Corporation's learning thereof, written
notice of (i) any pending litigation affecting the Corporation or any
of its subsidiaries, whether or not the claim is considered by the
Corporation to be covered by insurance, and (ii) any pending
administrative or arbitration proceeding or investigation, or the
receipt by the Corporation or any of its subsidiaries of any notice or
order from any regulatory body or agency having jurisdiction over the
Corporation or any of its subsidiaries (except in the case of an
action or proceeding which individually, and together with any related
action or proceeding, could not reasonably be expected to result in
any losses, costs or expenses, including (without limitation) costs of
investigation or defense, aggregating $50,000 or more);
(i) promptly upon the occurrence thereof, notice of (i) any
change in the business or affairs of the Corporation or any of its
subsidiaries which has had, or could reasonably be expected to have, a
Material Adverse Effect; (ii) any breach of any of its covenants, or
any material breach of any representations or warranties, set forth in
this Agreement; (iii) any material labor dispute to which the
Corporation or any of its subsidiaries may become a party, any strikes
or walkouts relating to any of the Corporation's or any such
subsidiary's facilities, and the expiration or termination of any
labor contract to which the Corporation or any of its subsidiaries is
a party or by which the Corporation or any of its subsidiaries is
bound or of any negotiations with respect thereto; (iv) a default by
the Corporation or any of its subsidiaries under any note, indenture,
loan agreement, mortgage, material lease, deed or other material
agreement to which the Corporation or such subsidiary is a party or by
which the Corporation or any such subsidiary is bound, which default
constitutes a payment default or a default that entitles, or with
notice or lapse of time or both would entitle, the holder of such
note, indenture, loan agreement, mortgage, lease, deed or other
agreement to accelerate the payment or other material obligations of
the Corporation or such subsidiary thereunder; (v) the Corporation's
or any of its subsidiaries' learning that any of its assets is (A) the
subject of any "Superfund" evaluation or investigation or (B) the
subject of any federal, state or local investigation evaluating
whether any remedial action is needed to respond to a release of any
Hazardous Substance into the environment; (vi) the receipt by the
Corporation or any of its subsidiaries of a notice of violation with
respect to any of its permits
-26-
<PAGE> 28
(environmental or otherwise) or a notice of an enforcement action
relating to any such permits (except for such violations or
enforcement actions which, individually and in the aggregate, could
not reasonably be expected to result in any loss to the Corporation or
its subsidiaries in excess of $25,000); or (vii) receipt by the
Corporation or any of its subsidiaries of notice of any event
described in Section 4043 of ERISA and the regulations thereunder for
which the reporting requirement is not thereby waived; and
(j) with reasonable promptness, such other data, reports and
information as from time to time a Purchaser or other such holder may
reasonably request and such data, press releases, reports and
information as the Corporation or any of its subsidiaries may from
time to time furnish to holders of its securities.
Section 4.3. Inspection Rights. With respect to any person
who holds 20% or more of the Preferred Shares (treating any Common Shares into
which Preferred Shares have been converted as if they have not been converted,
any such holder being referred to as a "Substantial Purchaser"), the
Corporation will permit an authorized representative designated by such person
to visit and inspect the properties of the Corporation or any of its
subsidiaries, including its and their books (and to make extracts therefrom)
and to discuss its and their affairs, finances and accounts with its and their
officers, personnel and auditors, all at such reasonable times and as often as
such person may reasonably request, all upon reasonable notice to the Chairman
of the Board of Directors of the Corporation.
Section 4.4. Accounting Principles. The Corporation will use
a fiscal year ending January 31.
ARTICLE V
Additional Covenants
The Corporation hereby covenants and agrees:
Section 5.1. Insurance. The Corporation shall maintain or
cause to be maintained, and shall cause each of its subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to its
properties and businesses and the properties and businesses of its subsidiaries
against loss or damage as may be required by law or as is customary for
companies similarly situated and which reflects the Corporation's best business
judgment as to the types and amounts of insurance that should be carried in
light of conditions in the insurance industry, and at the request of a
Substantial Purchaser shall furnish such
-27-
<PAGE> 29
Substantial Purchaser with evidence of the same. The insurance coverage of the
Corporation and its subsidiaries shall be evaluated annually by Board of
Directors and management.
Section 5.2. Tax Matters. The Corporation will, and will
cause each of its subsidiaries to, pay or cause to be paid all taxes,
assessments and other governmental charges levied upon any of its properties or
assets or those of its subsidiaries or in respect of its or their respective
franchises, businesses, income or profits before the same become delinquent,
except that (unless and until foreclosure, distraint, sale or other similar
proceedings shall have been commenced) no such charge need be paid if being
contested in good faith and by appropriate proceedings promptly initiated and
diligently conducted if (i) such reserve or other appropriate provision, if
any, as shall be required by generally accepted accounting principles shall
have been made therefor and (ii) no property or assets are in imminent danger
of forfeiture. The Corporation will withhold all amounts for taxes required to
be withheld by it under applicable law.
Section 5.3. Payment of Indebtedness. The Corporation shall
pay, and cause each of its subsidiaries to pay, all amounts owed on any
indebtedness for borrowed money of the Corporation and each of its subsidiaries
as and when the same shall become due and payable by the lapse of time, by
declaration, by call for redemption or otherwise, and to fulfill its
obligations upon all leasing arrangements included in the Loan Documents.
Section 5.4. Compliance With Laws; Obligations. The
Corporation shall, and shall cause each of its subsidiaries to, comply with all
laws, rules, regulations, judgments, orders and decrees of any governmental or
regulatory authority applicable to it (including, without limitation,
conditions, terms and provisions of its permits and licenses) and its
respective assets and properties (collectively, "Laws") and with all contracts
and agreements to which it is a party or shall become a party the violation of
which Laws, contracts or agreements individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, and the Corporation
shall perform, and shall cause each of its subsidiaries to perform, all
obligations which it has or shall incur, the violation or lack of performance
of which, individually or in the aggregate, could have a Material Adverse
Effect. Notwithstanding the foregoing, nothing in this Section 5.4 shall
prohibit the Corporation from contesting in good faith the validity or
applicability of any law by appropriate proceedings, promptly initiated and
diligently conducted, if such reserve or other appropriate provision, if any,
as shall be required by generally accepted accounting principles, shall have
been made therefor.
Section 5.5. Preservation of Corporate Existence and
Property. The Corporation shall preserve and maintain, and shall cause each of
its subsidiaries to preserve and maintain (i) its corporate existence, (ii) its
rights, franchises and privileges and (iii) all its assets and properties in
adequate working order and condition, with the exception of (x) ordinary wear
and tear and (y) casualty losses fully covered by insurance carried by the
Corporation except for reasonable deductibles.
-28-
<PAGE> 30
Section 5.6. Employee Benefit Plans. The Corporation and its
subsidiaries shall maintain and operate, and shall cause any member of any
ERISA Controlled Group to maintain and operate, each Employee Benefit Plan that
the Corporation or any subsidiary or such member sponsors, maintains or
contributes to, in compliance with all applicable requirements of ERISA and the
Age Discrimination in Employment Act, and in compliance with all applicable
requirements of the Code, for obtaining any tax benefits respecting such
Employee Benefit Plan claimed by the Corporation or any subsidiary where the
failure to so maintain and operate could reasonably be expected to have a
Material Adverse Effect. The Corporation and its subsidiaries shall pay, and
cause any member of ERISA Controlled Group to pay, promptly when due under the
terms of any Employee Benefit Plan, or otherwise when due (or required to avoid
any excise tax or the necessity of any governmental waiver) under any
applicable law respecting any Employee Benefit Plan, all amounts that the
Corporation, any subsidiary or any such member is required to pay to or in
respect of any Employee Benefit Plan.
Section 5.7. Directors' Expenses. The Corporation shall
reimburse each of its directors for the reasonable out-of-pocket expenses
incurred by such director in attending meetings of the Board of Directors or
any committee thereof and for otherwise fulfilling his fiduciary obligations as
a director of the Corporation.
Section 5.8. Directors' Meetings. The Corporation shall hold
meetings of its Board of Directors periodically but not less often than
quarterly.
Section 5.9. Fees and Expenses. The Corporation agrees to
bear all of its own expenses in connection herewith and with the transactions
contemplated hereby, and shall also pay all out-of-pocket expenses reasonably
incurred by the Purchasers, including the reasonable legal fees and
disbursements of Sidley & Austin, counsel to certain of the Purchasers, in
connection herewith and with the transactions contemplated hereby including,
without limitation, all out-of-pocket expenses reasonably incurred in
connection with (i) the preparation, negotiation, closing under, amendment,
waiver, administration or enforcement of, or the preservation of any rights
under, this Agreement, the Preferred Shares, the Underlying Common Shares, the
Registration Rights Agreement, the Stockholders Agreement or under the Charter
or By-laws, (ii) any stamp and other taxes payable with respect to this
Agreement and (iii) any filing with any governmental agency with respect to any
Purchaser's purchase of Preferred Shares.
Section 5.10. Indemnification. (a) The Corporation shall
indemnify, defend and hold each Purchaser, Bace and their respective directors,
members, officers, employees, affiliates and agents (collectively, the
"Indemnified Persons") harmless from and against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including, without limitation, interest,
penalties, court costs and reasonable attorneys' fees, that any Indemnified
Person shall incur or suffer, which arise, result from, or relate to (i) any
breach of, or failure by the Corporation to perform, any of its
representations, warranties, covenants or agreements in this Agreement, the
Preferred Shares,
-29-
<PAGE> 31
the Registration Rights Agreement, the Stockholders Agreement or any schedule,
certificate, exhibit or instrument furnished or to be furnished by the
Corporation hereunder or thereunder or (ii) any claim, litigation,
investigation or proceeding (whether or not such Indemnified Person is a party
thereto) relating to any transactions, services or matters that are the subject
of this Agreement or any instrument, document or agreement executed or
delivered in connection herewith; provided, that such indemnification
obligation under clause (i) or (ii) of this Section 5.10 shall not apply to any
breaches or inaccuracies in representations or warranties (other than breaches
or inaccuracies with respect to the representations and warranties contained in
Sections 2.1, 2.2 (other than subsection (a)(iii) thereof), 2.3 or 2.4 of this
Agreement which will not be subject to this proviso) unless (x) such breaches
or inaccuracies result in a claim, demand, loss, cost, expense, obligation,
liability, damage, recovery or deficiency (collectively, "Loss") against or
involving an Indemnified Person directly, rather than simply a diminution in
the value of the Corporation or (y) the effect of such breaches or inaccuracies
taken together and aggregated with the effect of any such breaches referred to
in clause (ii) of Section 5.10(b), cause the Corporation or its subsidiaries,
taken as a whole, to realize Loss in excess of 3.5% of the aggregate amounts
then having previously been paid for the Preferred Shares and the Bace Shares,
after giving effect to any amounts recovered from Zodiac, the Selling
Shareholders or any other seller or selling shareholders pursuant to an
acquisition agreement as to which representations and warranties are being made
pursuant to Section 2.14, directly or from any escrow fund; provided, however,
that such indemnity under paragraph (ii) shall not apply to any such
liabilities or related expenses finally determined by a court of competent
jurisdiction to have arisen from the gross negligence or willful misconduct of
such Indemnified Person. Notwithstanding the foregoing, Bace and its
directors, members, officers, employees, affiliates and agents (collectively,
"Bace Indemnified Parties") (I) shall not be entitled to indemnification under
this Agreement with respect to any breach or inaccuracy of any representation
or warranty to the extent Richard M. Tyler or Craig J. Zoellner knew of such
breach or inaccuracy at the time such representation or warranty was made and
(II) in computing any Loss to any Bace Indemnified Party, the Bace Securities
shall be deemed to constitute only the Series B Preferred and the shares of
Class A Common Stock initially issuable upon conversion thereof and ignoring
any value or rights relating to the issuance or potential issuance of
Additional Conversion Shares (as such term is defined in the Charter).
(b) The Corporation, shall indemnify, defend and hold each
Indemnified Person harmless from and against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries, injuries (to persons, property or natural resources) and
deficiencies, including, without limitation, interest, penalties, court costs,
reasonable attorneys' fees and reasonable environmental consultants' fees, that
at any time or from time to time may be paid, incurred or suffered by, or
asserted against, any Indemnified Person for, with respect to, or as a direct
or indirect result of the violation by the Corporation or any of its
subsidiaries of any Environmental Laws, or with respect to, or as a direct or
indirect result of the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission or release from, properties utilized by the
Corporation or any of its subsidiaries in the
-30-
<PAGE> 32
conduct of their respective businesses into or upon any land, the atmosphere,
or any watercourse, body of water or wetland, of any Hazardous Substances
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under the Environmental Laws);
provided, that such indemnification obligation under this Section 5.10(b) shall
not apply to any breaches or inaccuracies in representations or warranties
unless (i) such breaches or inaccuracies result in a Loss against or involving
an Indemnified Person directly, rather than simply a diminution in the value of
the Corporation or (ii) the effect of such breaches or inaccuracies taken
together and aggregated with the effect of any such breaches referred to in
clause (ii)(y) of Section 5.10(a), cause the Corporation or its subsidiaries,
taken as a whole, to realize a Loss in excess of 3.5% of the aggregate amounts
then having previously been paid for the Preferred Shares and the Bace Shares,
after giving effect to any amounts recovered from Zodiac, the Selling
Shareholders or any other seller or selling shareholders pursuant to an
acquisition agreement as to which representations and warranties are being made
pursuant to Section 2.14, directly or from any escrow fund; provisions of and
undertakings and indemnification set out in this Section 5.10 shall survive the
redemption or other purchase of the Preferred Shares and termination of this
Agreement.
(c) If any indemnifiable claim by a third party is made
against any Indemnified Person, such Indemnified Person shall promptly provide
written notice to the Corporation of such claim; provided that the failure to
give such notice shall not affect any rights of such Indemnified Person
hereunder except to the extent the Corporation is materially prejudiced by such
failure to give notice. By delivering written notice to such Indemnified
Person within 15 days after receipt of such Indemnified Person's notice, the
Corporation may, or upon written request of such Indemnified Person shall,
assume the defense of such claim at its sole expense through counsel reasonably
satisfactory to such Indemnified Person, provided that (i) the Corporation
shall not permit any lien, encumbrance or other adverse charge upon any asset
of such Indemnified Person, (ii) the Corporation shall permit such Indemnified
Person to participate in such settlement or defense through counsel selected by
at such Indemnified Person's expense, and (iii) the Corporation shall agree to
promptly reimburse such Indemnified Person's for the full amount of its
liability to the third party claimant. If the Corporation shall not have
employed counsel to defend such claim or if such Indemnified Person shall have
reasonably concluded (with the written advice of counsel) that the position of
such Indemnified Person and the Corporation may be in conflict (in which case
the Corporation shall not have the right to direct the defense of any such
claim on behalf of such Indemnified Person), the reasonable legal and other
expenses incurred by such Indemnified Person shall be borne by the Corporation.
Notwithstanding the foregoing, each Indemnified Person shall have the right to
pay or settle any such claim provided in such event it shall waive its right to
indemnity therefor by the Corporation.
Section 5.11. Certain Restrictions and Limitations. So long
as any Preferred Shares or Underlying Common Shares remain outstanding, without
the approval of the Majority Holders, the Corporation shall not:
-31-
<PAGE> 33
(a) amend, or permit any of its subsidiaries to amend, its
charter or by-laws;
(b) increase or decrease, or permit any of its
subsidiaries to increase or decrease, the total number of its
authorized shares of capital stock or any class or series;
(c) (i) authorize or issue, or obligate itself to issue, any
equity security (including any security convertible into or
exercisable or exchangeable for any equity security), except for (i)
the issuance of Underlying Common Shares upon conversion of the
Preferred Shares or Underlying Bace Shares upon conversion of the Bace
Shares and (ii) options to purchase shares of Class B Common Stock, to
be granted after the First Closing Date, to members of management or
other key employees of the Corporation with the approval of the
Compensation Committee of the Corporation's Board of Directors at
exercise prices determined by such Compensation Committee (not
exceeding 5% of the number of shares of Class A Common Stock and Class
B Common Stock that would be outstanding if all outstanding Preferred
Shares and the Bace Shares were converted into Common Stock) or (ii)
file a registration statement under the Securities Act of 1933, as
amended, with respect to any offering of securities by the
Corporation;
(d) redeem, retire, purchase or otherwise acquire, directly
or indirectly, through any of its subsidiaries or otherwise, shares of
its capital stock, warrants or options with respect to such capital
stock, other than the repurchase pursuant to the terms of the
Stockholders Agreement;
(e) declare or pay, or permit its subsidiaries to declare or
pay, any cash or other dividend or make, or permit its subsidiaries to
make, any other distribution of any kind on, or purchase or set aside
any sums for the purchase or payment of, its capital stock other than
(i) stated dividends on the Preferred Stock, the Bace Shares or the
Class A Common Stock or (ii) dividends of the Corporation payable
solely in shares of Class A Common Stock and dividends and
distributions from the Corporation's subsidiaries to the Corporation
or to any other of the Corporation's wholly-owned subsidiaries;
(f) enter into, or permit any of its subsidiaries to enter
into, any agreement with respect to any merger or consolidation (other
than a merger into or consolidation with the Corporation or any of its
wholly-owned subsidiaries) or transfer, or permit any of its
subsidiaries to transfer, (whether by sale, exchange, lease or other
disposition in one or more transactions) an amount greater than 10
percent of the Corporation's or any of its subsidiaries' assets;
provided, however,
-32-
<PAGE> 34
that this limitation shall not apply to transfers to the Corporation
or any of the Corporation's wholly-owned subsidiaries.
(g) enter into or permit to exist, or permit any of its
subsidiaries to enter into or permit to exist, any agreement or
undertaking (other than this Agreement) which prohibits, restricts or
limits the ability of any of its subsidiaries to pay dividends or
distributions to the Corporation, or otherwise to transfer assets or
engage in transactions with the Corporation, other than the Loan
Documents;
(h) recapitalize or otherwise change its capital structure in
such a manner as will result in a change in control from one person to
another person, either directly or indirectly, of the power to vote 50
percent or more of the securities or other interests of the
Corporation having voting power for the election of directors of the
Corporation or otherwise having voting power to direct or cause the
direction of management policies of the Corporation;
(i) voluntarily dissolve or liquidate;
(j) (i) have a subsidiary which is not wholly-owned by the
Corporation, either directly or indirectly through one or more other
wholly-owned subsidiaries or (ii) sell any shares of capital stock of
any subsidiary, or permit any subsidiary to sell any shares held by it
in any subsidiary, except in each case for a sale to the Corporation
or a wholly-owned subsidiary;
(k) permit any of its subsidiaries to issue or sell or to
obligate such subsidiary to issue or sell any shares of its capital
stock (including any warrants, rights or options to purchase or
otherwise acquire shares of such capital stock or other securities
exercisable or exchangeable for or convertible into shares of such
capital stock);
(l) enter into or become liable in respect of, or permit any
of its subsidiaries to enter into or become liable in respect of, any
guarantee of any indebtedness, dividend or other obligation of any
person (other than the Corporation or a wholly-owned subsidiary
thereof);
(m) enter into, or permit any of its subsidiaries to enter
into, or be a party to, (i) any transaction or arrangement with any
Affiliate (as hereinafter defined), including any transaction or
arrangement pursuant to which the Corporation or any of its
subsidiaries is required to pay to any Affiliate any management or
monitoring fee, other than the Management Agreement dated as of the
date of this Agreement between BACE Industries, LLC and the
Corporation or (ii) any amendment, supplement or modification of, or
waiver
-33-
<PAGE> 35
with respect to, the Management Agreement (as used herein, "Affiliate"
shall mean any person (other than a subsidiary) (i) which directly or
indirectly through one or more intermediaries controls, is controlled
by or is under common control with, the Corporation or (ii) 10 percent
or more of the voting capital stock (or in the case of a person which
is not a corporation, 10 percent or more of the equity interest) of
which is beneficially owned or held by the Corporation or any of its
subsidiaries. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting capital stock, by contract or otherwise);
(n) amend, supplement, modify or waive, or allow any of its
subsidiaries to amend, supplement, modify or waive, any of the terms
of the Loan Documents if the effect of such amendment, supplement,
modification or waiver would be to (i) increase the principal,
interest or lease payments payable on the Loans or increase or
accelerate any other monetary obligation of any Corporation to the
Lenders or change the dates on which any payments under any of the
Loans are due and payable, (ii) shorten the term of any of the Loans
or (iii) create any defaults under any of the Loan Documents or impose
any obligations on the Corporation (whether consisting of affirmative
or negative covenants or otherwise), the failure to comply with which
would cause an event of default under any Loan Document;
(o) incur, create, assume, become or be liable in any manner
with respect to, or permit to exist, or permit any of its subsidiaries
to incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any indebtedness for borrowed money
(including, without limitation, capitalized leases) or for the
deferred purchase price for the acquisition of property other than (i)
the Loans, (ii) trade payables incurred in the ordinary course of
business or (iii) other indebtedness for borrowed money not to exceed
in the aggregate at any one time $100,000;
(p) make or commit to make, or permit any of its subsidiaries
to make or commit to make, capital expenditures for any fiscal year if
the aggregate amount of such expenditures for the Corporation and its
subsidiaries on a consolidated basis for such fiscal year would exceed
5% over the amount budgeted therefor in the budget approved by the
Board of Directors for such fiscal year, as updated for any budget
approved by the Board of Directors with respect to an acquisition;
(q) withdraw, or permit any member of any ERISA Controlled
Group to withdraw, in whole or in part from any multi-employer pension
plan within the
-34-
<PAGE> 36
meaning of Section 3(37) of ERISA if such withdrawal or partial
withdrawal would subject the Corporation or any of its subsidiaries to
material liability under Subtitle E of Title IV of ERISA; or to
establish or maintain any Employee Pension Benefit Plan that has at
any time a material amount of unfunded benefit liabilities as defined
in Section 4001(a)(18) of ERISA, or violate, or permit any subsidiary
to violate, ERISA or any other legal requirement relating to any
Employee Benefit Plan;
(r) violate, or permit any of its subsidiaries to violate in
any material respect, any Environmental Laws;
(s) permit any of its subsidiaries to use or permit any
proceeds of the purchase price of the Preferred Shares to be used,
either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying margin stock"
within the meaning of Regulations G, U and X of the Board of Governors
of the Federal Reserve System, as amended from time to time;
(t) create or permit to exist, or permit any of its
subsidiaries to create or permit to exist, any new Employee Benefit
Plan unless such Employee Benefit Plan has been approved by the Board
of Directors (including a majority of the directors designated by the
holders of Shares);
(u) increase, or permit any of its subsidiaries to increase,
the salary or aggregate compensation of any executive officers listed
in Schedule III (or any person hired in replacement of such executive
officers) in excess of the compensation listed with respect to such
executive officers on such Schedule III, or adopt, or permit any of
its subsidiaries to adopt, any employee benefit plan or agreement or
any severance plan, agreement or policy, without in each case the
approval of the Board of Directors or the Compensation Committee
thereof of the Corporation (including the approval of a majority of
the members thereof designated by the holders of Shares);
(v) enter into, amend or modify any employment agreement
providing for annual compensation of $100,000 or more to which the
Corporation or any of its subsidiaries is or may become a party;
(w) become a party to or permit any of its subsidiaries to
become a party to any agreement which by its terms or otherwise could
reasonably be expected to materially and adversely affect the
Corporation's performance of or compliance with this Agreement, the
Preferred Shares, the Registration Rights Agreement or the Charter; or
-35-
<PAGE> 37
(x) enter into an agreement which creates or otherwise
constitutes a "Dividend Restriction," as defined in Article IV of the
Charter.
Section 5.12. Compensation Committee. If the Board of
Directors of the Corporation has a Compensation Committee, a majority of the
members of such committee shall be members of the Board of Directors designated
by the holders of Shares. The Corporation shall cause the members of the
compensation committee of any subsidiary of the Corporation that has such a
committee to be the same as the members of the Compensation Committee of the
Board of Directors of the Corporation.
Section 5.13. Board of Directors of Subsidiaries. The
Corporation shall cause the members of the Board of Directors of each
subsidiary of the Corporation to be the same as the members of the Board of
Directors of the Corporation.
Section 5.14. Observation of Board Meetings. The Majority
Holders shall have the right to designate up to two persons at any one time who
will have the right to attend meetings of the Board of Directors of the
Corporation and any subsidiary thereof, and any committee of any of the
foregoing, and the Corporation shall give notice to any such designee of all
meetings of any such Board or committee and shall promptly furnish any such
designee with the minutes of all meetings thereof and all consents to actions
in lieu of any such meetings.
ARTICLE VI
Events of Default
Section 6.1. Events of Default. If any of the following
events (each is herein referred to as an "Event of Default") occur:
(a) the Corporation fails to redeem the Preferred Shares or
the Bace Shares on the date specified in or pursuant to the terms of
the Preferred Stock or the Series B Preferred;
(b) (i) the Board of Directors of the Corporation fails for a
period of two consecutive quarters, commencing with the first quarter
in which the Corporation is permitted by the Loan Documents to pay
dividends, after the first anniversary hereof to declare any dividends
on the rate stated in the terms of the Preferred Stock ("Stated
Dividends") or (ii) the Corporation fails to pay the Stated Dividends
in full for two consecutive quarters, commencing with the first
quarter in which the Corporation is permitted by the Loan Documents to
pay dividends;
-36-
<PAGE> 38
(c) default shall occur in the performance of or compliance
with any covenant contained herein which shall continue uncured for
more than 20 days (in the case of a payment default) or 30 days (in
the case of any other default) after the Corporation becomes aware of
such default;
(d) if any representation or warranty to the Purchasers made
in writing by the Corporation in this Agreement or in any agreement,
certificate, report, financial statement or instrument delivered under
or pursuant to any provision hereof or thereof, in the Loan Documents,
or in connection with the transactions contemplated hereby or thereby,
shall prove to have been false or inaccurate in any material respect
on the date as of which made; provided, that any such breaches or
inaccuracies shall not constitute an Event of Default if they relate
to the business, financial statements or operations of Zodiac or A to
Z as of or prior to the date of this Agreement (except for
inaccuracies with respect to the representations and warranties
contained in Sections 2.1, 2.2, 2.3 or 2.4 of this Agreement which
shall not be subject to this proviso), unless the effect of such
inaccuracies, taken together, cause the Corporation or its
subsidiaries, taken as a whole, to realize Loss in excess of 3.5% of
the aggregate amounts then having previously been paid for the
Preferred Shares and the Bace Shares, after giving effect to any
amounts recovered from Zodiac or the Selling Shareholders or any
seller or selling shareholders under the acquisition agreements
referred to in Section 3.3(e) directly or from any escrow fund;
(e) any default shall occur under the Loan Documents or
default shall occur in the making of the payment of the principal of
or interest on any other indebtedness of the Corporation or any of its
subsidiaries for borrowed money or lease obligations in excess of
$150,000;
(f) default or the happening of any event shall occur under
any indenture, agreement or other instrument under which any
indebtedness aggregating at least $150,000 of the Corporation or any
of its subsidiaries for borrowed money is or may be issued, and such
default or event shall continue for a period of time sufficient to
permit the acceleration of the maturity of any indebtedness of the
Corporation or any of its subsidiaries outstanding thereunder (which
default or happening of event has not been cured or waived);
(g) a receiver, conservator, custodian, liquidator or trustee
of the Corporation or any of its subsidiaries or of all or any of the
property of any of them, is appointed by court order and such order
remains in effect for more than 60 days; or an order for relief is
entered under the federal bankruptcy laws with respect to the
Corporation or any of its subsidiaries; or any of the material
property of any of them is sequestered by court order and such order
remains in
-37-
<PAGE> 39
effect for more than 60 days; or a petition is filed against the
Corporation or any of its subsidiaries under the bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, and is not dismissed within 60 days after such
filing;
(h) the Corporation or any of its subsidiaries files a
petition in voluntary bankruptcy or seeking relief under any provision
of any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, or consents to the
filing of any petition against it under any such law;
(i) the Corporation or any of its subsidiaries makes an
assignment of all or any substantial part of its assets for the
benefit of its creditors, or admits in writing its inability to pay,
or in fact does not pay, its debts generally as they become due, or
consents to the appointment of a receiver, conservator, custodian,
liquidator or trustee of the Corporation or any of its subsidiaries,
or of all or any part of the property of any of them;
(j) final judgment for the payment of money in excess of
$150,000 shall be rendered by a court of record against the
Corporation or any of its subsidiaries, and the Corporation or such
subsidiary shall not (i) discharge the same (by insurance or
otherwise) or provide for its discharge in accordance with its terms
or (ii) procure a stay of execution thereof within 60 days from the
date of entry thereof and within said period of 60 days, or such
longer period during which execution of such judgment shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal;
(k) a material breach by the Corporation of the Registration
Rights Agreement; or
(l) a material breach by the Corporation of the Stockholders
Agreement;
then, when any Event of Default has occurred and shall be continuing, and
unless the holder or holders of a majority or more of the Preferred Shares at
the time outstanding shall have waived such Event of Default in writing, the
dividend rate on the Preferred Shares and the Bace Shares shall increase from
5% to 7% and any holder of Preferred Shares or Bace Shares, in addition to any
other rights of such holder in law or in equity or pursuant to this Agreement
or the Charter, may require all of such holder's Preferred Shares or Bace
Shares to be immediately redeemed by the Corporation at a price equal to the
par value thereof, plus all accrued and unpaid dividends and interest thereon;
provided, that no holder of Preferred Stock or Bace Shares may require such a
redemption unless the holders of a majority of the shares of Series A Preferred
Stock have given, or concurrently give, notice of such demand for redemption.
-38-
<PAGE> 40
Section 6.2. Remedies on Default. (a) If an Event of Default
shall have occurred pursuant to Section 6.1, holders of the Shares or Bace
Securities shall be entitled, in addition to the rights specified in Section
6.1, to the rights set forth in the Charter, Preferred Shares and the Bace
Shares, and, in addition, may proceed to protect and enforce any or all other
rights, powers and remedies of such holders of Shares or Bace Shares, as the
case may be, by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any covenant contained
herein or in the Charter, the Preferred Shares, the Bace Shares or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any right, power or remedy granted hereby or thereby or
available at law, in equity, by statute or otherwise.
(b) If any holder of any shares of the Corporation's capital
stock, any of the Loans or any other indebtedness of the Corporation or any of
its subsidiaries for borrowed money shall serve any notice or demand or take
any other action in respect of a claimed default, the Corporation shall
forthwith give written notice thereof to each holder of the Preferred Shares or
Bace Shares at the time outstanding, describing the notice, demand or action
and the nature of the claimed default.
(c) No right, power or remedy conferred hereby or by
ownership of the Shares or the Bace Securities or now or hereafter available at
law, in equity, by statute or otherwise shall be exclusive of any other right,
power or remedy referred to herein or therein or now or hereafter available at
law, in equity, by statute or otherwise; provided, however, that the right of
any holder of the Shares or the Bace Shares to make a claim against the
Corporation for damages for breach of representation or warranty shall only
exist if such breach of representation or warranty is of a type or amount as to
which indemnification could be sought under Section 5.10.
ARTICLE VII
Miscellaneous
Section 7.1. Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended with the
written consent of the Majority Holders; provided, that any such amendment
which is detrimental to the rights of the holders of Bace Securities in any
material respect shall also require the approval of the holders of a majority
of the Bace Securities (it being understood that an amendment which amends the
provisions of any representations, warranties, conditions or covenants in this
Agreement in a manner which is not materially more onerous to the Corporation
shall be deemed in any case to be not detrimental
-39-
<PAGE> 41
to the rights of the holders of Bace Securities). No course of dealing between
the Corporation and the holder of any of the Shares or the Bace Securities or
any delay in exercising any rights hereunder or under the Charter will operate
as a waiver of any rights of any such holders.
Section 7.2. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith will survive the execution and delivery of this
Agreement, the consummation of any Closing and any investigation made at any
time by or on behalf of any Purchaser.
Section 7.3. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not. In addition, and whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of the Purchasers or holders of the Shares are also for the benefit of,
and enforceable by, any subsequent holders of any portion of the Shares and the
provisions of this Agreement which are for the benefit of Bace or holders of
the Bace Securities are also for the benefit of and enforceable by, any
subsequent holders of any portion of the Bace Securities.
Section 7.4. Severability. Whenever possible, each provision
of this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to
be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 7.5. Descriptive Headings. The descriptive headings
of this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement.
Section 7.6. Notices. Any notices required, desired or
permitted to be given hereunder, shall be delivered personally, sent by
overnight courier or mailed, registered or certified mail, return receipt
requested, to the following addresses (or to such other address as each party
may specify in a notice given hereunder) or transmitted by facsimile
transmission (with such transmission promptly confirmed by writing delivered
personally, by overnight courier or mailed as provided in this Section 7.6) and
shall be deemed to have been received on the day of personal delivery, one
business day after delivery to the overnight courier service, three business
days after such mailing or, in the case of facsimile transmission, when
received:
-40-
<PAGE> 42
If to Mesirow:
Mesirow Capital Partners VI
350 North Clark Street
Chicago, Illinois 60610
Attention: Thomas E. Galuhn
FAX #: 312/670-6211
If to Edgewater:
The Edgewater Private Equity Fund II, L.P.
666 Grand Avenue
Suite 200
Des Moines, Iowa 50309
Attention: James A. Gordon
FAX #: 515/245-5660
-41-
<PAGE> 43
with a copy in the case of notice to any of the Purchasers to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: John J. Sabl
FAX #: 312/853-7036
If to the Corporation:
RentX Industries, Inc.
1522 Blake Street
Denver, Colorado 80202
Attention: Dirk M. Tyler
FAX #: 303/620-9016
If to Bace:
BACE Investments, LLC
1522 Blake Street
Denver, Colorado 80202
Attention: Craig J. Zoellner
FAX #: 303/620-9016
with a copy in the case of a notice to the Corporation or
Bace to:
Sherman & Howard L.L.C.
First Interstate Tower North
633 Seventeenth Street
Suite 3000
Denver, Colorado 80202
Attention: B. Scott Pullara
FAX #: 303/298-0940
SECTION 7.7. GOVERNING LAW. THE VALIDITY, MEANING AND EFFECT
OF THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF ILLINOIS
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE.
-42-
<PAGE> 44
Section 7.8. Representations of Bace. Bace represents to the
Purchasers and the Corporation that (i) it is a duly organized and validly
existing limited liability company under the laws of the State of Colorado;
(ii) this Agreement has been duly authorized, executed and delivered by Bace
and constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms; (iii) the Registration Rights Agreement and the
Stockholders Agreement have been duly authorized by Bace and, when executed and
delivered by Bace on the First Closing Date, will constitute the legal, valid
and binding obligations of Bace, enforceable against it in accordance with its
terms; (iv) the execution, delivery and performance under this Agreement, the
Registration Rights Agreement and the Stockholders Agreement will not breach
the provisions of any agreement to which Bace is a party; (v) Bace is acquiring
shares of Class A Common Stock for its own account and not with a view to
reselling or distributing such securities in any transaction which would
constitute a "distribution" within the meaning of the Securities Act; (vi) Bace
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its investment in such shares;
(vii) Bace is able to bear the complete loss of its investment in such shares;
(viii) Bace has had the opportunity to ask questions of, and receive answers
from, the Corporation concerning the terms and conditions of the offering of
such shares and to obtain additional information about the Corporation and it
has obtained such information; (ix) Bace is not an entity formed solely to make
this investment; (x) Bace is an "accredited investor" as defined in Rule 501
promulgated under the Securities Act; and (xi) Bace has its principal executive
office in the State of Colorado.
Section 7.9. Purchasers' Investment Representation. Each
Purchaser represents to the Corporation that: (i) such Purchaser is acquiring
the Preferred Shares for such Purchaser's own account and not with a view to
reselling or distributing such securities in any transaction which would
constitute a "distribution" within the meaning of the Securities Act; (ii) such
Purchaser has such knowledge and experience in financial and business matters
that such Purchaser is capable of evaluating the merits and risks of the
investment in the Preferred Shares; (iii) such Purchaser is able to bear the
complete loss of such Purchaser's investment in the Preferred Shares; (iv) such
Purchaser has had the opportunity to ask questions of, and receive answers
from, the Corporation concerning the terms and conditions of the offering of
the Preferred Shares and to obtain additional information about the Corporation
and it has obtained such information; (v) if an entity, it is not an entity
formed solely to make this investment; (vi) this Agreement has been duly
authorized, executed and delivered by such Purchaser and constitutes such
Purchaser's legal, valid and binding obligation, enforceable against it in
accordance with its terms; (vii) such Purchaser's execution, delivery and
performance under this Agreement will not breach the provisions of any
agreement to which such Purchaser is a party; (viii) such Purchaser is an
"accredited investor" as defined in Rule 501 promulgated under the Securities
Act; (ix) in the case of Mesirow and Edgewater the principal executive office
of such Purchaser is in Illinois (in the case of Mesirow) or Iowa (in the case
of Edgewater); and (x) in the case of any other Purchaser, it is a resident or
its principal executive office is of the jurisdiction as to which it has
furnished written notice to the Corporation.
-43-
<PAGE> 45
Section 7.10. Exhibits and Schedules. All Exhibits and
Schedules hereto are an integral part of this Agreement.
Section 7.11. Exchange of Certificates. Upon surrender by
any holder to the Corporation of any certificate or certificates evidencing any
securities (including the Preferred Shares, the Common Shares and the Bace
Securities), the Corporation at its expense will issue in exchange therefor,
and deliver to such holder, a new security or securities, in such denomination
or denominations as may be requested by such holder. Upon receipt of evidence
reasonably satisfactory to the Corporation of the loss, theft, destruction or
mutilation of any security issued by it and in case of any such loss, theft or
destruction, upon delivery of an indemnity agreement reasonably satisfactory to
the Corporation of any such mutilation, upon surrender and cancellation of such
security, the Corporation at its expense will issue and deliver to any such
holder a new security of like tenor, in lieu of such lost, stolen, destroyed or
mutilated certificate.
Section 7.12. Final Agreement. This Agreement, together with
those document which are exhibits hereto, constitute the final agreement of the
parties concerning the matters referred to herein and therein, and supersedes
all prior and contemporaneous agreements and understandings.
Section 7.13. Delays or Omissions. No delay or omission to
exercise any right, power or remedy accruing to any holder of the Shares or the
Bace Securities, upon any breach or default of the Corporation under this
Agreement, the Preferred Shares, the Bace Shares, the Registration Rights
Agreement, the Stockholders Agreement, or the Charter or any other agreement
contemplated hereby or thereby shall impair any such right, power or remedy of
any such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any such holder of any provisions or conditions of this Agreement,
the Preferred Shares, the Bace Shares, the Registration Rights Agreement, the
Stockholders Agreement or the Charter must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, under either this Agreement, the Registration Rights Agreement, the
Preferred Shares, the Bace Shares, the Stockholders Agreement, the Charter or
the By-laws or otherwise afforded to any holder of the Shares or the Bace
Securities, shall be cumulative and not alternative.
Section 7.14. Execution in Counterparts. The Agreement may
be executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and such counterparts together shall
constitute one instrument.
-44-
<PAGE> 46
Section 7.15. Certain Defined Terms; Interpretation. As used
in this Agreement,
(a) "person" shall mean an individual, corporation, trust,
partnership, limited liability company, joint venture, unincorporated
organization, government agency or any agency or political subdivision
thereof, or other entity.
(b) "subsidiary" shall mean, as to the Corporation, any
corporation of which more than 50% of the outstanding capital stock
having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by the
Corporation by one or more of its subsidiaries, or by the Corporation
and one or more of its subsidiaries, and in any case shall include A
to Z unless at a time after any Closing Date such 50% ownership level
is not maintained.
(c) the expressions "best knowledge of the Corporation,"
"knowledge of the Corporation," "known to the Corporation," "of which
the Corporation is aware" and similar expressions shall mean the
knowledge of Richard Tyler, Craig Zoellner, Robert Kilgore, Charles
Greenidge and Gary Kulesza.
(d) whenever the expression "in the case of Zodiac and A to Z
only, to the knowledge of the Corporation" or any similar expression
is used in connection with a representation or warranty, it shall mean
that such representation or warranty insofar as it relates to the
Corporation is made without such knowledge qualification and, insofar
as it relates to Zodiac and A to Z only, is made with such knowledge
qualification.
(e) "Majority Holders" means at any time the persons holding
a majority of the Shares then outstanding, measured by treating the
Preferred Shares as if they all had been converted into Underlying
Common Shares.
(f) "Permitted Liens" shall mean any liens, charges,
restrictions, claims or encumbrances (collectively, "Liens") (i)
arising under the Loan Documents, or (ii) Liens expressly permitted by
Section 8.14 of the Credit Agreement, as such section is in effect on
the date hereof.
SECTION 7.16. JURISDICTION; VENUE; FORUM NON CONVENIENS. (A)
EACH OF THE CORPORATION, BACE AND EACH PURCHASER HEREBY IRREVOCABLY SUBMITS IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, WHETHER ARISING
IN CONTRACT, TORT, EQUITY OR OTHERWISE, TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED IN THE STATE OF ILLINOIS AND WAIVES ANY AND ALL
-45-
<PAGE> 47
OBJECTIONS TO JURISDICTION THAT IT MAY HAVE UNDER THE LAWS OF THE UNITED STATES
OR OF ANY STATE.
(B) EACH OF THE CORPORATION, BACE AND EACH PURCHASER WAIVES
ANY OBJECTION THAT IT MAY HAVE (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF
THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS) TO THE LOCATION OF THE
COURT IN WHICH ANY PROCEEDING IS COMMENCED IN ACCORDANCE WITH THIS SECTION
7.16.
SECTION 7.17. WAIVER OF JURY TRIAL. EACH OF THE CORPORATION,
BACE AND EACH PURCHASER WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN ANY OF THE PARTIES
HERETO ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 7.18. Attorneys' Fees. In the event of any action or
suit based upon or arising out of any actual or alleged breach by any party of
any representation, warranty or agreement in this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys' fees and expenses
of such action or suit from the other party, in addition to any other relief
ordered by the court.
-46-
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the 15th day of May, 1996.
RENTX INDUSTRIES, INC.
By: /s/ CRAIG J. ZOELLNER
------------------------------------
Name: Craig J. Zoellner
-------------------------------
Title: Vice President
------------------------------
BACE INVESTMENTS, LLC
By: /s/ CRAIG J. ZOELLNER
------------------------------------
Name: Craig J. Zoellner
Title: Member
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services,
Inc., General Partner
By: /s/ THOMAS E. GALUHN
-------------------------------
Thomas E. Galuhn
Vice President
<PAGE> 49
THE EDGEWATER PRIVATE
EQUITY FUND II, L.P.
By: Gordon Management, Inc.
General Partner
By: /s/ JAMES A. GORDON
-------------------------------
James A. Gordon
President
(Signature page to the RentX Industries, Inc.
Investment Agreement)
-48-
<PAGE> 50
EXHIBITS
A Charter
B Form of Registration Rights Agreement
C Form of Stockholders Agreement
D-1 Form of Opinion of Sherman & Howard, L.L.C. for First Closing
D-2 Form of Opinion of Finke & Associates, P.C. for First Closing
E-1 Form of Opinion of Sherman & Howard, L.L.C. for Second and Additional
Closings
E-2 Form of Opinion of Paine, Hamblen, Coffin, Brooke & Miller LLP for
Second Closing*
F Form of Management Agreement
SCHEDULES
I Disclosure Schedule
II Preferred Shares to be Purchased at First Closing, Second Closing and
any Additional Closing; Stockholders
III Officers
IV Agreements, Employee Benefit Plans and Insurance
V Projections
- -------------
* Such form will be subject to mutual agreement of the Corporation and the
Majority Holders.
<PAGE> 51
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
RENTX INDUSTRIES, INC.
ARTICLE 1
The name of the corporation is RentX Industries, Inc.
ARTICLE 2
The address of the corporation's registered office in the State
of Delaware is 1013 Centre Road, Wilmington, Delaware 19805. The name of its
registered agent at such address is Corporation Service Company.
ARTICLE 3
The purposes for which the corporation is organized are to engage
in any lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law and to possess and employ all powers and
privileges now or hereafter granted or available under the laws of the State of
Delaware to such corporations.
ARTICLE 4
The total number of shares which the corporation shall have
authority to issue is 100 shares, all of which shares shall be common stock,
par value $.01 per share.
The affirmative vote of a majority of all outstanding shares of
the corporation's common stock shall be required for the stockholders to act.
ARTICLE 5
The name and mailing address of the incorporator are:
B. Scott Pullara
633 17th Street, Suite 3000
Denver, Colorado 80202
ARTICLE 6
The powers of the incorporator shall terminate upon the filing of
this certificate of incorporation in the office of the Secretary of State of
the State of Delaware. The names and mailing addresses of each of the persons
who are to serve as the directors of the corporation until their successors are
elected and qualified or their earlier resignation or removal are:
<PAGE> 52
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Richard M. Tyler 1522 Blake Street
Denver, CO 80202
Craig J. Zoellner 1522 Blake Street
Denver, CO 80202
</TABLE>
The number of directors of the corporation shall be fixed from
time to time in the manner provided in the bylaws and may be increased or
decreased from time to time in the manner provided in the bylaws. Election of
directors need not be by written ballot except and to the extent provided in
the bylaws of the corporation.
The affirmative vote of a majority of all directors constituting
the board of directors shall be required for the board of directors to act.
ARTICLE 7
The board of directors of the corporation is expressly authorized
to make, alter or repeal the bylaws of the corporation, but such authorization
shall not divest the stockholders of the power, nor limit their power, to
adopt, amend or repeal bylaws.
ARTICLE 8
No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except as to liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for violations of Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the director
derived any improper personal benefit. If the Delaware General Corporation Law
hereafter is amended to eliminate or limit further the liability of a director,
then, in addition to the elimination and limitation of liability provided by
the preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent provided or permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this Article 8 shall
not adversely affect any right or protection of a director under this Article 8
as in effect immediately prior to such repeal or modification with respect to
any liability that would have accrued, but for this Article 8, prior to such
repeal or modification.
ARTICLE 9
The corporation shall have authority, to the fullest extent now
or hereafter permitted by the Delaware General Corporation Law, or by any other
applicable law, to enter into any contract or transaction with one or more of
its directors or officers, or with any corporation, partnership, joint venture,
trust, association or other entity in which one or more of its directors or
officers are directors
-2-
<PAGE> 53
or officers or have a financial interest, notwithstanding such relationships
and notwithstanding the fact that the director or officer is present at or
participates in the meeting of the board of directors or committee thereof
which authorizes the contract or transaction.
Executed March 7, 1996.
/s/ B. SCOTT PULLARA
------------------------------
B. Scott Pullara
-3-
<PAGE> 54
EXHIBIT B
FORM OF
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated
as of May 15, 1996, is among RentX Industries, Inc., a Delaware corporation
(the "Corporation"), Mesirow Capital Partners VI, an Illinois limited
partnership ("Mesirow"), The Edgewater Private Equity Fund II, L.P., a Delaware
limited partnership ("Edgewater," Mesirow, Edgewater and any other persons who
purchase shares of Preferred Stock pursuant to the Investment Agreement (as
each term is defined below) being collectively referred to as the "Investors")
and BACE Investments, LLC, a Colorado limited liability company ("Bace").
RECITALS
WHEREAS, the Investors are purchasing shares of convertible
Series A Preferred Stock, par value $1.00 per share (the "Preferred Stock")
convertible into shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock"), of the Corporation and Bace is purchasing shares of
convertible Series B Preferred Stock, par value $1.00 per share, convertible
into shares of Class A Common Stock (all shares of Class A Common Stock into
which the Preferred Stock or the Series B Preferred are converted or may be
convertible from time to time being referred to as the "Purchased Shares") as
contemplated by that certain Investment Agreement dated as of May 15, 1996 (the
"Investment Agreement"), among the Corporation, the Investors, and Bace;
provided that certain registration rights are granted to the Investors; and
WHEREAS, the Corporation deems it desirable for the
Corporation to grant certain registration rights to the Investors in order to
induce the Investors to purchase the Preferred Stock pursuant to the terms of
the Investment Agreement and to Bace.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) "Commission" means the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Common Stock" means the common stock of the
Corporation of any class.
<PAGE> 55
(c) "Person" means a natural person, a partnership,
a corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a
governmental entity or any department, agency or political subdivision thereof.
(d) "Registrable Shares" means at any time (i) the
Purchased Shares (whether or not such shares have been issued or are issuable
or are issuable upon conversion of the Preferred Stock or the Series B
Preferred); (ii) any shares of Common Stock then outstanding which were issued
as, or were issued directly or indirectly upon the conversion or exercise of
other securities issued as, a dividend or other distribution with respect to or
in replacement of other Registrable Shares; and (iii) any shares of Common
Stock then issuable directly or indirectly upon the conversion or exercise of
other securities which were issued as a dividend or other distribution with
respect to or in replacement of other Registrable Shares; provided, that
Registrable Shares shall not include any shares (i) the sale of which has been
registered pursuant to the Securities Act and which shares have been sold
pursuant to such registration or (ii) which have been sold to the public
pursuant to Rule 144 of the Commission under the Securities Act. For purposes
of this Agreement, a Person will be deemed to be a holder of Registrable Shares
whenever such Person has the then existing right to acquire such Registrable
Shares (by exercise, conversion or otherwise), whether or not such acquisition
has actually been effected.
(e) "Registration Expenses" has the meaning ascribed
to it in Section 6 of this Agreement.
(f) "Securities Act" means the Securities Act of
1933, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from time to
time.
(g) "Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended, or any similar federal statute, and the rules
and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
2. Demand Registrations.
(a) Requests for Registration. At any time after
May 15, 1999, the holders of at least 50% or more of the then outstanding
Registrable Shares at any time may request registration under the Securities
Act of all or part of their Registrable Shares for sale in the manner specified
in such request. Within ten days after receipt of any request pursuant to this
Section 2(a), the Corporation will give written notice of such request to all
other holders of Registrable Shares and will include in such registration all
Registrable Shares with respect to which the Corporation has received written
requests for inclusion therein within 15 days after the receipt of the
Corporation's notice. All registrations requested pursuant to this Section
2(a) are referred to herein as "Demand Registrations."
-2-
<PAGE> 56
(b) Number of Demand Registrations. The Corporation
shall be obligated to register Registrable Shares pursuant to a Demand
Registration on three occasions only; provided that a registration will not
count as a Demand Registration until it has become effective and unless the
holders of Registrable Shares requesting such Registration are able to register
and sell at least 90% of the Registrable Shares requested to be included in
such registration; provided that in any event the Corporation will pay all
Registration Expenses in connection with any registration requested hereunder;
provided, however, that a registration that is withdrawn at the request of the
holders of Registrable Shares who demanded such Demand Registration will count
as a Demand Registration unless the Company is reimbursed by holders of
Registrable Shares for all reasonable out-of-pocket expenses incurred by the
Company in connection with such registration. The Company shall not be
required to effect a Demand Registration if the number of shares requested to
be registered is less than 2% of the shares of Common Stock then outstanding.
(c) Priority on Demand Registrations. If a Demand
Registration is an underwritten public offering, the holders of a majority of
the Registrable Shares to be sold pursuant to such offering may designate the
managing underwriters for such offering; provided that the selection of such
managing underwriters is subject to the approval of the Corporation, which
approval may not be unreasonably withheld. If in such an underwritten public
offering the managing underwriters advise the Corporation in writing that in
their opinion the number of Registrable Shares and other securities requested
to be included exceeds the number of Registrable Shares and other securities
which can be sold in such offering, the Corporation will include in such
registration, prior to the inclusion of any securities which are not
Registrable Shares, the number of Registrable Shares requested to be included
which in the opinion of such underwriters can be sold, pro rata among the
respective holders on the basis of the number of Registrable Shares owned by
such holders, with further successive pro rata allocations among the holders of
Registrable Shares if any such holder of Registrable Shares has requested the
registration of less than all such Registrable Shares it is entitled to
register.
(d) Restrictions on Registrations. The Corporation
may postpone for up to four months the filing or the effectiveness of a
registration statement for a Demand Registration if the Corporation reasonably
believes that such Demand Registration will have a material adverse effect on
any proposal or plan by the Corporation or any of its subsidiaries to engage in
any acquisition of assets (other than in the ordinary course of business) or
any merger, consolidation, tender offer or other significant transaction;
provided that the Corporation shall have the right to so postpone such filing
or effectiveness only one time during any period of fourteen consecutive
months.
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Corporation
proposes to register any of its securities under the Securities Act (other than
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Shares (a "Piggyback
-3-
<PAGE> 57
Registration"), the Corporation will give prompt written notice to all holders
of Registrable Shares of its intention to effect such a registration (which
notice shall be given not less than 30 days prior to the date the registration
statement is to be filed) and will include in such registration all Registrable
Shares with respect to which the Corporation has received written requests for
inclusion therein within 15 days after the receipt of the Corporation's notice.
(b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the
Corporation, and the managing underwriters advise the Corporation in writing
that in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, the
Corporation will include in such registration (i) first, the securities the
Corporation proposes to sell, (ii) second, the Registrable Shares requested to
be included in such registration which in such opinion of such underwriters can
be sold, pro rata among the holders of such Registrable Shares on the basis of
the number of Registrable Shares owned by such holders, with further successive
pro rata allocations among the holders of Registrable Shares if any such holder
of Registrable Shares had requested the registration of less than all such
Registrable Shares it is entitled to register, and (iii) third, other
securities requested to be included in such registration.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Corporation's securities, and the managing underwriters advise the
Corporation in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold in
such offering, the Corporation will include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Shares requested to be included in
such registration which in such opinion of such underwriters can be sold, pro
rata among the holders of such Registrable Shares on the basis of the number of
Registrable Shares owned or deemed to be owned by such holders, with further
successive pro rata allocations among the holders of Registrable Shares if any
such holder of Registrable Shares has requested the registration of less than
all such Registrable Shares it is entitled to register, and (iii) third, other
securities requested to be included in such registration.
(d) Other Registrations. If the Corporation has previously
received a request for a Demand Registration pursuant to Section 2 or has
previously filed a registration statement with respect to Registrable
Securities pursuant to this Section 3, and if such previous request or
registration has not been withdrawn or abandoned, the Corporation will not file
or cause to be effected any other registration of any of its equity securities
or securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor form),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of 6 months has elapsed from the effective date of
such Demand Registration or previous registration, as the case may be.
-4-
<PAGE> 58
4. Holdback Agreements.
(a) Each of the holders of Registrable Shares agrees not to
effect any public sale or distribution of equity securities of the Corporation,
or any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the 90-day period beginning on
the effective date of any underwritten Demand Registration (except as part of
such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(b) The Corporation agrees (i) not to effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) use all reasonable efforts
to cause each holder of at least 1% (on a fully-diluted basis) of its equity
securities (other than equity securities acquired in a public trading market),
or any securities convertible into or exchangeable or exercisable for such
securities, purchased from the Corporation at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution of any such securities during such period
(except as part of such underwritten registration, if otherwise permitted),
unless the underwriters managing the registered public offering otherwise
agree.
5. Registration Procedures. Whenever the holders of
Registrable Shares have requested that any Registrable Shares be registered
pursuant to this Agreement, the Corporation will use its best efforts to effect
the registration and the sale of such Registrable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto the Corporation
will as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Shares and use its best efforts to
cause such registration statement to become and remain effective for such
period as may be reasonably necessary to effect the sale of such securities,
not to exceed nine months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than nine months (or such longer period as
is necessary for the underwriters in an underwritten offering to sell unsold
allotments) and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by
the sellers thereof set forth in such registration statement;
-5-
<PAGE> 59
(c) furnish to each seller of Registrable Shares and the
underwriters of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as such seller or underwriters may reasonably request
in order to facilitate the disposition of the Registrable Shares owned by such
seller or the sale of such securities by such underwriters;
(d) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable Shares
owned by such seller (provided, however, that the Corporation will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subsection or (ii)
consent to general service of process in any such jurisdiction);
(e) cause all such Registrable Shares to be listed or
authorized for quotation on each securities exchange or automated quotation
system on which similar securities issued by the Corporation are then listed or
quoted;
(f) provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such registration
statement;
(g) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Shares being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Shares (including, without limitation,
effecting a stock split or a combination of shares);
(h) make available for inspection by the seller of
Registrable Shares, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Corporation, and cause the
Corporation's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
(i) notify each seller of such Registrable Shares, promptly
after it shall receive notice thereof, of the time when such registration
statement has become effective or a supplement to any prospectus forming a part
of such registration statement has been filed;
(j) notify each seller of such Registrable Shares of any
request by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
-6-
<PAGE> 60
(k) prepare and file with the Commission, promptly upon the
request of any seller of such Registrable Shares, any amendments or supplements
to such registration statement or prospectus which, in the opinion of counsel
selected by the holders of a majority of the Registrable Shares being
registered, is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of Registrable Shares by such
seller;
(l) prepare and promptly file with the Commission and
promptly notify each seller of such Registrable Shares of the filing of such
amendment or supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading;
(m) advise each seller of such Registrable Shares, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
such purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued;
(n) at least forty-eight hours prior to the filing of any
registration statement or prospectus or any amendment or supplement to such
registration statement or prospectus, furnish a copy thereof to each seller of
such Registrable Shares and refrain from filing any such registration
statement, prospectus, amendment or supplement to which counsel selected by the
holders of a majority of the Registrable Shares being registered shall have
objected on the grounds that such amendment or supplement does not comply in
all material respects with the requirements of the Securities Act or the rules
and regulations thereunder, unless, in the case of an amendment or supplement,
in the opinion of counsel for the Corporation the filing of such amendment or
supplement is reasonably necessary to protect the Corporation from any
liabilities under any applicable federal or state law and such filing will not
violate applicable laws;
(o) at the request of any seller of such Registrable Shares
in connection with an underwritten offering, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel,
addressed to the underwriters and the sellers of Registrable Shares, covering
such matters as such underwriters and sellers may reasonably request and as are
customarily covered by the issuer's counsel in an underwritten offering; and
(ii) a letter or letters from the independent certified public accountants of
the Corporation addressed to the underwriters and the sellers of Registrable
Shares, covering such matters as such underwriters and sellers may reasonably
request and as are customarily covered in accountant's letters in connection
with an underwritten offering; and
-7-
<PAGE> 61
(p) otherwise use its best efforts to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement in accordance with the
intended method of disposition and to make generally available to its security
holders, as soon as reasonably practicable, an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
(q) Each holder of Registrable Shares that sells Registrable
Shares pursuant to a registration under this Agreement agrees that in
connection with registration as follows:
(i) Such seller shall cooperate as reasonably
requested by the Corporation with the Corporation in
connection with the preparation of the registration statement,
and for so long as the Corporation is obligated to file and
keep effective the registration statement, shall provide to
the Corporation, in writing, for use in the registration
statement, all such information regarding such seller and its
plan of distribution of the Registrable Shares as may be
reasonably necessary to enable the Corporation to prepare the
registration statement and prospectus covering the Registrable
Shares, to maintain the currency and effectiveness thereof and
otherwise to comply with all applicable requirements of law in
connection therewith.
(ii) During such time as such seller may be engaged
in a distribution of the Registrable Shares, such seller shall
comply with Rules 10b-6 and 10b-7 promulgated under the
Securities Exchange Act and pursuant thereto it shall, among
other things; (x) not engage in any stabilization activity in
connection with the securities of the Corporation in
contravention of such rules; (y) distribute the Registrable
Shares under the registration statement solely in the manner
described in the registration statement; and (z) cease
distribution of such Registrable Shares pursuant to such
registration statement upon receipt of written notice from the
Corporation that the prospectus covering the Registrable
Shares contains any untrue statement of a material fact or
omits a material fact required to be stated therein or
necessary to make the statements therein not misleading.
6. Registration Expenses.
(a) All expenses incident to the Corporation's performance of
or compliance with this Agreement, including, without limitation, all
registration and filing fees, fees of transfer agents and registrars, fees and
expenses of compliance with securities or blue sky laws, fees of the National
Association of Securities Dealers, Inc., printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for the Corporation
and its independent certified public accountants, underwriters (excluding
discounts and commissions attributable to the Registrable Shares included in
such registration) and other Persons retained by the Corporation (all such
expenses being herein called "Registration Expenses"), will be borne by the
Corporation. In addition, the Corporation will pay its internal expenses
(including, without
-8-
<PAGE> 62
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance obtained by the Corporation and
the expenses and fees for listing or authorizing for quotation the securities
to be registered on each securities exchange on which any shares of common
stock are then listed or quoted.
(b) In connection with each Demand Registration and Piggyback
Registration effected pursuant to this Agreement, the Corporation will
reimburse the holders of Registrable Shares covered by such registration for
the reasonable fees and disbursements of one counsel for the holders chosen by
the holders of a majority of such Registrable Shares.
7. Indemnification.
(a) The Corporation agrees to indemnify, to the fullest
extent permitted by law, each seller of Registrable Shares, its officers and
directors and each Person who controls such seller (within the meaning of the
Securities Act or the Exchange Act) against all losses, claims, damages,
liabilities and expenses (including, without limitation, attorneys' fees except
as limited by Section 7(c)) caused by any untrue or alleged untrue statement of
a material fact contained in any registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Corporation by such seller expressly for use therein or by such seller's
failure to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Corporation has furnished such
seller with a sufficient number of copies of the same. In connection with an
underwritten offering, the Corporation will indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act or the Exchange Act) to the same extent as
provided above with respect to the indemnification of the sellers of
Registrable Shares and in connection therewith the Corporation shall enter into
an underwriting agreement in customary form containing such provisions for
indemnification and contribution as shall be reasonably requested by the
underwriters. The reimbursements required by this Section 7(a) will be made by
periodic payments during the course of the investigation or defense, as and
when bills are received or expenses incurred.
(b) In connection with any registration statement in
which a seller of Registrable Shares is participating, each such seller will
furnish to the Corporation in writing such information and affidavits as the
Corporation reasonably requests for use in connection with any such
registration statement or prospectus and, to the fullest extent permitted by
law, will indemnify the Corporation, its directors and officers and each Person
who controls the Corporation (within the meaning of the Securities Act) against
any losses, claims, damages, liabilities and expenses (including, without
limitation, attorneys' fees except as limited by Section 7(c)) resulting from
any untrue statement of a material fact contained in the registration
-9-
<PAGE> 63
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such seller; provided that
the obligation to indemnify will be several, not joint and several, among such
sellers of Registrable Shares, and the liability of each such seller of
Registrable Shares will be in proportion to; provided further that such
liability will be limited to, the net amount received by such seller from the
sale of Registrable Shares pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give such
notice shall not limit the rights of such Person) and (ii) unless in such
indemnified party's reasonable judgment (with written advice of counsel) a
conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed, the indemnifying party will not be subject
to any liability for any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably withheld). An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment (with written advice of counsel) of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.
(d) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 7(a) or Section 7(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the holders or any underwriters or all of them were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 7(d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such
-10-
<PAGE> 64
indemnified party in connection with investigating or, except as provided in
Section 7(c), defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no holder shall be required to contribute an
amount greater than the dollar amount of the proceeds received by such holder
with respect to the sale of any Registrable Shares. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The holders' obligations in this
Section 7(d) to contribute shall be several in proportion to the amount of
Registrable Shares registered by them and not joint.
(e) The indemnification and contribution provided for under
this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified party and will survive the
transfer of securities. The Corporation also agrees to make such provisions as
are reasonably requested by any indemnified party for contribution to such
party in the event the Corporation's indemnification is unavailable for any
reason.
8. Compliance with Rule 144. In the event that the
Corporation (a) registers a class of securities under Section 12 of the
Exchange Act, (b) issues an offering circular meeting the requirements of
Regulation A under the Securities Act or (c) commences to file reports under
Section 13 or 15(d) of the Exchange Act, then the Corporation shall (i) make
and keep public information available, as those terms are understood and
defined in Rule 144 of the Commission, (ii) file with the Commission in a
timely manner all reports and other documents required of the Corporation under
the Securities Act and the Exchange Act and (iii) at the request of any holder
who proposes to sell securities in compliance with Rule 144, forthwith furnish
to such holder a written statement of compliance with the reporting
requirements of the Commission as set forth in Rule 144 as such rule may be
amended from time to time and make available to the public and such holders
such information as will enable the holders to make sales pursuant to Rule 144.
9. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is underwritten
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements.
10. No Inconsistent Agreements. The Corporation will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of the Registrable Shares
in this Agreement.
11. Adjustments Affecting Registrable Shares. The
Corporation will not take any action, or permit any change to occur, with
respect to its securities which would adversely affect the ability of the
holders of Registrable Shares to include such Registrable Shares in a
-11-
<PAGE> 65
registration undertaken pursuant to this Agreement or which would adversely
affect the marketability of such Registrable Shares in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
12. Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages caused by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
13. Amendments and Waivers. Except as otherwise
expressly provided herein, the provisions of this Agreement may be amended or
waived at any time only by the written agreement of the Corporation and the
holders of 80 percent of the Registrable Shares; provided that any such
amendment or waiver shall apply equally to all holders of Registrable Shares
except to the extent a holder of Registrable Shares adversely affected by
unequal treatment otherwise consents. Any waiver, permit, consent or approval
of any kind or character on the part of any such holders of any provision or
condition of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in writing.
14. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not. In addition and whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Shares are also for the benefit
of, and enforceable by, any subsequent holder of Registrable Shares who
consents in writing to be bound by this Agreement. However, any successor,
assign or holder to have the benefits of this Agreement must at the request of
the Corporation agree to be bound by the terms hereof.
15. Other Registration Rights. Except for the
registration rights granted hereunder, the Corporation will not grant to any
Persons the right to request the Corporation to register any equity securities
of the Corporation, or any securities convertible or exchangeable into or
exercisable for such securities, without the written consent of the holders of
at least two-thirds of the Registrable Shares. Except for registrations
pursuant to registration rights granted to the holders of Registrable Shares
hereunder or registrations of securities by the Corporation, the Corporation
shall not register any equity securities of the Corporation, or any securities
convertible or exchangeable into or exercisable for such securities, without
the written consent of the holders of at least two-thirds of the Registrable
Shares. The Corporation will not include in any Demand Registration any
securities which are not Registrable Shares (for the purposes of Section 2),
without the written consent of the holders of at least a majority of the
Registrable Shares requesting such registration.
-12-
<PAGE> 66
16. Final Agreement. This Agreement constitutes the
final agreement of the parties concerning the matters referred to herein, and
supersedes all prior agreements and understandings.
17. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
18. Descriptive Heading. The descriptive headings of
this Agreement are inserted for convenience of reference only and do not
constitute a part of and shall not be utilized in interpreting this Agreement.
19. Notices. Any notices required or permitted to be
sent hereunder shall be delivered personally or mailed, certified mail, return
receipt requested, or delivered by overnight courier service to the following
addresses, or such other addresses as shall be given by notice delivered
hereunder, and shall be deemed to have been given upon delivery, if delivered
personally, three business days after mailing, if mailed, or one business day
after delivery to the courier, if delivered by overnight courier service:
If to the holders of Registrable Shares, to the addresses set
forth on the stock record books of the Corporation;
with a copy to (in the case of notices to holders other than
Bace and its transferees):
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: John J. Sabl
20. Governing Law. The validity, meaning and effect of
this Agreement shall be determined in accordance with the laws of the State of
Illinois applicable to contracts made and to be performed in that state.
21. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and the Corporation.
-13-
<PAGE> 67
22. Attorneys' Fees. In the event of any action or suit
based upon or arising out of any actual or alleged breach by any party of any
representation, warranty or agreement in this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and expenses of
such action or suit from the other party, in addition to any other relief
ordered by the court.
-14-
<PAGE> 68
This Registration Agreement was executed on the date first set forth
above.
RENTX INDUSTRIES, INC.
By: /s/ CRAIG J. ZOELLNER
------------------------------------
Craig J. Zoellner
Vice President
MESIROW CAPITAL PARTNERS VI
By: Mesirow Private Equity
Investments, Inc.,
General Partner
By: /s/ THOMAS E. GALUHN
--------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY FUND,
II L.P.
By: Gordon Management, Inc.
By: /s/ J.A. GORDON
------------------------------
James A. Gordon
President
BACE INVESTMENTS, LLC
By: /s/ CRAIG J. ZOELLNER
------------------------------
Craig J. Zoellner
Member
<PAGE> 69
EXHIBIT C
FORM OF
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement"), dated as of
May 15, 1996, is among BACE Investments, LLC, a Colorado limited liability
company ("Bace"), Mesirow Capital Partners VI, an Illinois limited partnership
("Mesirow"), The Edgewater Private Equity Fund II, L.P., a Delaware limited
partnership ("Edgewater," Mesirow and Edgewater together with any other parties
to this Agreement who purchase shares of Preferred Stock pursuant to the
Investment Agreement (as each term is defined below) or successors or assigns
of such purchasers, being collectively referred to as the "Purchasers"),
Richard M. Tyler ("Tyler") and Craig J. Zoellner ("Zoellner"), and each other
holder of record of Common Stock, as defined herein, or an option to acquire
Common Stock who may execute this Agreement or hereafter execute a separate
agreement to be bound by the terms hereof ( Bace, Purchaser and each other
person that may become a party hereto as contemplated hereby are hereinafter
collectively referred to as the "Parties" and individually a "Party"), and
RentX Industries, Inc., a Delaware corporation (the "Corporation").
RECITALS
WHEREAS, the Corporation has authorized capital stock
consisting of 233,900 shares of Class A Common Stock, 12,350 shares of
nonvoting Class B Common Stock, 15,000 shares of convertible Series A Preferred
Stock, $1.00 par value per share (the "Series A Preferred"), and 200 shares of
convertible Series B Preferred Stock, $1.00 par value (the "Series B
Preferred") having the respective rights and powers set forth in the
certificate of incorporation of the Corporation (as amended from time to time,
the "Charter");
WHEREAS, the Parties are the legal and beneficial owners of
all of the issued and outstanding shares of Capital Stock (as defined below) of
the Corporation on the date hereof; and
WHEREAS, the Parties have agreed, among other things, to make
certain provisions for the management of the Corporation and its subsidiaries,
and to restrict the transfer of their Capital Stock.
NOW, THEREFORE, in consideration of the covenants and
agreements made herein, the Parties and the Corporation agree as follows:
<PAGE> 70
ARTICLE 1
CERTAIN DEFINED TERMS
1.1 Certain Terms. In addition to terms defined elsewhere in
this Agreement, for purposes of this Agreement, except as otherwise set forth
herein or the context otherwise requires, the following terms shall have the
following meanings:
"Accredited Investor" shall have the meaning set forth in
Regulation D or any successor rule then in effect.
"Accredited Party" has the meaning set forth in Section
3.1(c)(i).
"Affiliate" of a Party means (i) in all cases, any person or
entity controlling, controlled by or under common control with, such Party,
(ii) in the case of Mesirow, Mesirow Financial Services, Inc. ("MFS"), any of
the general or limited partners of Mesirow, any general or limited partners of
such partners, any person or entity controlling, controlled by or under common
control with Mesirow or MFS, Edgewater or any Affiliate of Edgewater, (iii) in
the case of Edgewater, Gordon Management, Inc. ("GMI"), any of the general or
limited partners of Edgewater, any general or limited partners of such
partners, any person or entity controlling, controlled by or under common
control with Edgewater or GMI, Mesirow or any Affiliate of Mesirow, (iv) in the
case of a Party who is a natural person, such Party's spouse, the issue of such
Party or such Party's spouse (including any by adoption), such Party's estate
and any trust entirely for the benefit of any one or more of such Party, such
Party's estate, such Party's spouse and the issue of such Party or such Party's
spouse (including any by adoption), (v) in the case of Bace, Tyler, Zoellner,
any Affiliate of Tyler, any Affiliate of Zoellner or any employee of Bace other
than Tyler or Zoellner (a "Bace Employee"), (vi) in the case of Tyler, any
Affiliate of Tyler or any Bace Employee, Zoellner or any Affiliate of Zoellner,
and (vii) in the case of Zoellner, any Affiliate of Zoellner or any Bace
Employee, Tyler or any Affiliate of Tyler.
"Board of Directors" means the board of directors of the
Corporation.
"Capital Stock" means the Common Stock, the Preferred Stock
and any other class of capital stock of the Corporation that may be outstanding
from time to time.
"Class A Common Stock" means the Class A Common Stock of the
Corporation, par value $.01 per share.
"Class B Common Stock" means the Class B Common Stock of the
Corporation, par value $.01 per share, which stock generally is nonvoting.
-2-
<PAGE> 71
"Common Stock" means the Class A Common Stock and the Class B
Common Stock.
"Common Stock Equivalents" means (without duplication with any
other Common Stock or Common Stock Equivalents) rights, warrants, options
(including, without limitation, employee stock options), convertible securities
or indebtedness, exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock and securities convertible or exchangeable into Common Stock,
whether at the time of issuance or upon the passage of time or the occurrence
of some future event, including (without limitation) the Series A Preferred and
the Series B Preferred.
"Fully Diluted Common Stock" means, at any time, the then
outstanding Common Stock of the Corporation plus (without duplication) all
shares of Common Stock issuable, whether at such time or upon the passage of
time or the occurrence of future events, upon the exercise, conversion or
exchange of all then outstanding Common Stock Equivalents.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Investment Agreement" means the Investment Agreement dated as
of May 15, 1996, among the Corporation, the Purchasers and Bace, as may be
amended from time to time.
"Preferred Stock" means the Series A Preferred Stock and the
Series B Preferred Stock of the Corporation, par value $1.00 per share.
"Qualified Public Offering" means the sale in an underwritten
public offering or a series of public offerings, registered under the
Securities Act, of Common Stock which results in public ownership of not less
than 25% of the Fully Diluted Common Stock of the Corporation, which shares of
Common Stock are listed upon the New York Stock Exchange, the American Stock
Exchange or are approved for quotation on the NASDAQ National Market and which
offerings shall have resulted in the receipt by the Corporation of aggregate
cash proceeds (after deduction of underwriting discounts and the costs
associated with the offerings) of at least $8 million and with the average
price in such offering or offerings reflecting a valuation of the Fully Diluted
Common Stock (excluding shares being issued in the offering or offerings)
aggregating at least $30 million.
"Regulation D" means Regulation D promulgated by the SEC under
the Securities Act, as amended from time to time.
"SEC" means the Securities and Exchange Commission or any
successor governmental agency.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
-3-
<PAGE> 72
"Subsidiary" means any corporation or other entity, a majority
of whose capital stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions is at the time held by the Corporation or any Subsidiary
thereof.
ARTICLE 2
MANAGEMENT OF THE CORPORATION AND CERTAIN ACTIVITIES
2.1 Board of Directors.
(a) The Parties and the Corporation hereby acknowledge and
agree that the Board of Directors shall consist of five members; provided, that
either the Purchasers or Bace may elect to increase the size of the Board of
Directors to seven members at any time by notice given to the Corporation.
Bace shall be entitled to designate two of the directors (or three if the Board
of Directors has seven members) and the Purchasers shall be entitled to
designate the remaining three directors (or four if the Board of Directors has
seven members) at all times during the term of this Agreement. Accordingly,
the Parties and the Corporation agree to take all action within their
respective power, including, but not limited to, the voting of Capital Stock,
required to cause the Board of Directors to at all times (i) consists of five
members (or seven at the election of the Purchasers or Bace) and (ii) include
two designees (or three if the Board of Directors has seven members) of Bace,
as determined in its sole discretion, and three designees (or four if the
Board of Directors has seven members) of the Purchasers, as determined in
their sole discretion. The Corporation agrees that it shall cause the board of
directors of any and all Subsidiaries of the Corporation to consist of the same
members as of the Board of Directors. The Parties further agree that, unless
the Board of Directors concludes in good faith that such person has committed
misconduct or otherwise is unfit to serve as an officer of the Corporation,
that the Parties agree to take all action within their respective power to
cause each of Tyler and Zoellner to continue to be elected as a vice president
of the Corporation.
(b) In the event that any director (a "Withdrawing Director")
designated pursuant to Section 2.1(a) is unable to serve, or once having
commenced to serve, is removed or withdraws from the Board of Directors, such
Withdrawing Director's replacement (the "Substitute Director") on the Board of
Directors will be designated by the persons or entities entitled to designate
such director pursuant to Section 2.1(a); provided, that a director designated
pursuant to Section 2.1(a) may only be removed by the person or entity entitled
to designate such director pursuant to Section 2.1(a). The Corporation and
each of the Parties agree to take all action within its or his power,
including, but not limited to, the voting of Capital Stock, to cause the
election of such Substitute Director as soon as practicable following such
designation.
(c) In the event a Party ceases to be entitled to designate
directors pursuant to this Agreement, the vacancy or vacancies resulting
therefrom shall be filled by the directors or
-4-
<PAGE> 73
by the stockholders in the manner provided by applicable law. In the event a
Party chooses not to designate any director or directors, such directorship or
directorships shall not otherwise be filled and the size of the Board of
Directors shall be correspondingly reduced until such time as such Party elects
to designate a director or directors in accordance with this Agreement.
(d) The Corporation and the Parties agree that no action
shall be taken at any meeting of the Board of Directors unless each director
shall receive at least one business day's notice of such meeting or shall waive
such notice. The Corporation and each of the Parties agree to take all action
within its or his power, including, but not limited to, the voting of Capital
Stock, to prevent action from being taken without such notice unless such
notice is waived by all of the members of the Board of Directors.
(e) The Corporation and the Parties shall vote to approve and
adopt by-laws and amendments to the Charter and to take such other actions in
furtherance of, and to give effect to, the agreements and provisions set forth
in this Agreement and the Investment Agreement, and shall not vote to repeal or
adopt any by-law or amendment to the Charter or take any other action in
violation of, or inconsistent with, such agreements and provisions, including,
without limitation, the provisions of Section 2.1(a) of this Agreement or of
the Investment Agreement.
2.2 Non-Compete; Fiduciary Duties. It is understood and
accepted that a Party may not have any interests (other than the ownership of
not more than 5% of the common stock of a publicly held entity in which such
party does not have any other involvement) or engage in any other business
ventures which compete in any material respect with the activities of the
Corporation and its Subsidiaries. Except as provided below in this Section
2.2, nothing in this Agreement, express or implied, shall relieve any officer
or director of the Corporation or any of its Subsidiaries, or any Party, of any
fiduciary or other duties or obligations they may have to the Corporation's
stockholders. Notwithstanding anything to the contrary set forth above in this
Section 2.2 or in the Corporation's Charter, the Parties acknowledge and agree
that the business of the Corporation (the "Business") shall be limited to
engaging in (a) construction and industrial equipment rentals, general tool and
equipment rentals, event and party rentals and related activities and (b) such
other business activities as the Corporation shall hereafter, with the consent
of a majority of the Board of Directors (including the approval of a majority
of the members of the Board of Directors designated by the Purchasers), be
engaged in or have determined to engage in. Consequently, (x) the "corporate
opportunities" doctrine shall not apply to: (i) any activities or opportunities
outside the scope of the Business set forth in clause (a) of the preceding
sentence or (ii) prior to a Qualified Public Offering, activities referred to
in clause (b) of the preceding sentence ("Non-RentX Activities") unless the
consent of Bace, Tyler, Zoellner or at least one member of the Board of
Directors designated by Bace, so long as Bace is permitted to make such
designation, has been given in connection with the determination for the
Corporation to engage in such activities; and (y) except as set forth in
subsection (x)(ii), no officer or director of the Corporation or any of its
Subsidiaries, or any Party, shall have any fiduciary or other duties,
obligations or liabilities with respect to any Non-RentX Activities which such
officer, director or Party pursues outside of the Corporation (it
-5-
<PAGE> 74
being understood that this provision in no way limits fiduciary or other
obligations to maintain the confidentiality of confidential information of the
Corporation or its Subsidiaries or refrain from using such information or other
assets of the Corporation in connection with Non-RentX Activities pursued
outside of the Corporation; provided, however, no such officer, director or
other Party shall have any obligation to maintain the confidentiality of, or
refrain from using, any confidential information with respect to Non-RentX
Activities (A) which becomes generally known to and available for use by the
public other than as a result of a disclosure by such officer, director or
other Party, (B) with respect to which such officer's, director's or other
Party's duty of confidentiality is waived by the Corporation, (C) if required
by applicable law, regulation or order of any governmental agency or court of
competent jurisdiction, (D) which was known to the public when received by such
officer, director or other Party or (E) which is lawfully obtained by such
officer, director or other Party from other sources).
2.3 Availability of Common Stock. The Parties and the
Corporation agree that the Corporation shall at all times when any shares of
Preferred Stock are outstanding have available and reserved sufficient shares
of authorized but unissued shares or treasury shares of Common Stock for
issuance upon any conversion of Preferred Stock, and the Parties and the
Corporation agree to take all action with their respective power, including,
but not limited to the voting of Capital Stock, required to cause all such
Common Stock to be available for such issuance upon conversion at all times.
2.4 Liquidity Events. The Parties agree that the Purchasers
shall have control over a merger or consolidation of the Corporation, the sale
or other disposition of all or a majority of its assets or capital, a public
offering of Capital Stock or a dissolution or liquidation of the Corporation
(collectively, "Liquidity Events") and agree to cooperate as reasonably
requested by the Purchasers and take all action within their respective power
(including, but not limited to, the voting of Capital Stock and using all
reasonable efforts to have their designees on the Board of Directors vote as
directors) to consummate a Liquidity Event designated by the Purchasers, it
being understood that the Corporation shall bear all of the Parties' reasonable
out-of-pocket expenses in connection therewith. Without limiting the
generality of the foregoing, each of Bace and the other Parties (other than the
Purchasers), agrees (i) to sell the shares of Common Stock and Common Stock
Equivalents held by him on the same basis as the Purchasers in connection with
any Liquidity Event structured as a sale of Common Stock or Common Stock
Equivalents, (ii) in connection with any Liquidity Event structured as a
merger, consolidation or sale of assets, to not perfect or enforce any rights
they might otherwise have to demand an appraisal for the shares of Common Stock
or Common Stock Equivalents held by them and (iii) to refrain from otherwise
attempting to impede, delay or prevent the consummation of a Liquidity Event
sought by the Purchasers.
-6-
<PAGE> 75
ARTICLE 3
TRANSFER OF SECURITIES
3.1 Transfers. During the term hereof, no Party shall sell,
transfer or otherwise dispose of, hypothecate or otherwise encumber
(voluntarily or involuntarily) (any such sale, transfer, disposition,
hypothecation or encumbrance being referred to as a "transfer") any Common
Stock or Common Stock Equivalents except as expressly permitted in any
subsection of this Section 3.1.
(a) A Party may transfer shares of Common Stock or Common
Stock Equivalents, to an Affiliate thereof; provided, that (i) such Party first
delivers to the Corporation the written representation of such Party and such
Affiliate, expressly for the benefit of the Corporation and the other Parties,
that such transfer is not being made for purposes of circumventing the
provisions of this Article 3 and that such Affiliate agrees to be bound by the
terms and provisions of this Agreement and (ii) the Corporation determines, in
its reasonable discretion, that such representation is true. Notwithstanding
the foregoing, none of Bace, Tyler, Zoellner or any Bace Employee may transfer
shares of Common Stock or Common Stock Equivalents pursuant to this Section
3.1(a) (other than to Tyler, Zoellner or Bace, so long as a majority of the
voting rights and equity ownership with respect to Bace continues to be held by
Tyler or Zoellner) unless Tyler, Zoellner and Bace (but only counting Bace if a
majority of the voting rights and equity ownership with respect to Bace
continues to be held by Tyler or Zoellner) continue to hold in the aggregate a
majority of Series B Preferred Stock and the Common Stock Equivalents relating
thereto.
(b) A Party may transfer shares of Common Stock or Common
Stock Equivalents pursuant to a registered public offering or pursuant to Rule
144 (other than Subsection (k) thereof) promulgated under the Securities Act or
any successor rule or regulation then in place.
(c) A Party (the "Transferor") may at any time give written
notice (the "Transferor's Notice") to the Corporation and the other Parties
(the "Other Parties") that it has received a bona fide written offer to
purchase any or all shares of such Party's Common Stock or Common Stock
Equivalents and that such Party desires to transfer any or all of such shares
or Common Stock Equivalents. The Transferor's Notice shall specify the
proposed transferee thereof, all material terms of the proposed transaction,
including the number of shares of Common Stock or Common Stock Equivalents to
be transferred and the amount and type of consideration to be received
therefor, shall be accompanied by a copy of such bona fide offer, and shall
contain an undertaking by the proposed transferee to honor any Participation
Offer (as defined below) which is made in accordance with the terms hereof and
shall contain the following offers:
(i) The Transferor shall offer to sell (the "First Option")
all such shares or Common Stock Equivalents to the Corporation for
cash at the same price per share or
-7-
<PAGE> 76
per Common Stock Equivalent as to be paid by the proposed transferee.
Regardless of whether the Corporation exercises the First Option, to
the extent the consideration to be paid by the proposed transferee
consists of assets other than cash, the cash equivalent of such
consideration shall be determined reasonably and in good faith by the
Corporation. The cash equivalent determination required by the
preceding sentence, as well as the decision whether or not the
Corporation will accept the First Option, in any particular instance
shall be made by the Board of Directors, excluding therefrom any
directors designated by the Transferor or the proposed transferee (or
any Affiliate thereof), who may be counted for quorum purposes but
shall abstain from any such decision, utilizing any method and/or
advisory assistance the Board of Directors deems appropriate, and the
Corporation shall give the Transferor and the Other Parties written
notice of such determination within 20 days after receipt of the
Transferor's Notice. If the Corporation (A) fails to notify the
Transferor in writing within 20 days after receipt of the Transferor's
Notice that it elects to accept the First Option or (B) by written
notice rejects the First Option, in whole or in part, the Transferor
shall offer to sell (the "Second Option") the shares or Common Stock
Equivalents not so purchased by the Corporation to the Other Parties
who are Accredited Investors and any Affiliate of an Other Party that
is not an Accredited Investor so designated by such Other Party if
such Affiliate is an Accredited Investor (collectively, the
"Accredited Parties") for cash at the same price as the Corporation is
entitled to purchase such shares or Common Stock Equivalents pursuant
to the First Option. The Accredited Parties may purchase the shares
or Common Stock Equivalents so offered in the proportions upon which
they mutually agree, or, if they are unable to agree upon an
allocation of such shares or Common Stock Equivalents among
themselves, then in proportion to the number of shares of Fully
Diluted Common Stock owned by each such Accredited Party who wishes to
participate in the purchase of such shares or Common Stock Equivalents
pursuant to the Second Option. The Second Option may be accepted by
one or more of such Accredited Parties by written notice delivered to
the Transferor within thirty days after receipt of the Transferor's
Notice. Unless, through exercise of the First Option and the Second
Option, all the shares or Common Stock Equivalents proposed to be
transferred in the Transferor's Notice are to be acquired by the
Corporation and Other Parties, the Transferor may transfer all shares
or Common Stock Equivalents covered by the Transferor's Notice to the
proposed transferee upon the terms of such transfer set forth in the
Transferor's Notice, and, if the Participation Offer described in
clause (ii) below has been accepted, subject to and in compliance with
the Participation Offer; provided, however, that such transfer must
occur no later than 75 days after the date the Transferor's Notice was
received by the Corporation or five days after the expiration or
termination of any waiting period applicable to such transfer pursuant
to the HSR Act, whichever is later. If the First Option or the Second
Option, as the case may be, is accepted in a manner such that all
shares or Common Stock Equivalents covered by the Transferor's Notice
are to be purchased, the Transferor shall, except as otherwise
required by clause (ii) below, transfer all such shares or Common
Stock Equivalents (free of all liens and encumbrances except this
Agreement) to the respective purchasers thereof
-8-
<PAGE> 77
within 20 days after the date such offer is accepted by the
Corporation and Accredited Parties, whichever is later, against
delivery by the purchasers of the consideration for such shares;
provided that, if the HSR Act is applicable to the First Option or the
Second Option, such date shall be extended to the date which is five
days after the date the applicable waiting period expires or is
terminated.
(ii) In the Transferor's Notice, the Transferor shall
offer (the "Participation Offer") to include in the proposed transfer
to the proposed transferee referred to in Section 3.1(c) a number of
shares or Common Stock Equivalents designated by any of the Other
Parties, not to exceed, in respect of any such Other Party, the number
of shares or Common Stock Equivalents equal to the product of (A) the
aggregate number of shares or Common Stock Equivalents to be
transferred by the Transferor to the proposed transferee and (B) a
fraction with a numerator equal to the number of shares of Fully
Diluted Common Stock that such Other Party owns and a denominator
equal to the number of shares of Fully Diluted Common Stock owned by
the Transferor and each Other Party who wishes to participate in the
proposed transfer pursuant to the Participation Offer; provided, that,
if the consideration to be received by the Transferor includes any
securities, only Accredited Parties shall be entitled to include their
shares or Common Stock Equivalents in such transfer. The Participation
Offer shall be conditioned upon the Transferor transferring shares or
Common Stock Equivalents pursuant to the First Option and/or the
Second Option or consummating (which it shall not be obligated to do)
the transactions contemplated in the Transferor's Notice with the
transferee named therein. If any Party or Other Parties have accepted
the Participation Offer, the Transferor shall reduce to the extent
necessary the number of shares or Common Stock Equivalents it
otherwise would have sold in the proposed transfer so as to permit
Other Parties who have accepted the Participation Offer to sell the
number of shares or Common Stock Equivalents that they are entitled to
sell under this clause (ii), and the Transferor and such other Party
or Other Parties shall transfer the number of shares or Common Stock
Equivalents specified in the Participation Offer as follows: (W) to
the Corporation, if it exercised the First Option in whole, or (X) if
the Corporation exercised the First Option in part and the Other Party
or other Parties who exercised the Second Option do so with respect to
the remaining shares or Common Stock Equivalents, to the Corporation
and the Other Party or other Parties, or (Y) if the Corporation did
not exercise the First Option, to the other Party or Other Parties who
exercised the Second Option in full, if any, or (Z) in all other
events, to the proposed transferee in accordance with the terms of
such transfer set forth in the Transferor's Notice.
(d) No shares of Common Stock or Common Stock Equivalents may
be transferred by a Party (other than pursuant to an effective registration
statement under the Securities Act otherwise permitted hereunder) unless, upon
the request of the Corporation, such Party first delivers to the Corporation an
opinion of counsel, reasonably satisfactory to the Corporation, to the effect
that such transfer is not required to be registered under the Securities Act.
-9-
<PAGE> 78
(e) Transfers pursuant to Sections 3.1(a) and 3.1(b) shall
not be subject to Section 3.1(c). Other than transfers pursuant to Section
3.1(b), no transfers of shares of Common Stock or Common Stock Equivalents
shall be made unless prior to the consummation thereof, the Party transferring
such shares delivers to the Corporation in form reasonably acceptable to the
Corporation a written agreement of the proposed transferee to become a Party
and be bound by the terms hereof.
(f) Any purported transfer of Common Stock or Common Stock
Equivalents by a Party which is not permitted by the foregoing provisions of
this Section, or which is in violation of such provisions, shall be void and of
no force and effect whatsoever.
(g) Notwithstanding any provision to the contrary, the pledge
of Common Stock or Common Stock Equivalents to secure indebtedness or other
liabilities of the Corporation at the Corporation's request (including, without
limitation, the pledge pursuant to the pledge agreement contemplated by the
Loan Documents, as such term is defined in the Investment Agreement), and any
sale or disposition pursuant to the terms of any such pledge, shall not
constitute a transfer pursuant to Section 3.
3.2 Certain Events Not Deemed Transfers. In no event shall
any of the following constitute a transfer of shares or Common Stock
Equivalents for purposes of Section 3.1: an exchange, reclassification or
other conversion of shares into any cash, securities or other property pursuant
to (i) the terms thereof (including, without limitation, the conversion of the
Preferred Stock into Common Stock), (ii) a merger, consolidation or
recapitalization of the Corporation or any Subsidiary with, or (iii) a sale or
transfer by the Corporation or any Subsidiary of all or substantially all its
assets to, any person or entity.
3.3 Control of Bace by Tyler and Zoellner. Tyler and
Zoellner agree that so long as Bace owns any Common Stock Equivalents they will
maintain ownership and control of a majority of the equity interest and voting
power in Bace.
3.4 Pledge of Shares at the Request of the Corporation. If
requested by the Board of Directors and approved by Purchasers holding at
least a majority of the Fully Diluted Common Stock then held by the Purchasers,
the Corporation may require all Parties (excepting those exempted as provided
in the last sentence of this Section 3.4) to pledge the shares of Capital Stock
held by them (or a portion thereof pro rata among all such Parties) to secure
indebtedness and other liabilities of the Corporation or its Subsidiaries.
Each Party shall be obligated to execute and deliver such pledge agreements,
consents, financing statements or other certificates, instruments, agreements,
notices or other documents as the Board of Directors and such Purchasers may
deem necessary or advisable in connection therewith. In the event such a
pledge of shares of Capital Stock occurs and the pledgee forecloses upon a
pledge by a Party in a manner disproportionate to that of any other Party
(except for events in which such Party is in default of a covenant under its
pledge agreement other than through an act or omission of the Corporation or a
Subsidiary thereof), all Parties shall contribute portions of their remaining
-10-
<PAGE> 79
shares of Capital Stock in order to make such foreclosure proportionate among
all Parties; provided, however, that any proceeds obtained by such Party from
such a foreclosure shall be distributed among such Party and all other Parties
making such a contribution in the proportion to the shares of Capital Stock
held by them after such contribution. A Party may be exempted from the
obligation to pledge shares of Capital Stock or to contribute shares of Capital
Stock and proceeds with respect to any indebtedness or liabilities under this
Section 3.4 if such exemption is approved by (i) the holders of a majority of
the Fully Diluted Common Stock represented by Series A Preferred and Class A
Common Stock into which Series A Preferred has been converted and (ii) the
holders of a majority of the Fully Diluted Common Stock represented by Series B
Preferred and Class A Common Stock into which Series B Preferred has been
converted (the "Series B Majority Holders").
ARTICLE 4
TERMINATION
4.1 Termination. All provisions of this Agreement shall
terminate (a) in respect of all Parties, upon the consummation of a Qualified
Public Offering (provided, that (x) the obligations of the Parties to vote for
two (or three if the Board of Directors has seven members) designees of Bace to
the Board of Directors and three (or four if the Board of Directors had seven
members) designees of the Purchasers, pursuant to Section 2.1(a) (it being
understood that the size of the Board of Directors may be increased beyond
seven members in connection with a Qualified Public Offering and that the
Purchasers shall have the right to designate all such additional directors but
with such designees being subject to the approval of the Series B Majority
Holders) and (y) the requirement to make a Participation Offer as provided in
Section 3.1(c)(ii) except in the case of a transaction or transfer otherwise
exempt from Article 3 or a tender offer or similar offer or transaction made
available to all Parties hereto, shall all survive for a period of two years
from such a termination upon the consummation of a Qualified Public Offering
or, if earlier, the time this Agreement would otherwise terminate pursuant to
this Section 4.1); (b) in respect of any Party, when such Party (and its
Affiliates who acquired shares of Common Stock from such Party) no longer owns
any Common Stock or Common Stock Equivalents; (c) in respect of all Parties,
upon the written consent of Parties who then own 80% or more of the Fully
Diluted Common Stock held by all of the Parties (including either Tyler or
Zoellner if Bace remains a Party); and (d) in any event, upon the dissolution
of the Corporation.
-11-
<PAGE> 80
ARTICLE 5
MISCELLANEOUS
5.1 Amendment. Subject to the following sentence, this
Agreement may be altered or amended by the written consent of the Corporation
and Parties who then own 80% or more of the Fully Diluted Common Stock held by
all of the Parties (including at least one of Tyler, Zoellner or Bace if any
of them remains a Party owning Common Stock Equivalents subject to the terms of
this Agreement), and such alteration or amendment shall be binding upon all
Parties to this Agreement and all other persons. No alteration or amendment
that adversely affects the rights of a Party hereto shall be enforceable
against such Party until such Party has consented in writing to such alteration
or amendment; provided that any alteration or amendment made for the purpose of
adding an additional Party hereto shall not be deemed to adversely affect the
rights of any other Party hereto.
5.2 Equitable Relief. The Parties and the Corporation
recognize that the obligations imposed on them in this Agreement are special,
unique, and of extraordinary character, and that in the event of breach by any
party, damages will be an insufficient remedy; consequently, it is agreed that
the Parties hereto and the Corporation may have specific performance,
injunction, injunctive or other equitable relief (in addition to damages) as a
remedy for the enforcement hereof, without proving damages.
5.3 Assignment. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
Parties and the Corporation. No such assignment shall relieve the assignor
from any liability hereunder. No assignment hereof shall be effective until
the Party making an assignment hereof delivers to the Corporation an executed
counterpart of this Agreement by the transferee or an agreement in writing
executed by the transferee to be bound by the terms hereof to the same extent
as if such transferee was a Party hereto.
5.4 Shares Subject to this Agreement. All shares of Common
Stock or Common Stock Equivalents now owned or hereafter acquired by any of the
Parties shall be subject to the terms of this Agreement.
5.5 Legend. Certificates evidencing shares of Common Stock or
Common Stock Equivalents owned by the Parties shall bear a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD, UNLESS IT
HAS BEEN REGISTERED UNDER SUCH SECURITIES ACT OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS SECURITY IS
SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING RESTRICTIONS AND
OTHER TERMS AND CONDITIONS SET FORTH IN
-12-
<PAGE> 81
THE STOCKHOLDERS AGREEMENT, DATED AS OF MAY 15, 1996, AS IT MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM THE
CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES.
5.6 Notices. Any and all notices, designations, consents,
offers, acceptances or any other communications provided for herein shall be
given in writing by personal delivery overnight courier or telecopy, which
shall be addressed, or sent, to the respective addresses set forth on the
signature pages hereto or such other address as designated by any Party by like
notice from time to time.
5.7 Counterparts. This Agreement may be executed in two or
more counterparts and each counterpart shall be deemed to be an original and
which counterparts together shall constitute one and the same agreement of the
parties hereto.
5.8 Section Headings. Headings contained in this Agreement
are inserted only as a matter of convenience and in no way define, limit or
extend the scope or intent of this Agreement or any provisions hereof.
5.9 Governing Law. This Agreement shall be governed by the
laws of the State of Delaware, without giving effect to the conflicts of laws
principles thereof.
5.10 Entire Agreement. This Agreement contains the entities
understanding of the parties hereto respecting the subject matter hereof, and
supersedes all prior agreements, discussions and understandings.
5.11 Cumulative Rights. The rights of the Parties and the
Corporation under this Agreement are cumulative and in addition to all similar
and other rights of the parties under other agreements, including the
Investment Agreement.
5.12 Severability. Should any particular provision of this
Agreement be adjudicated to be invalid or unenforceable, such provision shall
be deemed deleted and the remainder of the Agreement, nevertheless, shall
remain unaffected and fully enforceable; further, to the extent any provision
herewith is deemed unenforceable by virtue of its scope but may be made
enforceable by limitation thereof, the parties hereto agree the same shall,
nevertheless, be enforceable to the fullest extent permissible.
5.13 No Waiver. No delay on the part of any party hereunder
in exercising any right, power or privilege under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude other or further exercise
thereof, or the exercise of any other right, power of privilege.
-13-
<PAGE> 82
5.14 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
5.15 Attorneys' Fees. In the event of any action or suit
based upon or arising out of any actual or alleged breach by any party of any
representation, warranty or agreement in this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and expenses of
such action or suit from the other party, in addition to any other relief
ordered by the court.
5.16 Action by Purchasers. Any action, approval or notice
that can be given by the Purchasers as a group pursuant to this Agreement shall
be deemed to be taken or made if so taken or made by Purchasers holding at
least a majority of the Fully Diluted Common Stock then held by the Purchasers.
-14-
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
RENTX INDUSTRIES, INC.
By: /s/ CRAIG J. ZOELLNER
--------------------------------
Craig J. Zoellner
Vice President
Address:
1522 Blake Street
Denver, Colorado 80202
Attention: Dirk M. Tyler
BACE INVESTMENTS, LLC
By: /s/ CRAIG J. ZOELLNER
--------------------------------
Craig J. Zoellner
Member
Address:
1522 Blake Street
Denver, Colorado 80202
Attention: Dirk M. Tyler
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services,
Inc., General Partner
By: /s/ THOMAS E. GALUHN
----------------------------
Thomas E. Galuhn
Vice President
Address:
350 North Clark Street
Chicago, Illinois 60610
Attention: Thomas E. Galuhn
<PAGE> 84
THE EDGEWATER PRIVATE EQUITY FUND
II, L.P.
By: Gordon Management, Inc.
General Partner
By: /s/ J. A. GORDON
-------------------------------
James A. Gordon
President
Address:
666 Grand Avenue
Suite 200
Des Moines, Iowa 50309
Attention: James A. Gordon
/s/ RICHARD M. TYLER
-------------------------------
Richard M. Tyler
Address:
1522 Blake Street
Denver, Colorado 80202
/s/ CRAIG J. ZOELLNER
-------------------------------
Craig J. Zoellner
Address:
1522 Blake Street
Denver, Colorado 80202
(Signature page to the RentX Industries, Inc.
Stockholders Agreement)
<PAGE> 85
EXHIBIT D-1
[SHERMAN & HOWARD L.L.C. LETTERHEAD]
Mesirow Capital Partners VI The Edgewater Private Equity Fund II, L.P.
350 North Clark Street 666 Grand Avenue, Suite 200
Chicago, Illinois 60610 Des Moines, Iowa 50309
Dear Ladies and Gentlemen:
We have served as special counsel to RentX Industries, Inc., a Delaware
corporation (the "Corporation"), BACE Investments, LLC, a Colorado limited
liability company ("BACE"), BACE Industries, LLC, a Colorado limited liability
company ("Industries"), Richard M. Tyler ("Tyler"), and Craig J. Zoellner
("Zoellner"), in connection with the transactions contemplated by the
Investment Agreement dated of even date herewith (the "Investment Agreement")
among the Corporation, Mesirow Capital Partners VI ("Mesirow"), The Edgewater
Private Equity Fund II, L.P. ("Edgewater") (Mesirow and Edgewater being
collectively referred to as the "Purchasers") and BACE. Capitalized terms used
but not elsewhere defined herein shall have the respective meanings ascribed to
such terms in the Investment Agreement.
In rendering this opinion we have examined copies certified by an
officer of the Corporation of the bylaws and corporate resolutions of the
Corporation, certificates of good standing for the Corporation from the
Secretaries of State of Delaware and Colorado, the Investment Agreement, the
Registration Rights Agreement, the Stockholders Agreement and such other
documents and records pertaining to our clients as in our judgment are
necessary or appropriate to enable us to render the opinions expressed below.
As to factual matters, we have relied upon the representations of the
Corporation and BACE contained in the Investment Agreement, the certificates
delivered at the First Closing by the Corporation pursuant to Sections 3.1(a),
(b) and (e) of the Investment Agreement, a certificate of officers of the
Corporation, certificates of the members of BACE and Industries, and
certificates of public officials, and have not made any independent review,
investigation or verification of the matters set forth therein. The Investment
Agreement, the Registration Rights Agreement, the Stockholders Agreement, the
Management Agreement and the other documents, instruments and agreements
executed and delivered by the Corporation are hereinafter referred to
collectively as the "Documents."
Our opinions are limited to matters governed by federal law, Colorado
law and the General Corporation Law of Delaware (collectively, the "Law"). We
note that the Documents (other than the Management Agreement) by their terms
are governed by the laws of Illinois. For purposes of this letter, we have
assumed that the Documents (other than the Management Agreement) are governed
by the internal laws of Colorado. We have not made or undertaken to make any
<PAGE> 86
SHERMAN & HOWARD L.L.C.
Mesirow Capital Partners VI
The Edgewater Private Equity Fund II, L.P.
Page 2
investigation to determine whether there is, and the extent of, any identity
between Colorado laws and the laws of any other state. We have also assumed
that the parties to the Documents other than the Corporation, BACE and
Industries are competent and have the legal capacity and authority to execute,
deliver, perform and otherwise be a party to the Documents. We have assumed
without contrary knowledge the genuineness of all signatures on documents
examined by us, the authenticity of all documents furnished to us as originals,
and the conformance to authentic originals in all documents furnished to us as
copies.
Whenever the phrase "to the best of our knowledge" appears in the
opinions set forth below, such phrase means the conscious awareness of facts or
other information by the attorneys in our firm who have been actively involved
in the transactions contemplated in the Documents.
Based upon the foregoing, but subject to the limitations set forth
below, we are of the opinion that:
1. The Corporation is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware, and the
Corporation is duly licensed or qualified to do business as a foreign
corporation and is in good standing with in Colorado. The Corporation has all
requisite corporate power and authority to own, lease and operate its property
and to carry on its business as now conducted by it and as anticipated to be
conducted by it after the First Closing Date.
2. BACE and Industries are each limited liability companies validly
existing under the laws of the State of Colorado. BACE and Industries each
have all requisite limited liability company power and authority to execute,
deliver and perform the Documents to which each of BACE and Industries,
respectively, are parties.
3. The Documents to which the Corporation, BACE, Industries, Tyler
and Zoellner, respectively, are parties (a) have been properly authorized,
executed and delivered by or on behalf of the Corporation, BACE and Industries,
as the case may be, and have been properly executed and delivered by Tyler and
Zoellner, (b) constitute the valid and binding obligations of the Corporation,
BACE, Industries, Tyler and Zoellner, respectively, and (c) are enforceable
against the Corporation, BACE, Industries, Tyler and Zoellner, respectively, in
accordance with their respective terms.
<PAGE> 87
SHERMAN & HOWARD L.L.C.
Mesirow Capital Partners VI
The Edgewater Private Equity Fund II, L.P.
Page 3
4. The Corporation has all requisite corporate power and authority
to execute, deliver and perform the Documents and to perform its obligations
thereunder and to issue, sell and deliver the Preferred Shares.
5. The Preferred Shares and the Underlying Common Shares have been
duly authorized and, when issued in accordance with the Investment Agreement
and, in the case of the Underlying Common Shares upon conversion of the
Preferred Shares, will be validly issued, fully paid and nonassessable. The
issuance, sale or delivery of the Preferred Shares and the Underlying Common
Shares are not subject to any preemptive right of stockholders of the
Corporation or to any right of first refusal or other right in favor of any
person or entity, except as set forth in the Stockholders Agreement.
6. At the time of the First Closing, the authorized capital stock of
the Corporation will consist of 233,900 shares of Class A Common Stock, 12,350
shares of Class B Common Stock, 15,000 shares of Preferred Stock and 200 shares
of Series B Preferred. At the time of the Closing, 5,020 shares of Preferred
Stock, 200 shares of Series B Preferred and 10 shares Class A Common Stock will
be validly issued and outstanding, fully paid and nonassessable. Immediately
following the First Closing, the stockholders of record and, to the best of our
knowledge, holders of subscriptions, warrants, options, convertible securities,
and other rights (contingent or other) created or issued by the Corporation to
purchase or otherwise acquire equity securities of the Corporation, and the
number of shares of stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each, are as set
forth in the Schedule II to the Investment Agreement or in the Stockholders
Agreement. The designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and in
accordance with Delaware General Corporation Law.
7. The execution and delivery by the Corporation, BACE and
Industries, respectively, of each of the Documents to which it is a party, the
performance of their respective obligations thereunder, including, with respect
to the Corporation, the issuance, sale and delivery of the Preferred Shares and
the Underlying Common Shares, will not: (a) conflict with, constitute an event
of default under, or result in a breach of or a violation of the provisions of
the charter or bylaws of the Corporation or the articles of organization of
BACE or Industries, (b) result in a violation of any applicable law, statute,
ordinance or regulation, or, to the best of our knowledge, any judgment, order,
writ, injunction, decree or rule of any court or other governmental agency or
authority or of any determination or award of any arbitrator applicable to the
Corporation, BACE or Industries, as the case may be, or (c) conflict with,
constitute an event of default under, or result in a breach of or a violation
of the provisions of any agreement listed on Schedule I hereto.
<PAGE> 88
SHERMAN & HOWARD L.L.C.
Mesirow Capital Partners VI
The Edgewater Private Equity Fund II, L.P.
Page 4
8. Subject to the accuracy of the representations and warranties of
BACE set forth in Section 7.8 of the Investment Agreement and of the Purchasers
set forth in Section 7.9 of the Investment Agreement, to the best of our
knowledge the Preferred Shares, the BACE Shares and the Class A Shares were
issued in compliance with all applicable Federal and state securities laws.
Subject to the accuracy of the representations and warranties of BACE set forth
in Section 7.8 of the Investment Agreement and of each Purchaser set forth in
Section 7.9 of the Investment Agreement, no registration or filing with, or
consent or approval of or other action by, any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by the Corporation of the Investment
Agreement, or the issuance, sale and delivery of the Preferred Shares and the
Underlying Common Shares.
9. The Corporation has all requisite corporate power and authority
to execute, deliver and perform the Zodiac Agreements (as defined in Schedule
I) and perform its obligations thereunder, such execution, delivery and
performance has been properly authorized by the Corporation, and the Zodiac
Agreements have been duly authorized, executed and delivered.
Our opinion in Paragraph 3 and the last sentence of Paragraph 6 are
subject to the following:
(i) enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally;
(ii) the enforcement of rights and remedies may be limited by
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(iii) we express no opinion as to the enforceability of any
provisions of the Documents with respect to any indemnification obligations of
the Corporation provided for in the Documents to the extent such obligations
arise from negligent or intentional acts of any Purchaser or BACE or to the
extent such obligations encompass claims against the Purchasers by the
Corporation; and
(iv) our opinion is subject to the possible unenforceability on
public policy grounds of agreements under the Registration Rights Agreement
providing for indemnification against liabilities under federal and state
securities laws.
<PAGE> 89
SHERMAN & HOWARD L.L.C.
Mesirow Capital Partners VI
The Edgewater Private Equity Fund II, L.P.
Page 5
In addition:
(i) we express no opinion as to any provisions of the
Documents under which a waiver of rights cannot arise from a course of dealing
among the parties or any provisions governing arbitration and related matters;
and
(ii) we express no opinion as to Sections 7.16 and 7.17 of the
Investment Agreement or as to the extent that the laws of any particular
jurisdiction apply to the Documents.
This letter is solely for your benefit and may not be furnished to or
relied upon by any other person without our prior written consent.
We confirm that, to the best of our knowledge, there is no outstanding
(a) action, suit, claim, proceeding or investigation pending or threatened in
writing against or affecting the Corporation, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (b) arbitration
proceeding relating to the Corporation, or (c) governmental inquiry pending or
threatened in writing against or affecting the Corporation (including without
limitation any inquiry as to the qualification of the Corporation to hold or
receive any license or permit) that would prevent the consummation of the
transactions contemplated by the Documents.
Very truly yours,
<PAGE> 90
SCHEDULE I
TO
OPINION OF FIRST CLOSING PURCHASERS
1. Credit Agreement dated May 15, 1996 among the Corporation, the Lenders
parties thereto and Harris Trust Savings Bank, individually and as agent
(the "Agent").
2. Revolving Credit Notes dated May 15, 1996 from the Corporation to each
of the Agent and LaSalle National Bank ("LaSalle") and the Term Notes
dated May 15, 1996 from the Corporation to each of the Agent and
LaSalle.
3. Security Agreement dated May 15, 1996 between the Corporation and the
Agent.
4. Pledge Agreements dated May 15, 1996 between the Corporation and each of
Mesirow, Edgewater and BACE.
5. Asset Purchase Agreement dated April 3, 1996, as amended by Amendment to
Asset Purchase Agreement dated April 29, 1996 and by letter agreement
dated May 13, 1996, among Zodiac Rentals, Inc., Zodiac Rentals III,
Inc., George A. Evans, Marilyn J. Evans, Maureen C. Davidson and Larry
W. Davidson, and the Assignment and Assumption Agreement, the Employment
Agreements, the Escrow Agreement and the Lease Agreements (each as
defined in, and delivered by the Corporation at the Closing under and
pursuant to such Asset Purchase Agreement) and the other agreements, if
any, delivered by the Corporation at such Closing, under and pursuant to
such Asset Purchase Agreement (collectively, the "Zodiac Agreements").
<PAGE> 91
EXHIBIT D-2
FINKE & ASSOCIATES, P.C.
ATTORNEYS AT LAW
1873 SOUTH BELLAIRE - SUITE 1401
DENVER, COLORADO 80222-4347
PHONE (303) 758-6500
FAX (303) 753-9352
To the Persons on the attached Schedule I
Ladies and Gentlemen:
We have acted as special counsel to Zodiac Rentals, Inc. ("Zodiac One"),
a Colorado corporation and Zodiac Rentals, Inc. III ("Zodiac Three"), a
Colorado corporation (together "the Sellers"); and George A. Evans, Marilyn J.
Evans, Maureen C. Davidson and Larry W. Davidson ("the Shareholders") in
connection with the Asset Purchase Agreement ("the Purchase Agreement") dated
as of April 3, 1996 among RentX Industries, Inc., a Delaware corporation ("the
Buyer"), the Sellers and the Shareholders and related documents with respect to
the acquisition by the Buyer of substantially all the assets of the Seller.
This opinion letter is delivered pursuant to Section 6.1(l) of the
Purchase Agreement. All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
In our capacity as counsel, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Purchase
Agreement, the other Seller Agreements, the other Shareholders Agreements, the
documents listed on Exhibit 3.1(l) to the Purchase Agreement and such other
documents, corporate records and instruments as we have deemed necessary and
appropriate for the purposes of this opinion. We have assumed the genuineness
of all signatures and the authenticity of all documents submitted to use as
originals and the conformity with authentic originals of all documents
submitted to us. In rendering the opinions and confirmations contained in this
letter, we have relied as to matters of fact solely upon representations made
in the Purchase Agreement, upon a certificate of an officer of the Seller and
certificates of the Shareholders delivered to us, and upon certificates of
public officials, and have not made any independent review, investigation or
verification of the matters set forth herein. However, we have no reason to
believe that any facts upon which we have relied are incorrect or incomplete.
Our opinions are limited to matters governed by the laws of the United
States of America and the State of Colorado.
Based on and subject to the foregoing and the qualifications and
limitations set forth elsewhere in this letter, we are of the opinion that:
<PAGE> 92
Page 2
To the Persons on attached Schedule A
1. Each of Zodiac One and Zodiac Three is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. Each of Zodiac One and Zodiac Three has all requisite power and
authority to own, lease, operate and sell its properties and to carry on its
business as it is now being conducted.
2. The authorized capital stock of Zodiac One consists of forty nine
thousand (49,000) shares of voting, common stock with no par value, of which
one thousand five hundred sixty seven and one-third (1,567 1/3) shares are
issued and outstanding. The authorized capital stock of Zodiac Three consists
of fifty thousand (50,000) shares of voting, common stock with no par value, of
which three hundred (300) shares are issued and outstanding. All of such
issued and outstanding shares are owned of record and, to the best of our
knowledge, beneficially by the Shareholders as set forth in Section 3.1(c) to
the Purchase Agreement.
3. The execution, delivery and performance by the Sellers of the
Purchase Agreement and the other Sellers Agreements to which it is a party
(collectively, "the Seller Agreements") have been duly authorized by all
necessary corporate action of the Seller. Each of the Seller Agreements
constitutes the legal, valid and binding obligation of, and is enforceable in
accordance with its terms against the Sellers. Each of the Purchase Agreement
and the other Shareholders Agreements to which a Shareholder is a party
(collectively, "the Shareholder Agreements") constitutes the legal, valid and
binding obligation of, and is enforceable in accordance with its terms against,
each Shareholder who is a party thereto.
4. The execution, delivery and performance by the Sellers of the
Seller Agreements, and by each Shareholder of the Shareholder Agreements to
which such Shareholder is a party, and the consummation of the transactions
contemplated thereby do not and will not (a) violate any legal requirement or
order to which the Sellers or any Shareholder, as the case may be, is subject
or any provision of the Articles of Incorporation or Bylaws of the Sellers or
(b) violate, with or without the giving of notice or the lapse of time or both,
or result in the breach or termination of any provision of, or constitute a
default under, or give any person the right to accelerate any obligation under,
or result in the creation of any encumbrance upon any of the properties, assets
or business of the Sellers or a Shareholder, as the case may be, pursuant to
any indenture, mortgage, deed of trust, lien, lease, license, agreement,
instrument or other arrangement to which the Sellers or any Shareholder, as the
case may be, is a party or by which the Sellers or any Shareholder, as the case
may be, or any of their respective assets and properties is bound or subject
which is known to us after diligent inquiry (including those identified in
Exhibit 3.1(l) to the Purchase Agreement). Except for notices given and
consents obtained by the Sellers and the Shareholders prior to the closing,
none of the Sellers nor the Shareholders need give any notice to, make any
filing with, or obtain authorization, consent or
<PAGE> 93
Page 3
To the Persons on attached Schedule A
approval of any governmental authority or other person in order for the parties
to consummate the transactions contemplated by the Purchase Agreement.
We confirm that we have no knowledge of any action, suit or proceeding
pending or threatened against the Sellers or any Shareholder before any
governmental authority or before any other person wherein an unfavorable order
would (a) prevent consummation of any of the transactions contemplated by the
Purchase Agreement, (b) cause any of the transactions contemplated by the
Purchase Agreement to be rescinded following consummation or (c) affect
adversely the right of the Buyer to own the acquired assets or conduct the
business, and we have no knowledge that any such order is in effect.
The enforceability of the Seller Agreements and the Shareholder
Agreements, as the case may be, may be subject to or limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium and other similar laws
relating to or affecting the rights of creditors generally, and is subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law. We express no opinion as to any provisions of the Seller
Agreements or the Shareholder Agreements under which a waiver of rights cannot
arise from a course of dealing among the parties.
This opinion is furnished solely for the benefit of the addressees and
may not be delivered to or relied upon by any other person without our prior
written consent.
Sincerely,
FINKE & ASSOCIATES, P.C.
/S/ RICHARD A. FINKE
Richard A. Finke
<PAGE> 94
SCHEDULE I
To
Opinion Letter of Finke & Associates, P.C.
Dated May 15, 1996
RentX Industries, Inc. Harris Trust and Savings Bank
1522 Blake Street 111 West Monroe Street
Denver, Colorado 80202 Chicago, Illinois 60603
LaSalle National Bank Mesirow Capital Partners VI
120 South LaSalle Street 350 North Clark Street
Chicago, Illinois 60603 Chicago, Illinois 60610
Edgewater Private Equity Fund II, L.P. BACE Investments, LLC
666 Grand Avenue, Suite 200 1522 Blake Street
Des Moines, Iowa 50309 Denver, Colorado 80202
<PAGE> 95
EXHIBIT E-1
[SHERMAN & HOWARD L.L.C. LETTERHEAD]
May 29, 1996
To the Persons on Attached Schedule I:
We have served as special counsel to RentX Industries, Inc., a Delaware
corporation (the "Corporation"), BACE Investments, LLC, a Colorado limited
liability company ("BACE"), BACE Industries, LLC, a Colorado limited liability
company ("Industries"), Richard M. Tyler ("Tyler"), and Craig J. Zoellner
("Zoellner"), in connection with the transactions contemplated by the
Investment Agreement dated as of May 15, 1996 (the "Investment Agreement")
among the Corporation, Mesirow Capital Partners VI ("Mesirow"), The Edgewater
Private Equity Fund II, L.P. ("Edgewater"), BACE and the other Purchasers from
time to time (Mesirow, Edgewater and such other Purchasers being collectively
referred to as the "Purchasers"). Capitalized terms used but not elsewhere
defined herein shall have the respective meanings ascribed to such terms in the
Investment Agreement.
In rendering this opinion we have examined copies certified by an
officer of the Corporation of the bylaws and corporate resolutions of the
Corporation, certificates of good standing for the Corporation from the
Secretaries of State of Delaware, Colorado and Washington the Investment
Agreement, the Registration Rights Agreement, the Stockholders Agreement and
such other documents and records pertaining to our clients as in our judgment
are necessary or appropriate to enable us to render the opinions expressed
below. As to factual matters, we have relied upon the representations of the
Corporation and BACE contained in the Investment Agreement, the certificates
delivered at the Second Closing by the Corporation pursuant to Sections 3.2(a),
(b) and (d) of the Investment Agreement, a certificate of officers of the
Corporation, certificates of the members of BACE and Industries, and
certificates of public officials, and have not made any independent review,
investigation or verification of the matters set forth therein. The Investment
Agreement, the Registration Rights Agreement, the Stockholders Agreement, the
Management Agreement and the other documents, instruments and agreements
executed and delivered by the Corporation pursuant to the Investment Agreement
at the First Closing or the Second Closing are hereinafter referred to
collectively as the "Documents."
Our opinions are limited to matters governed by federal law, Colorado
law and the General Corporation Law of Delaware (collectively, the "Law"). We
note that the Documents (other than the Management Agreement) by their terms
are governed by the laws of Illinois. For purposes of this letter, we have
assumed that the Documents (other than the Management Agreement) are governed
by the internal laws of Colorado. We have not made or undertaken to make any
investigation to determine whether there is, and the extent of, any identity
between Colorado laws
<PAGE> 96
SHERMAN & HOWARD L.L.C.
To the Persons on Attached Schedule I
May 29, 1996
Page 2
and the laws of any other state. We have also assumed that the parties to the
Documents other than the Corporation, BACE and Industries are competent and
have the legal capacity and authority to execute, deliver, perform and
otherwise be a party to the Documents. We have assumed without contrary
knowledge the genuineness of all signatures on documents examined by us, the
authenticity of all documents furnished to us as originals, and the conformance
to authentic originals in all documents furnished to us as copies.
Whenever the phrase "to the best of our knowledge" appears in the
opinions set forth below, such phrase means the conscious awareness of facts or
other information by the attorneys in our firm who have been actively involved
in the transactions contemplated in the Documents.
Based upon the foregoing, but subject to the limitations set forth
below, we are of the opinion that:
1. The Corporation is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware, and the
Corporation is duly licensed or qualified to do business as a foreign
corporation and is in good standing in Colorado and Washington. The
Corporation has all requisite corporate power and authority to own, lease and
operate its property and to carry on its business as now conducted by it and as
anticipated to be conducted by it after the Second Closing Date.
2. BACE and Industries are each limited liability companies validly
existing under the laws of the State of Colorado. BACE and Industries each
have all requisite limited liability company power and authority to execute,
deliver and perform the Documents to which each of BACE and Industries,
respectively, are parties.
3. The Documents to which the Corporation, BACE, Industries, Tyler
and Zoellner, respectively, are parties (a) have been properly authorized,
executed and delivered by or on behalf of the Corporation, BACE and Industries,
as the case may be, and have been properly executed and delivered by Tyler and
Zoellner, (b) constitute the valid and binding obligations of the Corporation,
BACE, Industries, Tyler and Zoellner, respectively, and (c) are enforceable
against the Corporation, BACE, Industries, Tyler and Zoellner, respectively, in
accordance with their respective terms.
4. The Corporation has all requisite corporate power and authority
to execute, deliver and perform the Documents, to perform its obligations
thereunder and to issue, sell and deliver the Preferred Shares issued on the
Second Closing Date.
<PAGE> 97
SHERMAN & HOWARD L.L.C.
To the Persons on Attached Schedule I
May 29, 1996
Page 3
5. The Preferred Shares issued on the Second Closing Date and the
Underlying Common Shares relating thereto have been duly authorized and, when
issued in accordance with the Investment Agreement and, in the case of such
Underlying Common Shares upon conversion of the Preferred Shares issued on the
Second Closing Date, will be validly issued, fully paid and nonassessable. The
issuance, sale or delivery of the Preferred Shares issued on the Second Closing
Date and the Underlying Common Shares relating thereto are not subject to any
preemptive right of stockholders of the Corporation or to any right of first
refusal or other right in favor of any person or entity, except as set forth in
the Stockholders Agreement.
6. At the time of the Second Closing, the authorized capital stock
of the Corporation will consist of 233,900 shares of Class A Common Stock,
12,350 shares of Class B Common Stock, 15,000 shares of Preferred Stock and 200
shares of Series B Preferred. At the time of the Second Closing, 6,907 shares
of Preferred Stock, 200 shares of Series B Preferred and 10 shares Class A
Common Stock will be validly issued and outstanding, fully paid and
nonassessable. Immediately following the Second Closing, the stockholders of
record and, to the best of our knowledge, holders of subscriptions, warrants,
options, convertible securities, and other rights (contingent or other) created
or issued by the Corporation to purchase or otherwise acquire equity securities
of the Corporation, and the number of shares of stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, are as set forth in the Schedule II to the Investment Agreement
or in the Stockholders Agreement. The designations, powers, preferences,
rights, qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with Delaware General Corporation Law.
7. The execution and delivery by the Corporation, BACE and
Industries, respectively, of each of the Documents to which it is a party, the
performance of their respective obligations thereunder, including, with respect
to the Corporation, the issuance, sale and delivery of the Preferred Shares
issued on the Second Closing Date and the Underlying Common Shares relating
thereto, will not: (a) conflict with, constitute an event of default under, or
result in a breach of or a violation of the provisions of the charter or bylaws
of the Corporation or the articles of organization of BACE or Industries, (b)
result in a violation of any applicable law, statute, ordinance or regulation,
or, to the best of our knowledge, any judgment, order, writ, injunction, decree
or rule of any court or other governmental agency or authority or of any
determination or award of any arbitrator applicable to the Corporation, BACE or
Industries, as the case may be, or (c) conflict with, constitute an event of
default under, or result in a breach of or a violation of the provisions of any
agreement listed on Schedule II hereto.
8. Subject to the accuracy of the representations and warranties of
BACE set forth in Section 7.8 of the Investment Agreement and of the Purchasers
in the Second Closing set
<PAGE> 98
SHERMAN & HOWARD L.L.C.
To the Persons on Attached Schedule I
May 29, 1996
Page 4
forth in Section 7.9 of the Investment Agreement, to the best of our knowledge
the Preferred Shares issued on the Second Closing Date were issued in
compliance with all applicable Federal and state securities laws. Subject to
the accuracy of the representations and warranties of BACE set forth in Section
7.8 of the Investment Agreement and of each Purchaser in the Second Closing set
forth in Section 7.9 of the Investment Agreement, no registration or filing
with, or consent or approval of or other action by, any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by the Corporation of the Investment
Agreement, or the issuance, sale and delivery of the Preferred Shares issued on
the Second Closing Date and the Underlying Common Shares relating thereto.
9. The Corporation has all requisite corporate power and authority
to execute, deliver and perform the A to Z Agreements (as defined in Schedule
II) and perform its obligations thereunder, such execution, delivery and
performance has been properly authorized by the Corporation, and the A to Z
Agreements have been duly authorized, executed and delivered.
Our opinion in Paragraph 3 and the last sentence of Paragraph 6 are
subject to the following:
(i) enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally;
(ii) the enforcement of rights and remedies may be limited by
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(iii) we express no opinion as to the enforceability of any
provisions of the Documents with respect to any indemnification obligations of
the Corporation provided for in the Documents to the extent such obligations
arise from negligent or intentional acts of any Purchaser or BACE or to the
extent such obligations encompass claims against the Purchasers by the
Corporation; and
(iv) our opinion is subject to the possible unenforceability on
public policy grounds of agreements under the Registration Rights Agreement
providing for indemnification against liabilities under federal and state
securities laws.
<PAGE> 99
SHERMAN & HOWARD L.L.C.
To the Persons on Attached Schedule I
May 29, 1996
Page 5
In addition:
(i) we express no opinion as to any provisions of the
Documents under which a waiver of rights cannot arise from a course of dealing
among the parties or any provisions governing arbitration and related matters;
and
(ii) we express no opinion as to Sections 7.16 and 7.17 of the
Investment Agreement or as to the extent that the laws of any particular
jurisdiction apply to the Documents.
This letter is solely for your benefit and may not be furnished to or
relied upon by any other person without our prior written consent.
We confirm that, to the best of our knowledge, there is no outstanding
(a) action, suit, claim, proceeding or investigation pending or threatened in
writing against or affecting the Corporation, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (b) arbitration
proceeding relating to the Corporation, or (c) governmental inquiry pending or
threatened in writing against or affecting the Corporation (including without
limitation any inquiry as to the qualification of the Corporation to hold or
receive any license or permit) that would prevent the consummation of the
transactions contemplated by the Documents.
Very truly yours,
<PAGE> 100
SCHEDULE I TO OPINION OF
SHERMAN & HOWARD L.L.C.
Mesirow Capital Partners VI
350 North Clark Street
Chicago, Illinois 60610
The Edgewater Private Equity Fund II, L.P.
666 Grand Avenue, Suite 200
Des Moines, Iowa 50309
Trustees of Grinnell College
P.O. Box 805
1103 Park Street
Grinnell, Iowa 50112
George A. Evans
8157 E. Hunters Hill Dr.
Englewood, Colorado 80112
Larry W. Davidson
9504 Southern Hills Cr.
Littleton, Colorado 80124
Charles D. Greenidge
26711 Chipmunk Drive
P.O. Box 2613
Evergreen, Colorado 80439
Gary J. Kulesza
8 Desert Willow Lane
Littleton, Colorado 80127
<PAGE> 101
SCHEDULE II
TO
OPINION OF SHERMAN & HOWARD L.L.C.
1. Credit Agreement dated May 15, 1996 among the Corporation, the Lenders
parties thereto and Harris Trust Savings Bank, individually and as agent
(the "Agent").
2. Revolving Credit Notes dated May 15, 1996 from the Corporation to each
of the Agent and LaSalle National Bank ("LaSalle") and the Term Notes
dated May 15, 1996 from the Corporation to each of the Agent and
LaSalle.
3. Security Agreement dated May 15, 1996 between the Corporation and the
Agent.
4. Pledge Agreements dated May 15, 1996, and Amendments to Pledge
Agreements dated May 29, 1996, between the Corporation and each of
Mesirow, Edgewater and BACE, and Pledge Agreements dated May 29, 1996
between the Corporation and each of Gary J. Kulesza, Charles P.
Greenidge and the Trustees of Grinnell College.
5. Asset Purchase Agreement dated April 3, 1996, as amended by Amendment to
Asset Purchase Agreement dated April 29, 1996 and by letter agreement
dated May 13, 1996, among Zodiac Rentals, Inc., Zodiac Rentals III,
Inc., George A. Evans, Marilyn J. Evans, Maureen C. Davidson and Larry
W. Davidson, and the Assignment and Assumption Agreement, the Employment
Agreements, the Escrow Agreement and the Lease Agreements (each as
defined in, and delivered by the Corporation at the Closing under and
pursuant to such Asset Purchase Agreement) and the other agreements, if
any, delivered by the Corporation at the Closing under and pursuant to
such Asset Purchase Agreement (collectively, the "Zodiac Agreements").
6. Stock Purchase Agreement dated May 29, 1996 among RentX Industries,
Inc., Milton L. Neumann and Alice E. Neumann, and Milt and Alice Neumann
Charitable Remainder Unitrust, Milt and Alice Neumann Charitable
Remainder Annuity Trust, Cheryl Kettrick Charitable Trust, Steve Neumann
Charitable Trust, Cheryl Kettrick Charitable Remainder Unitrust, Steve
Neumann Charitable Remainder Unitrust and Jody Depew Charitable
Remainder Unitrust, and the Employment Agreements, the Noncompetition
Agreement and the Premises Leases (each as defined in, and delivered by
the Corporation at the Closing under and pursuant to such Stock Purchase
Agreement) and the other agreements, if any, delivered by the
Corporation at the Closing under and pursuant to such Stock Purchase
Agreement (collectively, the "A to Z Agreements").
<PAGE> 102
EXHIBIT E-2
[PAINE, HAMBLEN, COFFIN, BROOKE & MILLER LLP LETTERHEAD]
To the Addressees Listed on Attached Schedule I
(Subject in the Case of the Equity Investors
to the Conditions stated Herein)
RE: Stock Purchase Agreement Dated as of May 29, 1996 Among RentX
Industries, Inc. and the Shareholders of A to Z Rentals and
Sales, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Milton L. Neumann and Alice E.
Neumann (the "Individual Shareholders") , the Milt and Alice Neumann Charitable
Remainder Unitrust, the Jody Depew Charitable Remainder Unitrust, the Cheryl
Kettrick Charitable Remainder Unitrust, the Steve Neumann Charitable Remainder
Unitrust, the Milt and Alice Neumann Charitable Remainder Annuity Trust, the
Cheryl Kettrick Charitable Trust, and the Steve Neumann Charitable Trust (the
"Trust Shareholders" and together with the Individual Shareholders, the
"Shareholders") , and Steven L. Neumann and Cheryl L. Kettrick (the "New
Employees") in connection with the Stock Purchase Agreement (the "Purchase
Agreement") dated as of May 29, 1996 among RentX Industries, Inc., a Delaware
corporation (the "Buyer"), and the Shareholders with respect to the acquisition
by the Buyer of all the outstanding shares of common stock of A to Z Rentals
and Sales, Inc. , a Washington corporation (the "Company") , the two related
Employment Agreements (as defined in the Purchase Agreement) between the Buyer
and the respective New Employees party thereto, the related Noncompetition
Agreement (as defined in the Purchase Agreement) between the Buyer and the
Shareholders, and the three related Shareholder Leases (as defined in the
Purchase Agreement) between the Buyer and the Individual Shareholders. We have
also acted as special counsel to the Company in connection
<PAGE> 103
Page - 2
with the related Assignment and Assumption Agreement (the "Douglass Lease
Assignment"), between the Buyer and the Company.
This opinion letter is delivered pursuant to Section 6.1(i) of the
Purchase Agreement. All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
In rendering this opinion, we have reviewed the following documents:
(1) The executed and acknowledged Purchase Agreement, including the
Exhibits thereto;
(2) The executed Employment Agreements;
(3) The executed Noncompetition Agreement;
(4) The executed and acknowledged Shareholder Leases;
(5) The executed and acknowledged Douglass Lease Assignment;
(6) The executed stock powers (the "Stock Powers") of the
Shareholders to the Buyer;
(7) The executed and acknowledged Deed and Bill of Sale (the "Bill of
Sale") of the Individual Shareholders to the Company;
(8) The Articles of Incorporation of the Company, certified by the
Secretary of the State of Washington as of May 23, 1996 with further
certifications by the Secretary of State of Washington as of such date to the
effect that the Company is incorporated as a Washington corporation and is duly
authorized to transact business in the State of Washington;
(9) The Bylaws of the Company, certified by the Secretary/Treasurer
and the President of the Company in the Officers' Certificate referred to
below;
(10) The certificate of the Secretary/Treasurer and the President of
the Company attached to Exhibit 3.1(b) to the Purchase Agreement (the
"Officers' Certificate");
(11) The other agreements of the Company listed in item 5(a) through
(d) , (g) , and (j) through (l) of Exhibit 3.1 (1) to the Purchase Agreement
(the "Other Company Agreements");
(12) The certificate of the Shareholders attached hereto (the
"Shareholders' Certificate");
(13) The other agreements of the Individual Shareholders, if any, and
of the Trust Shareholders listed in item 6 of the Shareholder Certificate (the
"Other Shareholder Agreements"), which
<PAGE> 104
Page - 3
include the Trust Agreements dated as of May 15, 1996 between Milton L. Neumann
and Alice E. Neumann as grantors and Bruce B. Butler as trustee (and in certain
cases a second trustee) with respect to the establishment of the Trust
Shareholders (the "Trust Agreements") and the Stock Transfer Agreements dated
as of May 15, 1996 between Milton L. Neumann and Alice E. Neumann as
transferors and the Trust Shareholders as transferees with respect to the prior
transfer to the Trust Shareholders of the shares of common stock of the Company
being sold by the Trust Shareholders pursuant to the Purchase Agreement (the
"Trust Transfer Agreements");
(14) The certificate of the New Employees attached hereto (the "New
Employees' Certificate");
(15) The other agreements of the New Employees, if any, listed in item
2 of the New Employees' Certificate (the "Other New Employee Agreements");
(16) The additional certificates and documents delivered by the
Shareholders, the New Employees and/or the Company as closing documents
pursuant to the Purchase Agreement and the other Agreements, including the
stock certificates representing the Shares, the additional certificates of the
Shareholders, the New Employees and/or officers of the Company (the "Additional
Certificates"), the Notice of Non-Routine Transaction listed in Exhibit 3.1(a)
to the Purchase Agreement, and the consents of third parties listed in items II
and IV of Exhibit 3.1(e) to the Purchase Agreement in connection with the Other
Company Agreements, the Other Shareholder Agreements and/or the Other New
Employee Agreements; and
(17) Such other limited records and documents of the Company as have
been provided to us.
The documents listed as (1) through (7) above are sometimes referred to
herein as the "Agreements". Any reference herein to any Agreement refers only
to such Agreement and the Exhibits thereto which do not consist of a form of
any other Agreements.
In rendering this opinion letter, we have assumed i) the genuineness of
all signatures, ii) the authenticity of all documents submitted to us as
originals, iii) the conformity with authentic originals of all documents
submitted to us as copies, iv) the legal capacity of the Individual
Shareholders and the New Employees, V) the power and authority of, and the due
authorization, execution and delivery of the Agreements by, each party thereto
other than the Shareholders, the New Employees, and the Company, and vi) each
of the Agreements constitutes the legal, valid and binding obligation of, and
is enforceable in accordance with its terms against, each party thereto other
than the Shareholders, the New Employees, and the Company. We have also
relied, as to matters of fact material to the opinions and the confirmations
set forth below, solely upon representations of the
<PAGE> 105
Page - 4
Shareholders, the New Employees and/or the Company made in the Agreements, upon
the certificates of the Shareholders, the New Employees, the officers of the
Company, and the public officials listed above, upon the other records and
documents listed above, and upon other oral or written statements or assurances
of the Shareholders, the New Employees and officers of the Company; but we have
not made any independent review, investigation or verification thereof. We
have no actual knowledge, however, that such matters of fact upon which we have
relied are incorrect.
In regard to such reliance, we note the following. We have acted as
special counsel to the Shareholders, the New Employees and the Company in
connection with the Agreements as described above and we have acted as special
counsel to the Individual Shareholders in connection with the Trust Agreements
and the Trust Transfer Agreements; but we have not represented the
Shareholders, the New Employees or the Company in connection with any other
matters. In addition, we have not reviewed any agreements, certificates,
documents or records of or relating to any such parties other than the ones
listed above. Without limiting the generality of the foregoing, we have not
represented any of such parties in connection with any environmental matters or
any pending or threatened actions, suits or proceedings against any of such
parties or their respective properties, nor have we reviewed any of the
documents or records of any such parties relating thereto other than those
listed in and attached to the Exhibits to the Purchase Agreement.
The opinions set forth below are specifically limited to the internal
laws of the State of Washington (excluding conflicts of laws). In addition, we
express no opinion as to any categories of law set forth in Section 19 of the
Accord referred to below, which Section is hereby incorporated herein by
reference, except as to Section 19(p) with respect to the Washington State law
opinions set forth in paragraphs 4, 5 and 6 below as to the Employment
Agreements. We note that the Purchase Agreement by its terms is governed by
the laws of the State of Colorado. In rendering the opinions set forth below,
we have assumed, notwithstanding such terms, that the Purchase Agreement is
governed by the internal laws of the State of Washington (excluding conflicts
of laws) . We express no opinion, however, as to the extent that the laws of
any jurisdiction are applicable to the subject matter hereof, or as to whether
a Washington court would enforce the contractual choice of Colorado law.
Based upon and subject to the foregoing and the further qualifications
and limitations set forth below, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Washington. The Company
has all requisite corporate power and authority under its Articles of
Incorporation and Bylaws and the
<PAGE> 106
Page - 5
Washington Business Corporation Act (RCW Title 23B) to own, lease, operate and
sell its properties and to carry on a rentals and sales business.
2. The authorized capital stock of the Company consists of 100,000
shares of common stock, $1.00 par value, of which 61,000 shares (the "Shares")
are issued and outstanding. All of the Shares have been duly authorized and
validly issued, are fully paid and nonassessable and are owned of record and,
to the best of our knowledge, owned beneficially by the Shareholders as set
forth in Section 2.2(a) of the Purchase Agreement (it being specifically
understood that, in the case of the Shares owned by the Trust Shareholders,
such Shares are further beneficially owned by the beneficiaries thereof). To
the best of our knowledge, i) there are no outstanding rights of first refusal,
buy-sell agreements, options, warrants, calls, purchase rights or similar
agreements with commitments to sell or transfer, or similar agreements with
restrictions on selling or transferring, any of the Shares, to which any
Shareholder is a party or by which any of them is bound (except the Purchase
Agreement being executed concurrently herewith), and ii) there are no
outstanding options, warrants, calls, purchase rights or similar agreements
with commitments to issue or sell any capital stock of the Company or other
securities of the Company convertible into or exchangeable for its capital
stock, to which the Company is a party or by which it may be bound.
3. Each Trust Shareholder has all requisite trust power and
authority under its Trust Agreement and the Washington Trust Act (RCW Title 11)
to execute, deliver and perform the Purchase Agreement. The execution,
delivery and performance by each Trust Shareholder of the Purchase Agreement,
the Noncompetition Agreement, its respective Stock Power and its respective
Additional Certificates have been duly authorized by all necessary trust action
on part of such Trust Shareholder. The Company has all requisite corporate
power and authority under its Articles of Incorporation and Bylaws and the
Washington Business Corporation Act to execute, deliver and perform the
Douglass Lease Assignment. The execution, delivery and performance by the
Company of the Douglass Lease Assignment have been duly authorized by all
necessary corporate action on the part of the Company.
4. Each of the Purchase Agreement and the Stock Powers constitutes
the legal, valid and binding obligation of, and is enforceable in accordance
with its terms against, each Shareholder party thereto. Each of the Employment
Agreements constitutes the legal, valid and binding obligation of, and is
enforceable in accordance with its terms against, each New Employee party
thereto. Each of the Shareholder Leases and the Bill of Sale constitutes the
legal, valid and binding obligation of, and is enforceable in accordance with
its terms against, each Individual Shareholder. The Douglass Lease Assignment
constitutes the legal, valid and binding obligation of, and is enforceable in
accordance with its terms against, the Company.
<PAGE> 107
Page - 6
5. The execution, delivery and performance of the Agreements by each
Shareholder, each New Employee and the Company, to the extent each is a party
thereto, and the consummation by each such party (as applicable) of the sale of
the Shares under the Purchase Agreement, of the noncompetition arrangements
under the Noncompetition Agreement, of the employment and noncompetition
provisions under the Employment Agreements, of the lease of the Premises under
the Shareholder Leases, and of the assignment of the Douglass Lease under the
Douglass Lease Assignment (collectively, the "Transactions") , will not i) to
the best of our knowledge, violate any Legal Requirement or Order to which such
Shareholder or New Employee is subject, or ii) with or without the giving of
notice or the lapse of time or both, (a) result in the breach of or constitute
a default under, (b) give any Person the right to accelerate any obligation
under, or (c) result in the creation of any Encumbrance upon any properties of
such Shareholder or New Employee under, any Other Shareholder Agreement or
Other New Employee Agreement to which such Shareholder or New Employee is a
party. Except for the notice referred to in Exhibit 3.1(a) of the Purchase
Agreement which has been given, no notice to, filing with or authorization,
consent or approval of i) to the best of our knowledge, (a) any Governmental
Authority under any Legal Requirement to which such Shareholder or New Employee
is subject or (b) any Person under any Order to which such Shareholder or New
Employee is subject or ii) any Person under any Other Shareholder Agreement or
Other New Employee Agreement to which such Shareholder or New Employee is a
party, is required to be given, made or obtained by such Shareholder or New
Employee for the due execution, delivery or performance by such party of the
Agreements or the consummation by such party of the Transactions.
6. The execution, delivery and performance of the Agreements by each
Shareholder, each New Employee and the Company, to the extent each is a party
thereto, and the consummation by each such party of the Transactions, do not
and will not i) to the best of our knowledge, violate any Legal Requirement or
order to which the Company is subject or any provision of the Articles of
Incorporation or Bylaws of the Company or ii) with or without the giving of
notice or the lapse of time or both, (a) result in the breach of or constitute
a default under, (b) give any Person the right to accelerate any obligation
under, or (c) result in the creation of any Encumbrance upon any properties of
the Company, under any Other Company Agreement (except the Other Company
Agreement listed in item 5(a) of Exhibit 3.1(1) (the "Douglass Lease") which is
separately addressed below). Except for the notices and consents referred to
in item II(a) of Exhibit 3.1(e) which have been given and obtained, no notice
to, filing with or authorization, consent or approval of i) to the best of our
knowledge, (a) any Governmental Authority under any Legal Requirement to which
the Company is subject or (b) any Person under any Order to which the Company
is subject, or ii) any Person under any Other Company Agreement (except the
Douglass Lease which is separately addressed below), is required to be given,
made or
<PAGE> 108
Page - 7
obtained by the Company for the due execution, delivery and performance by any
Shareholders, any New Employees or the Company of the Agreements or the
consummation by such parties of the Transactions. In addition, the Company has
obtained the consent of the landlord required under the Douglass Lease to the
sale of the Shares under the Purchase Agreement.
7. To the best of our knowledge, the consummation of the merger of
the Company into the Buyer immediately following the Closing will not, with or
without the giving of notice or the lapse of time or both, i) result in the
breach of or constitute a default under, ii) give any Person the right to
accelerate any obligation under, or iii) result in the creation of any
Encumbrance upon any properties of the surviving company under, any Other
Company Agreement (except the Douglass Lease which is separately addressed
below) . Except for the notices and consents referred to in item IV(a) of
Exhibit 3.1(e) which have been given and obtained, no notice to or consent of
any Person under any Other Company Agreement (except the Douglass Lease which
is separately addressed below) is required to be given or obtained by the
Company for the consummation of such merger. In addition, the Company has
obtained the consent of the landlord required under the Douglass Lease to the
assignment of the Douglass Lease under the. Douglass Lease Assignment.
We confirm that we have no actual knowledge of any action, suit or
proceeding against the Company, any Shareholder or any New Employee before any
Governmental Authority or before any other Person (i) which is pending or
threatened and which purports to challenge the legality or validity of the
Agreements or the consummation of the transactions referred to above or (ii)
except as disclosed by the Shareholders in the Exhibits to the Purchase
Agreement, which is pending and, if adversely determined against such parties,
would have an adverse effect on the Company's properties or business or on the
ownership of the Shares. We further confirm that we have no actual knowledge
of any order to which any Shareholder, any New Employee or the Company or their
respective properties is subject.
The opinions and confirmations expressed above are subject to the
following additional qualifications.
It is specifically understood that, under the scope of the opinion
expressed in paragraph 4 above, such opinion is specifically limited to the
enforceability of the Agreements specified therein against the Shareholders,
the New Employees and the Company as specified therein, and we express no
opinion therein as to the enforceability of such Agreements against the Buyer.
The opinion expressed in paragraph 4 above is subject to the Bankruptcy and
Insolvency Exception set forth in Section 12 of the Legal Opinion Accord (the
"Accord") of the ABA Section of Business Law (1991), the Equitable Principles
Limitation set forth in Section 13 of the Accord, and the Other Common
Qualifications set forth in
<PAGE> 109
Page - 8
Section 14 of the Accord, which Sections are hereby incorporated herein by
reference. In addition, we express no opinion in paragraph 4 above as to (a)
the noncompetition provisions of the Employment Agreements (it being
specifically understood that, under the scope of such opinion in paragraph 4
above, we also express no opinion therein as to the Noncompetition Agreement),
(b) the arbitration provisions of the Agreements, (c) the offset provisions of
the Agreements to the extent that any exercise of offset rights does not
involve a mutuality of parties and matured, liquidated obligations, (d) the
effect of judicial decisions which may permit the introduction of extrinsic
evidence to modify or interpret the terms of written contracts, or (e) the
effect on the provisions of Section 9.14 of the Purchase Agreement of agency
laws which permit a principal to terminate or modify an agency relationship or
which would otherwise cause or result in a termination or modification of an
agency relationship.
We further express no opinion as to (x) the Individual Shareholders'
rights in or title to the properties subject to the Shareholder Leases or the
Bill of Sale, the Company's rights in or title to the leasehold subject to the
Douglass Lease Assignment, or any Encumbrances thereon (it being specifically
understood that, under the scope of the opinions expressed above, we also
express no opinion as to i) the Shareholders' rights in or title to the Shares
or any Encumbrances thereon, except as specifically set forth in paragraph 2
above, or ii) the Company's rights in or title to any of its other properties
or any Encumbrances thereon) or (y) except as to general form, the adequacy,
sufficiency or accuracy of the legal description of the real property contained
in the Shareholder Leases or the Douglass Lease Assignment. We have further
assumed that the description of the personal property contained in the
Shareholder Leases, the Douglass Lease Assignment and the Bill of Sale is
sufficient to enable its identification by a subsequent purchaser, mortgagee or
transferee of any interest therein.
We further expressly disclaim any knowledge or expertise regarding, and
express no opinion or confirmation (except for the limited pending litigation
confirmation set forth above) as to, the existence of or liability for any
hazardous waste or toxic substance, including without limitation any discharge,
dispersal, release or escape of smoke, smudge, vapors, soot, fumes, acids,
alkalies, toxic chemicals, liquids or gases, waste materials or other
irritants, contaminants or pollutants into or upon land, the atmosphere or any
water course or body of water. We have made no investigation or examination of
any of the real or personal property of the Company or the Shareholders to
determine, and we are not qualified to determine, whether or not such liability
or substance may exist.
This opinion letter is for the information of the addressees hereof and
their counsel and is not to be filed with any Governmental Authority or
delivered or revealed to any other Person without our prior written consent.
Other than the addressees hereof
<PAGE> 110
Page - 9
and their counsel, no Person (including without limitation (i) any stockholders
of the Buyer except as specifically provided in the next sentence below, (ii)
any Persons that may be successor Lenders to, or new Lenders in addition to,
the Lenders to the Buyer listed as addressees hereof, and (iii) any Persons
that may purchase a participation interest in the rights and obligations of
such Lenders listed as addressees hereof) is entitled to rely upon this opinion
letter or the opinions or confirmations expressed herein. Each Equity Investor
listed as an addressee hereof is included as an addressee hereof subject to,
and only if, as represented by the Buyer and its counsel such Equity Investor
meets both of the following conditions: (a) such Equity Investor is an
"accredited investor" as defined in Rule 501(a) promulgated under the
Securities Act of 1933, as amended (the "Securities Act") and (b) such Equity
Investor is a sophisticated investor as described in Rule 506(b) (2) (ii)
promulgated under the Securities Act; otherwise, this opinion letter is not
addressed to such Equity Investor and is not to be delivered or revealed to, or
relied upon by, such Equity Investor. This opinion letter is given as of the
date hereof and imposes no obligation upon us to update this opinion letter.
We specifically disclaim any undertaking or obligations to advise the
addressees or their counsel or any other Person of any facts or circumstances
that may hereafter be brought to our attention or any change in any laws that
may hereafter occur which may alter or affect the opinions or confirmations
expressed herein.
Very truly yours,
PAINE, HAMBLEN, COFFIN,
BROOKE & MILLER LLP
/s/ PAINE-HAMBLEN
<PAGE> 111
Page - 10
Schedule I to Opinion of
Paine, Hamblen, Coffin, Brooke & Miller LLP
Dated May 29, 1996
Buyer
RentX Industries, Inc.
1522 Blake Street
Denver, CO 80202
Equity Investors
Mesirow Capital Partners VI
350 North Clark Street
Chicago, Illinois 60610
The Edgewater Private Equity Fund II, L.P.
666 Grand Avenue, Suite 200
Des Moines, Iowa 50309
George A. Evans
8157 E Hunters Hill Dr.
Englewood, CO 80112
Larry W. Davidson
9504 Southern Hills Cr.
Littleton, CO 80124
Charles D. Greenidge
26711 Chipmunk Drive
P.O. Box 2613
Evergreen, Colorado 80439
Gary J. Kulesza
8 Desert Willow Lane
Littleton, Colorado 80127
BACE Investments, LLC
1522 Blake Street
Denver, Colorado 80202
Trustees of Grinnell College
P. O. Box 805
1103 Park Street
Grinnell, Iowa 50112
<PAGE> 112
Lenders
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
<PAGE> 113
CERTIFICATE OF SHAREHOLDERS
This certificate is delivered to Paine, Hamblen, Coffin Brooke & Miller
LLP in connection with the legal opinion of such firm rendered pursuant to the
stock Purchase Agreement dated as of May 29, 1996 (the "Stock Purchase
Agreement") among RentX Industries, Inc., a Delaware corporation ("RentX"), and
the undersigned shareholders ("Shareholders") of A to Z Rentals and Sales,
Inc., a Washington corporation (the "Company"), and may be relied upon by such
firm in connection with such legal opinion. Capitalized terms used herein but
not otherwise defined herein .shall have the meaning set forth in the stock
Purchase Agreement. The Shareholders designated in the signature lines hereof
as Individual Shareholders are sometimes referred to herein as "Individual
Shareholders" and the Shareholders designated in the signature lines hereof as
Trust Shareholders are sometimes referred to herein as "Trust Shareholders".
Each undersigned Shareholder hereby certifies that:
1. Such Shareholder beneficially owns the respective Shares of the
Company as set forth in Section 2.2 (a) of the Stock Purchase Agreement (it
being specifically understood that, in the case of the Shares owned by the
Trust Shareholders, such Shares are further beneficially owned by the
beneficiaries thereof).
2. Such Shareholder has not pledged, encumbered, hypothecated,
assigned or transferred any of such Shares or any interest therein.
3. There are no outstanding rights of first refusal, buy-sell
agreements, options, warrants, calls, purchase rights or similar agreements
with commitments to sell or transfer, or similar agreements with restrictions
on selling or transferring any of the Shares, to which such Shareholder is a
party or by which such Shareholder is bound.
4. In the case of each Trust Shareholder, the Trustees thereof
listed in the signature lines below are the only Trustees of such Trust
Shareholder.
5. Such Shareholder and its properties are not subject to or bound
by any Order, including any agreed order or consent decree.
6. (a) In the case of each Trust Shareholder, such Trust
Shareholder is not a party to, and such Trust Shareholder and its properties
are not subject to or bound by, any indenture, mortgage, deed of trust, lien,
license, agreement, instrument or arrangement, other than as set forth below:
(i) Its respective Trust Agreement dated as of May 15, 1996
between Milton L. Neumann and Alice E. Neumann as
1
<PAGE> 114
grantors and Bruce B. Butler as Trustee (and in certain cases a
second Trustee as listed in the signature lines below) with
respect to the establishment of such Trust Shareholder; and
(ii) Its respective Stock Transfer Agreement dated as of May
15, 1996 between Milton L. Neumann and Alice E. Neumann as
transferors and such Trust Shareholder as transferee with respect
to the prior transfer to such Trust Shareholder of the Shares
being sold by such Trust Shareholder pursuant to the Stock
Purchase Agreement.
(b) In the case of each Individual Shareholder, such Shareholder
is not a party to, and such Individual Shareholder and his or her properties
are not subject to or bound by, any indenture, mortgage, deed of trust, lien,
license, agreement, instrument or arrangement relating in any way to (i) the
Shares being sold by such Individual Shareholder under the Stock Purchase
Agreement, (ii) requiring such Individuals Shareholders to engage in
employment, consulting, ownership, officer, directors or other relationships or
arrangements of any kind of the type prohibited under the non-competition
provisions of the Noncompetition Agreement or otherwise restricting such
Individual Shareholder from complying with such non-competition provisions, or,
(iii) the Premises being leased under the Shareholder Leases, other than as set
forth below:
None.
7. There is no action, suit or proceedings against the Company or such
Shareholder before any Governmental Authority (i) which is pending or
threatened and which purports to challenge the legality or validity of the
Stock Purchase Agreement, the Employment Agreements, the Noncompetition
Agreement or the Shareholder Leases or the consummation of the transactions
contemplated thereby or (ii), except as disclosed by the Shareholders in the
Exhibits to the Stock Purchase Agreement, which is pending and which involves
any other matters.
8. Such Shareholder otherwise confirms that (i) its representations
and warranties in the Stock Purchase Agreement, the Noncompetition Agreement,
the Shareholder Leases and any related agreements are correct and complete and
(ii) the certification of the officers of the Company in the related
Certificate of Secretary/Treasurer and President are correct and complete.
2
<PAGE> 115
IN WITNESS WHEREOF, the undersigned Shareholders have unto duly executed
and delivered this Certificate as of May 1996.
INDIVIDUAL SHAREHOLDERS
/s/ Milton L. Neumann
-----------------------------------------
Milton L. Neumann
/s/ Alice E. Neumann
-----------------------------------------
Alice E. Neumann
TRUST SHAREHOLDERS:
MILT AND ALICE NEUMANN
CHARITABLE REMAINDER UNITRUST
By: /s/ Bruce B. Butler
--------------------------------------
Name: Bruce B. Butler
Title: Trustee
NEUMANN CHARITABLE REMAINDER
ANNUITY TRUST
By: /s/ Bruce B. Butler
--------------------------------------
Name: Bruce B. Butler
Title: Trustee
CHERYL KETTRICK CHARITABLE TRUST
By: /s/ Bruce B. Butler
--------------------------------------
Bruce B. Butler
Title: Co-Trustee
By: /s/ Cheryl Kettrick
--------------------------------------
Cheryl Kettrick
Title: Co-Trustee
3
<PAGE> 116
STEVE NEUMANN CHARITABLE TRUST
By: /s/ Bruce B. Butler
--------------------------------------
Bruce B. Butler
Title: Co-Trustee
By: /s/ Steven Neumann
--------------------------------------
Steven Neumann
Title: Co-Trustee
CHERYL KETTRICK CHARITABLE
REMAINDER UNITRUST
By: /s/ Bruce B. Butler
--------------------------------------
Bruce B. Butler
Title: Co-Trustee
By: /s/ Cheryl Kettrick
--------------------------------------
Cheryl Kettrick
Title: Co-Trustee
STEVE NEUMANN CHARITABLE
REMAINDER UNITRUST
By: /s/ Bruce B. Butler
--------------------------------------
Bruce B. Butler
Title: Co-Trustee
By: /s/ Steven Neumann
--------------------------------------
Steven Neumann
Title: Co-Trustee
4
<PAGE> 117
JODY DEPEW CHARITABLE
REMAINDER UNITRUST
By: /s/ Bruce B. Butler
--------------------------------------
Bruce B. Butler
Title: Co-Trustee
By: /s/ Jody Depew
--------------------------------------
Jody Depew
Title: Co-Trustee
5
<PAGE> 118
CERTIFICATE OF NEW EMPLOYEES
This Certificate is delivered to Painey Hamblen, Coffin, Brooke & Miller
LLP in connection with the legal opinion of such firm rendered pursuant to the
Stock Purchase Agreement dated as of May 29, 1996 (the "Stock Purchase
Agreement") among RentX Industries, Inc., a Delaware corporation ("RentX"), and
the shareholders ("Shareholders") of A to Z Rentals and Sales, Inc., a
Washington corporation (the "Company"), and may be relied upon by such firm in
connection with such legal opinion. Capitalized terms used herein but not
otherwise defined herein shall have the meaning set forth in the Stock Purchase
Agreement. Each undersigned New Employee hereby certifies that:
1. Such New Employee and his or her properties are not subject to or
bound by any Order, including any agreed order or consent decree.
2. Such New Employee is not a party to, and such New Employee and
his or her properties are not subject to or bound by, any indenture, mortgage,
deed of trust, lien, license, agreement, instrument or arrangement (i)
restricting his or her employment in any way, (ii) requiring him or her to
engage in employment, consulting, ownership, officer, director or other
relationships or arrangements of any kind of the type prohibited under the
noncompetition provisions of the Employment Agreements, or (iii) otherwise
restricting him or her from complying with the employment and non-competition
provisions of the Employment Agreement other than as set forth below:
None.
3. There is no action, suit or proceedings against such New Employee
before any Governmental Authority (i) which is pending or threatened and which
purports to challenge the legality or validity of the Stock Purchase Agreement,
the Employment Agreements, the Noncompetition Agreement or the Shareholder
Leases or the consummation of the transactions contemplated thereby or (ii)
which is pending and which involves any other matters.
4. Such New Employee otherwise confirms that his or her
representations and warranties contained in the Stock Purchase Agreement, the
Employment Agreement and any related agreements are correct and complete.
1
<PAGE> 119
IN WITNESS WHEREOF, the undersigned New Employees have unto duly executed
and delivered this Certificate as of May ___, 1996.
/s/ Steve Neumann
-----------------------------------------
Steve Neumann
/s/ Cheryl Kettrick
-----------------------------------------
Cheryl Kettrick
2
<PAGE> 120
EXHIBIT F
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made effective as of May
1, 1996, regardless of its date of execution, between BACE Industries, LLC, a
Colorado limited liability company ("BI"), and RentX Industries, Inc., a
Delaware corporation (the "Company").
RECITALS
The Company was formed to acquire, own and operate various rental
businesses previously acquired and other assets which it may acquire in the
future. BI and the Company have agreed that BI's business expertise will be
valuable to the Company in managing its business, and that such expertise is
important to the Company's success. BI and the Company desire to set forth
their understanding pursuant to which BI has agreed to provide certain
management services to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
I. DEFINITIONS
For purposes of this Agreement, the following terms shall be defined as
follows:
1.1 Adjusted Income means the consolidated net income of the
Company for any fiscal year, as reflected on the audited financial statements
of the Company for such fiscal year, increased by (i) non-recurring or
extraordinary expenses, including, without limitation, for acquisitions,
mergers, financings (including, without limitation, public debt or stock
offerings), casualty losses (net of insurance proceeds) and facility moves,
(ii) taxes, (iii) amortization (other than amortization relating to debt), (iv)
expenses in excess of the fair market value of services actually rendered paid
by the Company to selling shareholders of entities acquired by, or whose assets
are acquired by, the Company in the future, (v) all payments by the Company to
BI for Fixed Management Fees or expense reimbursements, (vi) in the first 12
months after the date of this Agreement only, all compensation expense for the
Chief Executive Officer and Chief Financial Officer/Executive Vice President of
the Company and (vii) losses on dispositions of assets outside of the ordinary
course of business, and reduced by (x) non-recurring or extraordinary income
(including, without limitation, such income arising from the items specified in
clause (i) above) and (y) gains on dispositions of assets outside of the
ordinary course of business.
1.2 Affiliate means a person or entity which controls, is
controlled by, or is under common control with another person or entity.
<PAGE> 121
1.3 Fixed Management Fee means an annual amount based on the
Company's sales run rate determined per the following table (subject to annual
adjustment as provided below):
<TABLE>
<CAPTION>
Sales Fixed
Run Rate Management Fee
-------------- --------------
<S> <C>
Less than $15 million $150,000
15 Million 175,000
20 Million 200,000
50 Million 250,000
75 Million 300,000
</TABLE>
The Company's sales run rate means the Company's sales for the 12-month period
ending with the month preceding the month for which a payment of Fixed
Management Fee is being calculated. For that purpose, the Company's sales
shall be deemed to include the sales of all entities acquired, or whose assets
are acquired, by the Company prior to the date of acquisition (excluding any
sales relating to portions of such entities or their assets which are not so
acquired), even though the Company was not in existence or did not own the
acquired entity when those sales occurred. If the Company opens a new start-up
store, for purposes of computing the Company's sales run rate as of the end of
any month during the first 12 months after the opening of the new store, the
new store shall be deemed to have had sales during the 12-month period ending
with that month equal to 80% of the cumulative cost of all rental equipment
acquired by, transferred to or utilized by the new store as of the last day of
that month, notwithstanding the level of actual sales. For purposes of
computing the Company's sales run rate as of the end of the 13th through the
23rd month after the opening of the new store, the new store shall be deemed to
have had sales during each of the first 12 months after opening equal to 80% of
the cumulative cost of all rental equipment acquired by, transferred to or
utilized by the new store as of the last day of the 12th month after opening,
divided by 12, notwithstanding the actual level of sales. Sales for the 13th
and each subsequent month shall be actual sales of the new store in such month.
The month in which a new store is opened shall be treated as a full month after
opening.
In January 1997, the annual amounts of the Fixed Management Fee
reflected in the foregoing table should be increased by a proportion equal to
the proportionate increase in the Index released in January 1997 over the Index
released in January 1996. In January of each succeeding year during the term
of this Agreement, the annual amounts of the Fixed Management Fee established
in January of the preceding year shall be increased by a proportion equal to
the proportionate increase in the Index released in January of that year over
the Index released in January of the preceding year. If the Index shall have
decreased, the Fixed Management Fee shall not decrease.
-2-
<PAGE> 122
1.4 Variable Fee means 50% of the amount by which the Adjusted
Income for any fiscal year exceeds the Minimum Hurdle for that fiscal year;
provided, however, that the Variable Fee for any fiscal year shall not exceed
the amount of the Fixed Management Fee paid for that fiscal year.
1.5 Index means the Consumer Price Index - All Urban
Consumers, All Items for the Denver-Boulder metropolitan area, as released from
time to time.
1.6 Minimum Hurdle for each fiscal year means 25% of the
average equity capital that has been invested in the Company during that fiscal
year. For example, if $5,000,000 had been invested in the Company prior to the
beginning of a particular fiscal year and an additional $2,000,000 was invested
half-way through that year, the average equity capital for the year would be
$5,000,000 + ($2,000,000 / 2) = $6,000,000 and the Minimum Hurdle would be
$1,500,000. For that purpose, the first fiscal year of the Company shall be
deemed to include the 12-month period ending with the last day of such fiscal
year, even though the Company was not in existence throughout that period.
II. MANAGEMENT SERVICES
BI shall provide management level consulting services concerning
business planning, acquisitions, financing and other management matters to the
Company consistent with policies established by the Company's Board of
Directors (the "Board"), and shall report to the Board. BI and its partners,
employees and agents who provide services to the Company pursuant to this
Agreement shall be independent contractors as to the Company, and not its
employees. As independent contractors, neither BI nor its partners, agents or
employees shall, unless otherwise expressly granted by the Company's Board of
Directors, have the right or authority to execute documents in the name of the
Company or to otherwise bind the Company; provided, however, that nothing
contained in this Article II shall limit or diminish any rights or powers which
any such partners, employees or agents may have as directors or officers of the
Company.
III. COMPENSATION
3.1 Compensation. BI shall be entitled to receive from the Company on
the first day of each calendar month a payment of the Fixed Management Fee
equal to 1/12th of the annual amount thereof then in effect based on the
Company's sales run rate for the 12-month period ending with the preceding
month. Within 90 days after the end of each fiscal year, BI shall be entitled
to receive the Variable Fee, if any, for that fiscal year. If the Company does
not have aggregate debt financing and debt financing commitments totaling $35
million on or before May 1, 1997, the structure and amounts of BI's
compensation hereunder will be renegotiated to the mutual satisfaction of the
Board of Directors of the Company and BI. The Company's obligation to make
payment of the Variable Fee to BI shall be suspended during any period during
which there exists an Event of
-3-
<PAGE> 123
Default pursuant to Section 6.1(a) or (b) of the Investment Agreement dated as
of May 15, 1996 between the Company and the investors named therein, as amended
from time to time (the "Investment Agreement"), or a failure by the Company,
following demand given pursuant to Section 6.1 of the Investment Agreement, to
redeem the preferred stock of the Company; provided, however, that the
Company's obligation with respect to such compensation shall accrue during such
suspension and be payable immediately upon termination of such suspension.
3.2 Benefits and Expense Reimbursement. The Company shall reimburse
BI and its members and employees who perform services for or on behalf of the
Company hereunder for all reasonable out-of-pocket costs incurred by them,
including out-of-pocket costs incurred prior to the date hereof. The Company
shall provide health, medical, dental, disability and other similar insurance
benefits for up to four members or employees of BI who are providing services
for the Company hereunder on the same basis as provided to Company officers.
IV. TERM
4.1 Term. Unless previously terminated by mutual agreement of the
parties or unless terminated by the Company for cause pursuant to Section 4.2,
this Agreement shall continue until the earliest to occur of the following
events: (i) if Richard M. Tyler ("Tyler") and Craig J. Zoellner ("Zoellner"),
or their respective Affiliates, spouses, children and trusts, do not own a
number of shares of the Company's stock equal to at least one-third of the
number of shares owned by BACE Investments, LLC ("Investments") as of the date
hereof; (ii) the Company sells all or substantially all of its assets on a
consolidated basis in any single transaction or series of related transactions
for cash to a person or entity that is not an Affiliate; (iii) the Company is
acquired for cash by a person or entity that is not an Affiliate of BI,
including without limitation, through the purchase for cash of all or
substantially all of the Company's outstanding stock or through a cash merger
or consolidation; or (iv) the Company files, or there is filed against the
Company, a proceeding under Chapter 11 of the Federal Bankruptcy Code.
4.2 Termination for Cause. The Company may terminate this Agreement
for cause if (i) BI or any member, employee or authorized agent of BI commits
gross negligence in the performance of BI's duties hereunder, (ii) BI or any
member, employee or authorized agent of BI willfully engages in any improper
activity which is contrary to the best interests of the Company, (iii) BI or
any member, employee or authorized agent of BI willfully violates or disregards
written instructions from the Board with respect to BI's duties hereunder, (iv)
BI or any member, employee or authorized agent of BI engages in any activity
which has a material adverse effect upon the Company or its business, (v) if BI
commits a material breach of a material provision of this Agreement, or (vi) if
Tyler and Zoellner both cease to be members in, or otherwise own equity in, BI.
BI shall be given 10 days' notice of any action which the Company deems to be
cause for termination hereunder and BI shall be terminated only if BI fails to
cure such action or offense within such 10-day period or repeats or continues
the action or offense after such notice. If the action or offense was
-4-
<PAGE> 124
taken or committed by an employee or authorized agent of BI without BI's
express authorization or actual prior knowledge, solely for the purpose of
determining the Company's right to terminate this Agreement under this Section
4.2, BI shall be deemed to have cured the action or offense if it replaces the
employee or agent within the 10-day period.
V. NONCOMPETITION
BI expressly covenants and agrees that, during the term of this
Agreement and for one year thereafter, neither BI nor any member of BI will,
directly or indirectly, as an officer, agent, principal, employee, consultant,
or otherwise, engage in any activity which, at that time, competes to a
material extent with the Company. Nothing herein will preclude BI or any
member from acquiring or holding securities representing less than 5% of the
outstanding securities of any class of equity security registered under the
Securities Exchange Act of 1934, as amended, or from engaging in any Non-RentX
Activities (as defined in the Stockholders Agreement dated as of May 15, 1996,
as amended from time to time, among the Company and the other parties named
therein) unless the consent of Investments, Tyler, Zoellner or at least one
director designated by Investments pursuant to such Stockholders Agreement, so
long as Investments is permitted to make such designation, has been given in
connection with the determination by the Company to engage in such activities.
VI. CONFIDENTIALITY AND NON-DISCLOSURE
BI acknowledges that information, observations and data obtained by BI
and its partners and other personnel during the term of this Agreement
concerning the business or affairs of the Company (the "Confidential
Information") are the property of the Company. BI will not disclose to any
person or use for its own account any Confidential Information without the
written consent of the Board. Nothing herein shall prevent the disclosure of
Confidential Information (i) which becomes generally known to and available for
use by the public other than as a result of a disclosure by BI, (ii) with
respect to which BI's duty of confidentiality is waived by the Company, (iii)
if required by applicable law, regulation or order of any governmental agency
or court of competent jurisdiction, (iv) which was known to the public when
received by BI or (v) which is lawfully obtained by BI from other sources. BI
agrees that upon termination of this Agreement, it will deliver to the Company
all memoranda, notes, plans, records, reports and other documents containing
Confidential Information, and all copies thereof, that BI may then possess or
have under its control. The obligations set forth in this Article VI shall
continue for a period of two years following the termination of this Agreement.
VII. GENERAL PROVISIONS
7.1 Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the parties hereto and their
respective permitted successors and assigns. BI may not assign any of its
rights or obligations hereunder, except to an Affiliate.
-5-
<PAGE> 125
7.2 Notices. All notices hereunder shall be in writing and shall be
deemed to have been duly given when delivered in person, upon confirmation of
receipt if given by telecopier, or three days after being deposited in the
United States mail, certified mail, return receipt requested, postage prepaid,
as follows:
To the Company:
RentX Industries, Inc.
1522 Blake Street
Denver, Colorado 80202
Attn: Gary Kulesza
Telecopier: (303) 620-9016
To BI:
BACE Industries, LLC
1522 Blake Street
Denver, CO 80202
Attn: Richard M. Tyler
Telecopier: (303) 620-9016
or to such other address as either party shall have specified by notice in
writing to the other party.
7.3 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or any other
jurisdiction, but this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
7.4 Complete Agreement. This Agreement embodies the complete
Agreement and understanding between the parties and supersedes and preempts any
prior understandings, agreements or representations by or between the parties,
written or oral, which relate to the subject matter hereof.
7.5 CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF COLORADO.
7.6 Remedies. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of the
-6-
<PAGE> 126
provisions of this Agreement and to exercise all other rights in its favor at
law or in equity. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of Articles V
and VI of this Agreement and that any party may in its sole discretion apply
for specific performance and injunctive relief in order to enforce or prevent
any violations of the provisions of Article V or VI.
7.7 Amendments and Waivers. This Agreement may be amended only
pursuant to a duly authorized written agreement signed by all of the parties
hereto. No waiver of rights hereunder shall be effective unless such waiver is
set forth in writing signed by the party whose rights are being waived.
7.8 Arbitration. Any disputes arising under this Agreement,
including, without limitation, those involving claims for specific performance
or injunctive relief, shall be submitted to binding arbitration under the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be conducted in Denver, Colorado, before a single arbitrator
selected by BI and the Company, or, if they are unable to agree on an
arbitrator, before a panel of three arbitrators, one selected by BI, one
selected by the Company and the third selected by the two arbitrators. Failing
the selection of any required arbitrator, the selection shall be made by the
American Arbitration Association. The award of the arbitrators shall be final
and binding and judgment on the award may be entered by any court of competent
jurisdiction. This submission and agreement to arbitrate shall be specifically
enforceable.
7.9 Attorneys' Fees. The prevailing party or parties in any
arbitration or in any action to enforce or interpret this Agreement shall be
entitled to all reasonable out-of-pocket costs and expenses, including fees of
the arbitrators and reasonable attorneys' fees, incurred in connection
therewith.
-7-
<PAGE> 127
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RENTX INDUSTRIES, INC.
By: /s/ Craig J. Zoellner
------------------------------------------------
Its Vice President
---------------------------------------------
Date: May 15 , 1996
-------------------------------
BACE INDUSTRIES, LLC
By: /s/ Craig J. Zoellner
------------------------------------------------
Craig J. Zoellner, Member
Date: May 15 , 1996
---------------------------------
By: /s/ Richard M. Tyler
------------------------------------------------
Richard M. Tyler, Member
Date: May 15 , 1996
----------------------------------
-8-
<PAGE> 128
[SCHEDULES NOT PROVIDED]
<PAGE> 129
AMENDMENT NO. 1
TO
INVESTMENT AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 1 to the Investment Agreement (this
"Amendment"), dated as of August 2, 1996, is by and among RentX Industries,
Inc. ("RentX"), Mesirow Capital Partners VI ("Mesirow"), The Edgewater Private
Equity Fund II, L.P. ("Edgewater"), BACE Investments, LLC ("Bace") and Trustees
of Grinnell College ("Grinnell").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into
that certain Investment Agreement, dated as of May 15, 1996 (the "Investment
Agreement");
WHEREAS, Grinnell, in addition to certain other persons,
became a party to the Investment Agreement on May 29, 1996;
WHEREAS, the parties desire to enter into this Amendment in
order to amend certain provisions of the Investment Agreement; and
WHEREAS, the Investment Agreement may be amended by the
consent of the parties hereto;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. DEFINITIONS. Unless stated otherwise, capitalized
terms used in this Amendment shall have the meanings specified in the
Investment Agreement.
2. AMENDMENT TO SECTION 4.3.
Section 4.3 of the Investment Agreement is hereby amended to
read in its entirety as follows:
"Section 4.3. Inspection Rights. With respect to any person
who holds 10% or more of the Preferred Shares (treating for
this purpose (i) any Common Shares into which Preferred Shares
have been converted as if they have not been converted and
(ii) any commitments to purchase Preferred Shares at the
Additional Closings as outstanding Preferred Shares) (any such
holder being
<PAGE> 130
referred to as a "Substantial Purchaser"), the Corporation
will permit an authorized representative designated by such
person to visit and inspect the properties of the Corporation
or any of its subsidiaries, including its and their books (and
to make extracts therefrom) and to discuss its and their
affairs, finances and accounts with its and their officers,
personnel and auditors, all at such reasonable times and as
often as such person may reasonably request, all upon
reasonable notice to the Chairman of the Board of Directors of
the Corporation."
3. AMENDMENT TO SECTION 5.7.
Section 5.7 of the Investment Agreement is hereby amended to
read in its entirety as follows:
"Section 5.7. Directors' and Observers' Expenses. (a) The
Corporation shall reimburse each of its directors for the
reasonable out-of-pocket expenses incurred by such director in
attending meetings of the Board of Directors or any committee
thereof and for otherwise fulfilling his or her fiduciary
obligations as a director of the Corporation.
(b) The Corporation shall reimburse each of the other
persons (up to two such persons) selected by the Majority
Holders pursuant to Section 5.14 to attend meetings of the
Board of Directors of the Corporation and any subsidiary
thereof, and any committee of any of the foregoing, for the
reasonable out-of-pocket expenses incurred by such person in
attending any such meetings."
4. GOVERNING LAW. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Illinois
without regard to its conflicts of law doctrine.
5. COUNTERPARTS. This Amendment may be executed in
several counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
- 2 -
<PAGE> 131
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
-----------------------------------
Name: Richard M. Tyler
-----------------------------
Title: President
----------------------------
BACE INVESTMENTS, LLC
By: /s/ CRAIG J. ZOELLNER
-----------------------------------
Name: Craig J. Zoellner
-----------------------------
Title: Member
----------------------------
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.,
General Partner
By: /s/ THOMAS E. GALUHN
-----------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE
EQUITY FUND II, L.P.
By: Gordon Management, Inc.
General Partner
By: /s/ JAMES A GORDON
-----------------------------------
James A. Gordon
President
(Signature page to Amendment No. 1 to
Investment Agreement)
- 3 -
<PAGE> 132
TRUSTEES OF GRINNELL COLLEGE
By:/s/ DAVID S. CLAY
------------------------------------
David S. Clay
Vice President for Business
and Treasurer
(Signature page to Amendment No. 1 to
Investment Agreement)
- 4 -
<PAGE> 133
AMENDMENT NO. 2
TO
INVESTMENT AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 2 to Investment Agreement (this
"Amendment"), dated as of December 19, 1996, is by and among RentX Industries,
Inc. ("RentX"), Mesirow Capital Partners VI ("Mesirow"), The Edgewater Private
Equity Fund II, L.P. ("Edgewater"), BACE Investments, LLC ("Bace"), Trustees of
Grinnell College ("Grinnell") and Inroads Capital Partners, L.P. ("Inroads").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into
that certain Investment Agreement, dated as of May 15, 1996 (the "Investment
Agreement");
WHEREAS, Grinnell, in addition to certain other persons,
became a party to the Investment Agreement on May 29, 1996;
WHEREAS, Inroads became a party to the Investment Agreement on
August 2, 1996;
WHEREAS, the parties desire to enter into this Amendment in
order to amend certain provisions of the Investment Agreement; and
WHEREAS, the Investment Agreement may be amended by the
consent of the parties hereto;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. DEFINITIONS. Unless stated otherwise, capitalized
terms used in this Amendment shall have the meanings specified in the
Investment Agreement.
1
<PAGE> 134
2. AMENDMENT TO SECTION 1.1.
Section 1.1 of the Investment Agreement is hereby amended to
read in its entirety as follows:
"Section 1.1. Sales of Preferred Shares. Subject to the terms and
conditions herein set forth and in reliance upon the representations
and warranties of the Corporation set forth herein or in certificates
delivered pursuant hereto, the Corporation agrees to issue, sell and
deliver to each Purchaser, free and clear of any liens, claims,
charges and encumbrances whatsoever, except as set forth in the
Registration Rights Agreement and the Stockholders Agreement (in each
case as defined below), the provisions of this Section 1.1 and any
pledge required under the Loan Documents (as defined below), and each
Purchaser agrees, severally and not jointly, to purchase from the
Corporation (i) at the First Closing (as defined below), for $1,000
per share, the respective numbers of Preferred Shares so specified on
Schedule II, (ii) at the Second Closing (as defined below), for $1,000
per share, the respective numbers of Preferred Shares so specified on
Schedule II and (iii) at each Additional Closing (as defined below)
for $1,000 per share, the respective numbers of Preferred Shares in
accordance with Schedule II (it being understood that Mesirow and
Edgewater expect that some other person or persons they determine will
purchase all or a portion of the Preferred Shares to be purchased at
the Second Closing and a portion of the Preferred Shares to be
purchased at any Additional Closing and that each such person shall,
upon such determination by Mesirow and Edgewater and the execution by
such person of counterparts of this Agreement, the Registration Rights
Agreement and the Stockholders Agreement shall become a Purchaser
hereunder and Schedule II will be appropriately modified to reflect
such new Purchaser and the changes in the numbers of Preferred Shares
being purchased by the affected Purchasers); provided that the
purchases by Mesirow and Edgewater, taken together, shall account for
more than 50% of the Preferred Shares purchased pursuant to this
Agreement; provided further that the purchase of Preferred Stock by
any person (other than Mesirow, Edgewater, Grinnell or Inroads) shall
require the prior written approval of the Majority Holders. Bace
agrees that, not later than the First Closing, it will purchase the
Bace Shares. Mesirow, Edgewater, Grinnell and Inroads agree,
severally and not jointly, to purchase from the Corporation, in the
aggregate, 15,000 Preferred Shares in accordance with Schedule II."
2
<PAGE> 135
3. AMENDMENT TO SECTION 2.4.
The first sentence of Section 2.4 of the Investment Agreement
is hereby amended to read as follows:
"The authorized capital stock of the Corporation consists of 253,150
shares of Class A Common Stock, 12,350 shares of nonvoting Class B
Common Stock, $.01 par value ("Class B Common Stock") and 16,250
shares of Preferred Stock and 200 shares of Series B Preferred."
4. GOVERNING LAW. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Illinois
without regard to its conflicts of law doctrine.
5. COUNTERPARTS. This Amendment may be executed in
several counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
------------------------------------
Name: Richard M. Tyler
-------------------------------
Title: Vice President
------------------------------
BACE INVESTMENTS, LLC
By:/s/ RICHARD M. TYLER
------------------------------------
Name: Richard M. Tyler
-------------------------------
Title: Managing Member
------------------------------
3
<PAGE> 136
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.,
General Partner
By:/s/ THOMAS E. GALUHN
-------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE
EQUITY FUND II, L.P.
By: Gordon Management, Inc. General
Partner
By:/s/ JAMES A. GORDON
-------------------------------
James A. Gordon
President
TRUSTEES OF GRINNELL COLLEGE
By:/s/ DAVID S. CLAY
-------------------------------
David S. Clay
Vice President for Business
and Treasurer
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partner, L.P.,
General Partner
By:/s/ MARGARET E. FISHER
-------------------------------
Margaret E. Fisher
General Partner
(Signature page to Amendment No. 2 to
Investment Agreement)
4
<PAGE> 137
AMENDMENT NO. 3
TO
INVESTMENT AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 3 to Investment Agreement (this
"Amendment"), effective as of March 11, 1997, is by and among RentX Industries,
Inc. ("RentX"), Mesirow Capital Partners VI ("Mesirow"), The Edgewater Private
Equity Fund II, L.P. ("Edgewater"), BACE Investments, LLC ("Bace"), Trustees of
Grinnell College ("Grinnell") and Inroads Capital Partners, L.P. ("Inroads").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into
that certain Investment Agreement, dated as of May 15, 1996 (the "Investment
Agreement");
WHEREAS, Grinnell, in addition to certain other persons,
became a party to the Investment Agreement on May 29, 1996;
WHEREAS, Inroads became a party to the Investment Agreement on
August 2, 1996;
WHEREAS, the parties desire to enter into this Amendment in
order to amend certain provisions of the Investment Agreement; and
WHEREAS, the Investment Agreement may be amended by the
consent of the parties hereto;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. DEFINITIONS. Unless stated otherwise, capitalized
terms used in this Amendment shall have the meanings specified in the
Investment Agreement.
- 1 -
<PAGE> 138
2. AMENDMENT TO SECTION 1.1.
Section 1.1 of the Investment Agreement is hereby amended to
read in its entirety as follows:
"Section 1.1. Sales of Preferred Shares. Subject to the terms and
conditions herein set forth and in reliance upon the representations
and warranties of the Corporation set forth herein or in certificates
delivered pursuant hereto, the Corporation agrees to issue, sell and
deliver to each Purchaser, free and clear of any liens, claims,
charges and encumbrances whatsoever, except as set forth in the
Registration Rights Agreement and the Stockholders Agreement (in each
case as defined below), the provisions of this Section 1.1 and any
pledge required under the Loan Documents (as defined below), and each
Purchaser agrees, severally and not jointly, to purchase from the
Corporation (i) at the First Closing (as defined below), for $1,000
per share, the respective numbers of Preferred Shares so specified on
Schedule II, (ii) at the Second Closing (as defined below), for $1,000
per share, the respective numbers of Preferred Shares so specified on
Schedule II and (iii) at each Additional Closing (as defined below)
for $1,000 per share, the respective numbers of Preferred Shares in
accordance with Schedule II (it being understood that Mesirow and
Edgewater expect that some other person or persons they determine will
purchase all or a portion of the Preferred Shares to be purchased at
the Second Closing and a portion of the Preferred Shares to be
purchased at any Additional Closing and that each such person shall,
upon such determination by Mesirow and Edgewater and the execution by
such person of counterparts of this Agreement, the Registration Rights
Agreement and the Stockholders Agreement shall become a Purchaser
hereunder and Schedule II will be appropriately modified to reflect
such new Purchaser and the changes in the numbers of Preferred Shares
being purchased by the affected Purchasers); provided that the
purchases by Mesirow, Edgewater and Grinnell, taken together, shall
account for more than 50% of the Preferred Shares purchased pursuant
to this Agreement; provided further that the purchase of Preferred
Stock by any person (other than Mesirow, Edgewater, Grinnell or
Inroads) shall require the prior written approval of the Majority
Holders. Bace agrees that, not later than the First Closing, it will
purchase the Bace Shares. Mesirow, Edgewater, Grinnell and Inroads
agree, severally and not jointly, to purchase from the Corporation, in
the aggregate, 15,000 Preferred Shares in accordance with Schedule
II."
- 2 -
<PAGE> 139
3. AMENDMENT TO SECTION 2.4.
Section 2.4 of the Investment Agreement is hereby amended to
read in its entirety as follows:
"Section 2.4. Authorized Capital Stock. The authorized capital stock
of the Corporation consists of 5,061,538 shares of Class A Common
Stock, 192,308 shares of nonvoting Class B Common Stock, $.01 par
value ("Class B Common Stock") and 16,250 shares of Preferred Stock
and 200 shares of Series B Preferred. At the time of the First
Closing, 5,020 shares of Preferred Stock, 200 shares of Series B
Preferred, 10 shares of Class A Common Stock and no shares of Class B
Common Stock of the Corporation will be validly issued and
outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. The stockholders of record and
holders of subscriptions, warrants, options, convertible securities,
and other rights (contingent or other) to purchase or otherwise
acquire equity securities of the Corporation, and the number of shares
of capital stock and the number of such subscriptions, warrants,
options (expressed in terms of numbers of shares subject thereto or as
a percentage of shares to be outstanding on a fully diluted basis
giving effect to the conversion of all Preferred Stock and the Bace
Shares), convertible securities, and other such rights held by each,
are as set forth in the attached Schedule II, except that the
foregoing information with respect to the Series B preferred may be
disclosed in the aggregate in Schedule II (provided that, upon the
request of the majority holders, the corporation shall provide the
majority holders detailed information regarding the Series B preferred
on a Series B preferred per holder basis). The designations, powers,
preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the
Corporation are as set forth in the Charter, and all such
designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable and in accordance
with all applicable laws. Except as set forth in the attached
Schedule II, (i) no person owns of record or is known to the
Corporation to own beneficially any share of capital stock, (ii) no
subscription, warrant, option, convertible security, or other right
(contingent or other) to purchase or otherwise acquire equity
securities of the Corporation is authorized or outstanding and (iii)
there is no commitment by the Corporation to issue shares,
subscriptions, warrants, options, convertible securities, or other
such rights or to distribute to holders of any of its equity
securities any evidence of indebtedness or asset, except that the
foregoing information with respect to the Series B preferred may be
disclosed in the aggregate in
- 3 -
<PAGE> 140
Schedule II (provided that, upon the request of the majority holders,
the Corporation shall provide the majority holders detailed
information regarding the Series B preferred on a Series B preferred
per holder basis). Except as provided for in the Charter or as set
forth in the attached Schedule II, the Corporation has no obligation
(contingent or other) to purchase, redeem or otherwise acquire any of
its equity securities or any interest therein or to pay any dividend
or make any other distribution in respect thereof. There are no
voting trusts or agreements, stockholders' agreements, pledge
agreements, buy-sell agreements, rights of first refusal, preemptive
rights or proxies relating to any securities of the Corporation or any
of its subsidiaries (whether or not any of them is a party thereto),
except for this Agreement, the Stockholders Agreement, the pledge
agreements in favor of Harris Trust and Savings Bank ("HTSB"), as
agent for itself and the other lenders, to secure the Loans required
under the Loan Documents, and as set forth on Schedule II with respect
to certain shares of the Series B preferred. All of the outstanding
securities of the Corporation have been issued in compliance with all
applicable Federal and state securities laws."
4. GOVERNING LAW. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Illinois
without regard to its conflicts of law doctrine.
5. COUNTERPARTS. This Amendment may be executed in
several counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
- 4 -
<PAGE> 141
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
-----------------------------------
Name: Richard M. Tyler
-----------------------------
Title: Vice President
----------------------------
BACE INVESTMENTS, LLC
By: /s/ RICHARD M. TYLER
-----------------------------------
Name: Richard M. Tyler
-----------------------------
Title: Vice President
----------------------------
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.,
General Partner
By: /s/ THOMAS E. GALUHN
-----------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE
EQUITY FUND II, L.P.
By: Gordon Management, Inc.
General Partner
By: /s/ JAMES A GORDON
-----------------------------------
James A. Gordon
President
TRUSTEES OF GRINNELL COLLEGE
By:/s/ DAVID S. CLAY
------------------------------------
David S. Clay
Vice President for Business
and Treasurer
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partners,
L.P., General Partner
By: /s/ MARGARET E. FISHER
--------------------------------
Margaret E. Fisher
General Partner
(Signature page to Amendment No. 1 to Investment Agreement)
<PAGE> 142
SCHEDULE II TO
INVESTMENT AGREEMENT
<TABLE>
<S> <C>
HOLDER OF CLASS A COMMON STOCK
AT FIRST CLOSING
BACE 1,000 shares of Class A Common Stock
PURCHASERS OF PREFERRED SHARES AND BACE SHARES AT FIRST CLOSING
PURCHASER SHARES BEING PURCHASED
- --------- ----------------------
BACE 200 BACE Shares
Mesirow 2,510 Preferred Shares
Edgewater 2,510 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT SECOND CLOSING
PURCHASER SHARES BEING PURCHASED
- --------- ----------------------
Trustees of Grinnell College ("Grinnell") 1,277 Preferred Shares
George A. Evans 300 Preferred Shares
Larry W. Davidson 200 Preferred Shares
Gary J. Kulesza 60 Preferred Shares
Charles D. Greenidge 50 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT THIRD CLOSING
PURCHASER SHARES BEING PURCHASED
- --------- ----------------------
Grinnell 340 Preferred Shares
Inroads Capital Partners, L.P. ("Inroads") 1,000 Preferred Shares
</TABLE>
<PAGE> 143
<TABLE>
<S> <C>
PURCHASERS OF PREFERRED SHARES AT FOURTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Grinnell 675 Preferred Shares
Inroads 465 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT FIFTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Inroads 206 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT SIXTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Grinnell 271 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT SEVENTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 43 Preferred Shares
Edgewater 43 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT EIGHTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 451 Preferred Shares
Edgewater 451 Preferred Shares
Grinnell 358 Preferred Shares
Inroads 332 Preferred Shares
Arnold A. Bernstein 250 Preferred Shares
</TABLE>
-2-
<PAGE> 144
<TABLE>
<S> <C>
PURCHASERS OF PREFERRED SHARES AT NINTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 355 Preferred Shares
Edgewater 355 Preferred Shares
Grinnell 439 Preferred Shares
Inroads 315 Preferred Shares
Lawrence R. Redwine 200 Preferred Shares
John H. Hays 170 Preferred Shares
PREFERRED SHARES TO BE PURCHASED AT ADDITIONAL CLOSINGS
PURCHASER(1) SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 706 Preferred Shares
Edgewater 706 Preferred Shares
Grinnell 705 Preferred Shares
Inroads 487 Preferred Shares
</TABLE>
See Section 2.4 of Disclosure Schedule, as supplemented, for description of
possible purchases of Preferred Shares.
See Exhibit A hereto for a list of outstanding options granted to employees of
the Corporation to purchase its Class B Common Stock. All of the options have
an exercise price of $1.00 per share, except (i) Mr. Bernstein has the option
to acquire 38,462 shares at an exercise price of $0.15 per share and 64,984
shares at an exercise price of $8.00 per share and (ii) Mr. Kulesza has the
option to acquire 19,231 shares at an exercise price of $0.10 per share and
32,532 shares at an exercise price of $8.00 per share.
- ------------------------------
(1)The number of Preferred Shares to be purchased by Mesirow, Edgewater,
Grinnell and Inroads at each Additional Closing shall be determined by
agreement between the Corporation and the Majority Holders. As contemplated by
Section 1.1 of the Investment Agreement, Purchasers (other than Mesirow,
Edgewater, Grinnell and Inroads) designated by Mesirow and Edgewater may
purchase all or a portion of such Preferred Shares being purchased at any
Additional Closings subject to the provision contained in such Section 1.1.
-3-
<PAGE> 145
Exhibit A
OUTSTANDING EMPLOYEE STOCK OPTIONS
<TABLE>
<CAPTION>
No. of Shares
of Class B
Common Stock
Employee Title Subject to Options
-------- ----- ------------------
<S> <C> <C>
Arnold A. Bernstein President 103,446
Gary J. Kulesza Executive Vice President 51,763
Charles E. Baker Assistant Director of Development 4,808
Larry W. Davidson Director of Operations 2,000
George A. Evans Director of Development 2,000
Mary Ann Milton Director of Human Resources 2,000
Ronald R. Chiovetti Assistant Director of Operations 1,250
Nola M. Greenwald Accounting Manager 1,250
Hubert G. Brown National Sales Manager 1,250
Lance A. White Purchasing/Merchandising Manager 1,250
James Waite Associate Counsel 1,000
Jeffrey K. Henderson Safety and Training Manager 1,000
Douglas L. Sharpe Area Manager (Denver) 1,000
Fredric J. Opp Area Manager (Mountains) 1,000
Lawrence Redwine Area Manager (Oklahoma) 1,000
Don Bedford Area Manager (Spokane) 1,000
John H. Hays Area Manager (Development/Arkans 1,000
Patricia A. Pipkin Area Manager (Arkansas) 1,000
Clint A. Gregory Senior Store Manager 300
(El Dorado, Arkansas)
Tom L. Overton Senior Store Manager 300
(Hot Springs, Arkansas)
Terry J. Hornick Senior Store Manager 300
(#201 Spokane)
Allan W. Miller Manager #101 Denver 150
Everett M. Schneider Manager #102 Denver 150
Mark D. Holt Manager #103 Denver 150
Dan E. Parker Manager #104 Denver 150
Robert L. Nibbe Manager #106 Denver 150
Glenn A. Davidson Manager #105 Denver 150
Steven J. Nelson Manager #107 Denver 150
Robert L. Patterson Manager #108 Denver 150
Michael J. Pfeifer Manager #109 Denver 150
Edward Crilly Manager #302 Mountains 150
Rance M. Ketterling Manager #303 Mountains 150
</TABLE>
-4-
<PAGE> 146
<TABLE>
<CAPTION>
No. of Shares
of Class B
Common Stock
Employee Title Subject to Options
-------- ----- ------------------
<S> <C> C>
Donna M. Carter Manager #304 Mountains 150
William Tabor Manager #305 Mountains 150
Thomas R. Grote Manager #202 Spokane 150
Ruth P. Neumann Manager #203 Spokane 150
Darline Muggli Manager #204 Spokane 150
Dave R. Kistler Project Manager -
Computer Spokane 150
Michelle Pizello Manager #205 Spokane
Special Event (Party) 150
Tim Campbell Manager #206 Spokane 150
Tod Campbell Manager #207 Spokane 150
John P. Redwine Manager #401 Oklahoma 150
Brett E. Dawkins Manager #402 Oklahoma 150
Kevin Bogdan Manager #403 Oklahoma 150
Frank L. Burroughs III Manager - Camden, Arkansas 150
Rodger S. Bays Manager - Magnolia, Arkansas 150
Christopher M. Adams Manager - Arkadelphia 150
Janine C. Leupold Area Accountant 150
Marian Schneller Area Accountant 150
Maureen C. Davidson Accounts Receivable Supervisor 150
Rich R. Rainey Assistant Manager #101 - Denver 75
Robert A. Howell Assistant Manager #102 - Denver 75
David C. Takacs Assistant Manager #103 - Denver 75
Charles W. Milhimes Assistant Manager #104 - Denver 75
Sheila D. Nibbe Assistant Manager #105 - Denver 75
Steven J. Shoreland Assistant Manager #106 - Denver 75
Brian H. Treat Assistant Manager #107 - Denver 75
Robert C. Doran Assistant Manager #109 - Denver 75
Lonny R. Glatt Assistant Manager #201 - Spokane 75
Roxine Campbell Assistant Manager #302 - Mountains 75
Michael Siegfried Assistant Manager #204 - Spokane 75
Kim A. Godfrey Assistant Manager #202 - Spokane 75
Kenneth Geren Assistant Manager #203 - Spokane 75
Shane E. Wade Assistant Manager #305 - Mountains 75
Danny J. Williams Assistant Manager - Eldorado, Arkansas 75
Larry W. Talley Assistant Manager - Camden, Arkansas 75
Donna L. Gilzow Assistant Manager - Hot Springs, Arkansas 75
Jerry R. Poulsen Sales/Field - Denver 75
Dean Pfeifer Sales/Field - Denver 75
Christopher T. Sideroff Area Sales Supervisor - Arkansas 300
Donna J. Hamby Office Manager - El Dorado, Arkansas 75
Steve Franetovich Salesman - Oklahoma 75
</TABLE>
-5-
<PAGE> 147
<TABLE>
<CAPTION>
No. of Shares
of Class B
Common Stock
Employee Title Subject to Options
-------- ----- ------------------
<S> <C> <C>
Charles Lance Ikover Manager #404 Oklahoma 150
Douglas V. Richardson Manager - Denver 150
Richard C. Fellet Assistant Manager - Denver 75
Lachele A. Campbell Assistant Manager - Spokane
Special Event (Party) 75
-------
Total 186,592
</TABLE>
-6-
<PAGE> 148
AMENDMENT NO. 4
TO
INVESTMENT AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 4 to Investment Agreement (this "Amendment"),
effective as of May 19, 1997, is by and among RentX Industries, Inc. ("RentX"),
Mesirow Capital Partners VI ("Mesirow"), The Edgewater Private Equity Fund II,
L.P. ("Edgewater"), BACE Investments, LLC ("Bace"), Trustees of Grinnell
College ("Grinnell") and Inroads Capital Partners, L.P. ("Inroads").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into that
certain Investment Agreement, dated as of May 15, 1996 (the "Investment
Agreement");
WHEREAS, Grinnell, in addition to certain other persons, became a
party to the Investment Agreement on May 29, 1996;
WHEREAS, Inroads became a party to the Investment Agreement on August
2, 1996;
WHEREAS, the parties desire to enter into this Amendment in order to
amend certain provisions of the Investment Agreement; and
WHEREAS, the Investment Agreement may be amended by the consent of the
parties hereto;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereby agree as follows:
1. DEFINITIONS. Unless stated otherwise, capitalized terms used
in this Amendment shall have the meanings specified in the Investment
Agreement.
<PAGE> 149
2. AMENDMENTS TO SECTION 2.4.
The first sentence of Section 2.4 of the Investment Agreement is
hereby amended to read in its entirety as follows:
"Section 2.4. Authorized Capital Stock. The authorized capital stock
of the Corporation consists of 5,260,538 shares of Class A Common
Stock, 242,308 shares of nonvoting Class B Common Stock $.01 par value
("Class B Common Stock"), 17,245 shares of Preferred Stock and 200
shares of Series B Preferred.
3. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the internal laws of the State of Illinois without
regard to its conflicts of law doctrine.
4. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
RENTX INDUSTRIES, INC.
By: /s/ Richard M. Tyler
-------------------------------------
Richard M. Tyler Vice President
BACE INVESTMENTS, LLC
By: /s/ Richard M. Tyler
-------------------------------------
Richard M. Tyler Vice President
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.
General Partner
By: /s/ Thomas E. Galuhn
------------------------------
Thomas E. Galuhn
Vice President
- 2 -
<PAGE> 150
THE EDGEWATER PRIVATE
EQUITY FUND II, L.P.
By: Gordon Management Inc.,
General Partner
By: /s/ James A. Gordon
--------------------------------
James A. Gordon
President
TRUSTEES OF GRINNELL COLLEGE
By: /s/ James A. Gordon
------------------------------------
James A. Gordon
Authorized Officer or Agent
INROADS CAPITAL PARTNER, L.P.
By: Inroads General Partners, L.P.
General Partner
By:
---------------------------------
Margaret E. Fisher
General Partner
(Signature page to Amendment No. 4 to Investment Agreement)
- 3 -
<PAGE> 151
AMENDMENT NO. 5
TO
INVESTMENT AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 5 to Investment Agreement (this
"Amendment"), effective as of June 26, 1997, is by and among RentX Industries,
Inc. ("RentX"), Mesirow Capital Partners VI ("Mesirow"), The Edgewater Private
Equity Fund II, L.P. ("Edgewater"), BACE Investments, LLC ("Bace"), Trustees of
Grinnell College ("Grinnell") and Inroads Capital Partners, L.P. ("Inroads").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into
that certain Investment Agreement, dated as of May 15, 1996 (as amended, the
"Investment Agreement");
WHEREAS, Grinnell, in addition to certain other persons,
became a party to the Investment Agreement on May 29, 1996;
WHEREAS, Inroads became a party to the Investment Agreement on
August 2, 1996;
WHEREAS, the parties desire to enter into this Amendment in
order to amend certain provisions of the Investment Agreement; and
WHEREAS, the Investment Agreement may be amended by the
consent of the parties hereto;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. DEFINITIONS. Unless stated otherwise herein,
capitalized terms used in this Amendment shall have the meanings specified in
the Investment Agreement.
- 1 -
<PAGE> 152
2. AMENDMENT TO RECITALS. The fourth "Whereas" clause
of the recitals to the Investment Agreement shall be amended and restated in
its entirety to read as follows:
"WHEREAS, in order to finance a portion of the
purchase price pursuant to the Acquisition Agreements and to
fund the future growth of the Corporation, the Corporation
desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Corporation, up to
17,245 shares of the authorized but unissued shares of Series
A Preferred Stock, $1.00 par value, of the Corporation (the
"Series A Preferred") and 3,000 shares of Series C Preferred
Stock, $1.00 par value (the "Series C Preferred," the Series A
Preferred and Series C Preferred being collectively referred
to as the "Preferred Stock," and the shares of Preferred Stock
being purchased by the Purchasers being referred to as the
"Preferred Shares") which are convertible into shares of Class
A Common Stock, par value $.01 per share, of the Corporation
(the "Class A Common Stock"), with the Preferred Shares and
the shares of Class A Common Stock into which the Preferred
Shares are convertible (the "Underlying Common Shares," the
Preferred Shares and the Underlying Common Shares being
collectively referred to as the "Shares") and the Bace Shares
and the shares of Class A Common Stock into which the Bace
Shares are convertible (the "Underlying Bace Shares," the Bace
Shares and the Underlying Bace Shares being collectively
referred to as the "Bace Securities") to have the respective
rights specified in the Corporation's Certificate of
Incorporation, as amended to the date hereof (the "Charter"),
a copy of which is attached as Exhibit A hereto, all on the
terms and subject to the conditions set forth in this
Agreement;"
3. AMENDMENT TO SECTION 1.1. Section 1.1 shall be
amended by adding the sentence set forth below at the end of such section.
"The 3,000 shares of Series C Preferred shall be purchased by
the Purchasers so specified in Schedule II in the respective
amounts so specified at a single Additional Closing (the
"Series C Closing"), which may also be an Additional Closing
at which Series A Preferred is purchased."
4. AMENDMENT TO SECTION 2.4. Section 2.4 of the
Investment Agreement is hereby amended to read in its entirety as follows:
- 2 -
<PAGE> 153
"Section 2.4. Authorized Capital Stock. The authorized
capital stock of the Corporation consists of 5,964,326 shares
of Class A Common Stock, 242,308 shares of nonvoting Class B
Common Stock, $.01 par value ("Class B Common Stock"), and
20,395 shares of Preferred Stock (consisting of 17,195 shares
of Series A Preferred and 3,000 shares of Series C Preferred)
and 200 shares of Series B Preferred. At the time of the
First Closing, 5,020 shares of Series A Preferred, 200 shares
of Series B Preferred, 10 shares of Class A Common Stock and
no shares of Class B Common Stock of the Corporation will be
validly issued and outstanding, fully paid and nonassessable
with no personal liability attaching to the ownership thereof.
The stockholders of record and holders of subscriptions,
warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire equity
securities of the Corporation, and the number of shares of
capital stock and the number of such subscriptions, warrants,
options (expressed in terms of numbers of shares subject
thereto or as a percentage of shares to be outstanding on a
fully diluted basis giving effect to the conversion of all
Preferred Stock and the Bace Shares), convertible securities,
and other such rights held by each, in each case as of June
__, 1997 are as set forth in the attached Schedule II, except
that the foregoing information with respect to the Series B
Preferred may be disclosed in the aggregate in Schedule II
(provided that, upon the request of the Majority Holders, the
Corporation shall provide the Majority Holders detailed
information regarding the Series B Preferred on a Series B
Preferred per holder basis). The designations, powers,
preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized
capital stock of the Corporation are as set forth in the
Charter, and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions are
valid, binding and enforceable and in accordance with all
applicable laws. Except as set forth in the attached Schedule
II, (i) no person owns of record or is known to the
Corporation to own beneficially any share of capital stock,
(ii) no subscription, warrant, option, convertible security,
or other right (contingent or other) to purchase or otherwise
acquire equity securities of the Corporation is authorized or
outstanding and (iii) there is no commitment by the
- 3 -
<PAGE> 154
Corporation to issue shares, subscriptions, warrants, options,
convertible securities, or other such rights or to distribute
to holders of any of its equity securities any evidence of
indebtedness or asset, except that the foregoing information
with respect to the Series B Preferred may be disclosed in the
aggregate in Schedule II (provided that, upon the request of
the Majority Holders, the Corporation shall provide the
Majority Holders detailed information regarding the Series B
Preferred on a Series B Preferred per holder basis). Except
as provided for in the Charter or as set forth in the attached
Schedule II, the Corporation has no obligation (contingent or
other) to purchase, redeem or otherwise acquire any of its
equity securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof.
There are no voting trusts or agreements, stockholders'
agreements, pledge agreements, buy-sell agreements, rights of
first refusal, preemptive rights or proxies relating to any
securities of the Corporation or any of its subsidiaries
(whether or not any of them is a party thereto), except for
this Agreement, the Stockholders Agreement, the pledge
agreements in favor of Harris Trust and Savings Bank ("HTSB"),
as agent for itself and the other lenders, to secure the Loans
required under the Loan Documents, and as set forth on
Schedule II with respect to certain shares of the Series B
Preferred. All of the outstanding securities of the
Corporation have been issued in compliance with all applicable
Federal and state securities laws."
5. AMENDMENTS TO CERTAIN EXHIBITS AND SCHEDULES TO THE
INVESTMENT AGREEMENT. Exhibits A, B and C to the Investment Agreement shall be
amended as provided in the amendments set forth in Appendix A, B and C,
respectively, hereto, and each of the terms "Charter," "Registration Rights
Agreement" and "Stockholders Agreement" in the Investment Agreement shall mean
such respective document as so amended. The Disclosure Schedule to the
Investment Agreement, insofar as it relates to an Additional Closing which is
the Series C Closing, shall be amended as set forth in the Supplement to
Schedule I delivered by the Corporation in connection with such Additional
Closing.
6. AMENDMENT TO SECTION 6.1. Subsections (a) and (b) of
Section 6.1 of the Investment Agreement are hereby amended and restated in
their entirety to read as follows:
- 4 -
<PAGE> 155
"(a) the Corporation fails to redeem any of the
Preferred Shares or the Bace Shares on the date specified in
or pursuant to the terms of the Preferred Stock or the Series
B Preferred;
(b) (i) the Board of Directors of the Corporation
fails for a period of two consecutive quarters, commencing
with the first quarter in which the Corporation is permitted
by the Loan Documents to pay dividends, after the first
anniversary hereof to declare any dividends on any of the
Preferred Shares at the rate stated in the terms of the
Preferred Stock ("Stated Dividends") or (ii) the Corporation
fails to pay the Stated Dividends in full for two consecutive
quarters, commencing with the first quarter in which the
Corporation is permitted by the Loan Documents to pay
dividends:"
7. GOVERNING LAW. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Illinois
without regard to its conflicts of law doctrine.
8. COUNTERPARTS. This Amendment may be executed in
several counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
- 5 -
<PAGE> 156
IN WITNESS WHEREOF, this Amendment No. 5 to Investment
Agreement has been duly executed and delivered by the duly authorized officers
of the parties hereto as of the date first above written.
RENTX INDUSTRIES, INC.
By:/s/ ARNOLD A. BERNSTEIN
---------------------------------
Name: Arnold A. Berstein
Title: President - CEO
BACE INVESTMENTS, LLC
By:/s/ RICHARD M. TYLER
---------------------------------
Richard M. Tyler
Member
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.,
General Partner
By:/s/ THOMAS E. GALUHN
-----------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY
FUND II, L.P.
By: Gordon Management, Inc.,
General Partner
By:/s/ JAMES A. GORDON
-----------------------------
James A. Gordon
President
- 6 -
<PAGE> 157
TRUSTEES OF GRINNELL COLLEGE
By:/s/ JAMES A. GORDON
---------------------------------
James A. Gordon
Authorized Agent
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partners, L.P.
General Partner
By:/s/ MARGARET G. FISHER
-----------------------------
Margaret G. Fisher
General Partner
(Signature Page to Amendment No. 5 to
Investment Agreement)
- 7 -
<PAGE> 158
CERTIFICATE OF AMENDMENT APPENDIX A
TO
CERTIFICATE OF INCORPORATION
OF
RENTX INDUSTRIES, INC.
RentX Industries, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of RentX Industries, Inc., by
unanimous written consent of the directors effective June __, 1997, adopted
resolutions setting forth proposed amendments to the Certificate of
Incorporation of said corporation. The resolutions setting forth the proposed
amendments are as follows:
RESOLVED, that a proposed amendment to the Certificate of Incorporation
of the Corporation, amending and restating Article IV thereof to read
in its entirety as follows, is recommended to the stockholders for
approval as being in the best interests of the Corporation:
ARTICLE 4
CAPITALIZATION
4.1 Authorized Shares; Reclassification. The total number
of shares that the Corporation shall have authority to issue is
6,227,029 shares, comprised of (i) 6,206,634 shares of Common Stock,
each with a par value of $.01, of which 5,964,326 shares shall be
voting Class A Common Stock and 242,308 shares shall be nonvoting Class
B Common Stock (the Class A Common Stock and the Class B Common Stock
being collectively referred to herein as the "Common Stock"), and (ii)
20,395 shares of Preferred Stock, each with a par value of $1.00 and a
stated value of $1,000, of which 17,195 shares shall be Series A
Preferred Stock, 200 shares shall be Series B Preferred Stock and 3,000
shares shall be Series C Preferred Stock (the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock being
collectively referred to as the "Preferred Stock").
4.2 Preferred Stock. The Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock shall have the
respective voting powers, preferences and relative, participating,
optional and other special rights, and qualifications, limitations and
restrictions thereof set forth below (it being understood that except
as provided in this Certificate of Incorporation, the rights of the
Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock shall be identical on a share-for-share basis):
4.2.1 Dividends. (a) The holders of Preferred
Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds at the time legally available therefor,
dividends at the annual rate of $50.00 per annum per share
<PAGE> 159
($70.00 per annum per share during the continuance of any Event of
Default, i.e., a 5% annual rate on its $1,000 stated value but
increased to 7% during the continuance of an Event of Default), which
shall be fully cumulative, shall accrue from the date of initial
issuance of each share of Preferred Stock (on a daily basis whether or
not sufficient funds would be legally available at that time for the
payment of such dividends) and shall be payable in cash quarterly in
arrears on the first day of February, May, August and November in
respect of the 3-month period (or portion thereof during which such
Preferred Stock was outstanding) ended on the last day of the
preceding January, April, July and October, respectively (except that
if any such payment date is a Saturday, Sunday or legal holiday, then
such dividend shall be payable on the next day that is not a Saturday,
Sunday or legal holiday). Each such dividend shall be paid to the
holders of record of the Preferred Stock as they appear upon the stock
transfer books of the Corporation at the close of business on the last
day of the three-month period (or portion thereof) in respect of which
the dividend is payable. For purposes hereof, the term "legal
holiday" shall mean any day on which banking institutions are
authorized to close in Denver, Colorado and the term "business day"
shall mean any day other than a Saturday, Sunday or legal holiday.
Holders of shares of Preferred Stock that are redeemed or converted
will be entitled to receive the dividend accrued through the date of
redemption or conversion (whether or not such dividend accrued shall
have been previously declared), payable by the Corporation not later
than five days after the date of such conversion or redemption or, if
later, the date contemplated in the last sentence of Section 4.2.1(b).
Dividends on account of arrears for any past dividend period may be
declared and paid at any time, without reference to any regular
dividend payment date. The amount of dividends payable per share of
Preferred Stock for each full three-month dividend period shall be
computed by dividing the annual dividend amount by four. The amount
of dividends payable for the initial dividend period and any other
period shorter than a full quarterly period shall be computed on the
basis of a 360-day year of twelve 30-day months based on the 5% annual
rate applied to the $1,000 stated value per share (or 7% annual rate
for any period during the continuance of an Event of Default).
(b) The Corporation may elect to defer payment of
dividends (ratably among the shares of Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock) if and to the extent
the payment of such dividends would violate restrictions in any loan
agreement or indenture of the Corporation or a subsidiary thereof
pursuant to which any of them then has indebtedness outstanding (such
restrictions being referred to as "Dividend Restrictions") or violate
the General Corporation Law of the State of Delaware (the "GCL"), and
such dividends so deferred will accumulate additional dividends as
provided in Section 4.2.1(c). Except as provided in the following
sentence, such additional dividends will be payable quarterly at the
same times as dividends referred to in Section 4.2.1(a). The
Corporation shall pay all such deferred dividends and additional
amounts accrued
- 2 -
<PAGE> 160
thereon, out of funds then legally available therefor, as soon as, and
to the extent that, such payment does not violate the Dividend
Restrictions or the GCL, but in any event not later than the occurrence
of a Fundamental Change,
(c) Dividends whose payment is not made on a timely basis
as specified above (including, without limitation, all amounts referred
to in Section 4.2.1(b)) shall accumulate, together with an amount
computed at the rate of 5% per annum thereon (or 7% per annum during
the continuance of any Event of Default) from the date such dividends
were payable until paid in full, compounded quarterly, which additional
accrued amounts shall be paid as additional dividends hereunder. In
the event that the funds legally available for dividends are not
sufficient to pay the dividends accrued on the Preferred Stock, the
funds available shall be paid to the holders of Preferred Stock ratably
in proportion to the respective unpaid dividends accrued on the
Preferred Stock.
(d) After the payment in respect of each quarterly
dividend period of all cumulative dividends on the Preferred Stock
(including, without limitation, all amounts referred to in Section
4.2.1(b) or (c)) the Board of Directors of the Corporation, in its
discretion, may pay additional dividends to the holders of the Class A
Common Stock and to the holders of the Preferred Stock ratably,
calculated as if the holders of the Preferred Stock had converted such
shares into shares of Class A Common Stock as provided herein on the
record date with respect to such dividend.
(e) The term "Event of Default" shall have the meaning
specified therefor in the Investment Agreement dated as of May 15,
1996, among Mesirow Capital Partners VI, The Edgewater Private Equity
Fund II, L.P., BACE Investments, LLC and the Corporation and any other
parties thereto, as it may be amended from time to time.
4.2.2 Voting Rights. Except as otherwise provided by law or
expressly in this Certificate of Incorporation, the Preferred Stock
will be entitled to vote with the Class A Common Stock, voting together
as a single class, on all matters to be voted on by the Corporation's
stockholders, with the shares of Preferred Stock entitled to a number
of votes equal to the respective number of shares of Class A Common
Stock that would have been issuable if such shares of Preferred Stock
had been converted on the record date for the meeting at which the vote
is taken or for the submission of the matter in question to the
stockholders for action by written consent, as the case may be;
provided, that no amendment to this Article 4 may be made without the
affirmative vote or consent of the holders of a majority of the shares
of each series of Preferred Stock then outstanding.
4.2.3 Liquidation Preference. (a) In the event of a
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of
- 3 -
<PAGE> 161
shares of Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders an
amount equal to the dividends accrued and unpaid on such shares on the
date of final distribution to such holders, whether or not declared,
including any accruals thereon provided in Section 4.2.1(b) or (c),
plus a sum equal to $1,000 per share, before any payment shall be made
or any assets distributed to the holders of shares of Common Stock. If
the assets available for distribution to the stockholders are
insufficient to pay the entire amounts to which the holders of
Preferred Stock are entitled, the entire assets of the Corporation
available for distribution to stockholders shall be distributed ratably
among the holders of the Preferred Stock in proportion to the
respective preferential amounts to which each is entitled.
(b) After payment in full of the liquidation preferences
of the shares of the Preferred Stock, any remaining assets of the
Corporation available for distribution to the stockholders shall be
distributed to the holders of the Common Stock ratably. The
consolidation or merger of the Corporation with one or more
corporations shall not be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
4.2.4 Redemption. (a) During the continuance of an Event
of Default, unless the holder or holders of a majority of the shares of
Preferred Stock (other than Series B Preferred Stock) shall have waived
such Event of Default in writing, each holder of outstanding shares of
Preferred Stock may, at such holder's option on any business day set by
such holder, subject to the limitations, if any, imposed by applicable
law, require the Corporation to redeem all or any part of such holder's
Preferred Stock for an amount in cash per share equal to the sum of (i)
$1,000 plus (ii) all per share dividends accrued and unpaid thereon,
whether or not declared, including any accruals thereon provided in
Section 4.2.1(b) or (c) to but excluding the Redemption Date (as
defined below), such sum, as from time to time adjusted as provided
below, being hereinafter referred to as the "Redemption Price."
Notwithstanding the foregoing, no holder of Preferred Stock may require
such a redemption unless the holders of a majority of the shares of
Preferred Stock (other than Series B Preferred Stock) have given, or
concurrently give, notice of such demand for redemption.
(b) Not more than sixty nor less than fifteen days prior
to the date fixed for redemption (the "Redemption Date"), notice of the
redemption shall be given by the holder of the shares to be redeemed to
the Corporation, by registered or certified mail, postage prepaid,
addressed to the Corporation at its principal executive offices. Such
notice of redemption from a holder shall specify the Redemption Date
and the number of shares of Preferred Stock to be redeemed. On or
after the Redemption Date the holder requiring such redemption by the
Corporation shall surrender the
- 4 -
<PAGE> 162
certificate evidencing its shares at the principal executive offices of
the Corporation, and shall thereupon be entitled to receive payment of
the Redemption Price.
(c) Notice having been given as provided in Section
4.2.4(b) above, if, on the Redemption Date, funds necessary for the
redemption shall be available therefor and shall have been set aside by
the Corporation to pay the Redemption Price, then, notwithstanding that
the certificates evidencing any shares so called for redemption shall
not have been surrendered, dividends with respect to the shares so
called shall cease to accrue on and after the Redemption Date, such
shares shall no longer be deemed outstanding, the holders thereof shall
cease to be stockholders of the Corporation and all rights whatsoever
with respect to the shares so called for redemption (except the right
of the holders to receive the Redemption Price without interest upon
surrender of their certificates therefor) shall terminate. Shares of
Preferred Stock redeemed or otherwise acquired by the Corporation
(including, without limitation, upon conversion) shall be canceled and
not reissued or resold,
4.2.5 Conversion. (a) As used in this Section 4.2.5, the
following terms have the indicated meanings.
"Conversion Date" with respect to any share of
Preferred Stock means the date on which the certificate
representing such share is received by the Corporation for
conversion.
"Fifth Anniversary" means the fifth anniversary of the
original issuance of the first share of Series A Preferred
Stock issued by the Corporation.
"Fully Diluted Shares" shall mean at any time the sum
of (i) the number of outstanding shares of Class A Common Stock
(excluding any shares of Class A Common Stock issued in respect
of Class B Common Stock under Section 4.3.4 or upon conversion
of Series C Preferred Stock), (ii) the number of shares of
Class A Common Stock issuable upon conversion of outstanding
Series A Preferred Stock, and (iii) the number of shares of
Class A Common Stock issuable upon conversion of the Series B
Preferred Stock (whether attributable to the Base Series B
Conversion Rate or the Additional Conversion Rate); provided,
that shares issued in connection with a Fundamental Change
(other than with respect to previously outstanding shares of
the Corporation), such as shares to be issued by the
Corporation for sale to the public in a Qualified Public
Offering, shall not be included in the computation of Fully
Diluted Shares.
"Fundamental Change" means any (i) transaction or
event in connection with which the Class A Common Stock of the
Corporation shall be converted into or constitute solely the
right to receive cash, securities
- 5 -
<PAGE> 163
(other than solely equity securities of the Corporation),
property or other assets (whether by means of an exchange
offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise), (ii) conveyance, sale, lease,
assignment, transfer or other disposition of all or
substantially all of the Corporation's property, business or
assets, (iii) the sale by the Corporation or one or more of its
stockholders in a single transaction or series of related
transactions of Class A Common Stock or Preferred Stock
representing at least 50% of the Fully Diluted Shares after
such sale, or (iv) a Qualified Public Offering; provided,
however, that a Fundamental Change shall not be deemed to have
occurred with respect to any consolidation or merger of the
Corporation (without consent of the holders of a majority of
the outstanding shares of Series A Preferred Stock) in which
(A) the holders of Series B Preferred Stock or Class A Common
Stock immediately prior to such transaction own, directly or
indirectly, (x) 50% or more of the common stock of the
surviving corporation (or of the ultimate parent of such
surviving corporation) outstanding immediately after such
consolidation or merger and (y) securities representing 50% or
more of the combined voting power of the surviving
corporation's Voting Stock (as defined below) (or of the Voting
Stock of the ultimate parent of such surviving corporation)
outstanding at such time, and (B) the holders of each of the
Series A Preferred Stock and Series C Preferred Stock
immediately prior to such transaction receive securities
substantially identical to the Series A Preferred Stock and
Series C Preferred Stock, respectively, which are convertible
into a number of shares of the common stock of the surviving
corporation (or of the ultimate parent of such surviving
corporation) which bears at least as great a proportion to the
shares of such common stock received by the holders of Class A
Common Stock in the transaction as the number of shares of
Class A Common Stock issuable upon conversion of the Series A
Preferred Stock and Series C Preferred Stock, respectively,
immediately prior to the transaction bears to the number of
shares of Class A Common Stock outstanding prior to such
transaction. The phrase "Voting Stock" means, with respect to
any person, all capital stock of such person having general
voting power under ordinary circumstances to elect the board of
directors, managers or trustees of such person (irrespective of
whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the
happening of any contingency).
"Series B Director" means a member of the Board of
Directors of the Corporation who directly or indirectly owns
shares of Series B Preferred Stock or shares of Class A Common
Stock previously issued upon conversion of Series B Preferred
Stock or who has an Affiliate, as defined in Section
4.2.5(f)(iii), that directly or indirectly owns shares of
Series B Preferred Stock or such shares of Class A Common
Stock.
- 6 -
<PAGE> 164
"Qualified Public Offering" has the meaning specified
in the Stockholders Agreement dated as of May 15, 1996, among
Mesirow Capital Partners VI, The Edgewater Private Equity Fund
II, L.P., BACE Investments, LLC, the Corporation and any other
parties thereto, as it may be amended from time to time.
(b) Conversion of Series A Preferred Stock. (i) Each
holder of Series A Preferred Stock shall have the right at any time to
convert, without the payment of any additional consideration, all or
any portion of its shares of Series A Preferred Stock into the number
of fully paid and nonassessable shares of Class A Common Stock
determined by multiplying the number of shares of Series A Preferred
Stock being so converted by the Series A Conversion Rate subject to
adjustments as provided in this Section 4.2.5. The Series A Conversion
Rate shall be 200 multiplied by a fraction (the "Adjustment Fraction"),
the numerator of which is $5 and the denominator of which is the
Trigger Price in effect immediately prior to such conversion. The
initial Trigger Price shall be $5. Each conversion of shares of Series
A Preferred Stock into shares of Class A Common Stock shall be effected
by the delivery of notice of such conversion by such holder and the
surrender of the certificate or certificates representing the shares of
Series A Preferred Stock to be converted to the Corporation (or such
other office or agency designated by the Corporation), without the
payment of any additional consideration. All converted shares of
Series A Preferred Stock shall be permanently retired and shall not be
reissued.
(ii) Adjustment of Trigger Price. The
Trigger Price shall be subject to adjustment from time to time as
hereinafter provided.
(A) Adjustment of Trigger Price upon Issuance of
Common Stock. If and whenever after the date hereof the Corporation
shall issue or sell (or be deemed to issue or sell as provided
hereunder) any shares of its Common Stock for a consideration per share
less than the Trigger Price in effect immediately prior to the time of
such issue or sale, then, forthwith upon such issue or sale, the
Trigger Price shall be reduced to the price, calculated to the nearest
$.001, determined by dividing (i) the sum of (a) the number of Fully
Diluted Shares outstanding immediately prior to such issue or sale
multiplied by the then existing Trigger Price and (b) the
consideration, if any, received by the Corporation upon such issue or
sale, by (ii) the total number of Fully Diluted Shares outstanding
immediately after such issue or sale. Notwithstanding any other
provision hereof, no adjustment of the Trigger Price shall be made upon
the issuance or sale (or deemed issuance or sale) by the Corporation of
any shares of Common Stock issued or issuable (x) pursuant to the
conversion of Preferred Stock or the reclassification of Class B Common
Stock or (y) pursuant to the exercise of any Option (as defined below)
to acquire Common Stock granted to any employee of the Corporation on
or before ____________, 1997.
- 7 -
<PAGE> 165
(B) Issuance of Rights or Options. In case at any
time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options or warrants for the purchase of (such rights
or options being herein called "Options"), Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") whether or not such Options or the right to
convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable
upon the exercise of such options or upon conversion or exchange of
such Convertible Securities (determined as provided in the following
sentence) shall be less than the Trigger Price in effect immediately
prior to the time of the granting of such Options, then the total
maximum number of shares of Common Stock issuable upon the exercise of
all such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued for such price per
share as of the date of granting of such options and thereafter shall
be deemed to be outstanding. The price per share for which Common
Stock is issuable, as referred to in the preceding sentence, shall be
determined by dividing (a) the sum of (1) the total amount, if any,
received or receivable by the Corporation as consideration for the
granting of such Options, plus (2) the minimum aggregate amount of
additional consideration payable to the Corporation upon the exercise
of all such Options, plus (3) in the case of all such Options that
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of all
such Convertible Securities (to the extent not counted in clause (2))
and upon the conversion or exchange of all such Convertible Securities
into Common Stock, by (b) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options; the consideration received or receivable by
the Corporation shall in each Case be determined in accordance with
paragraph (E) hereof. Except as otherwise provided in paragraph (D)
hereof, no adjustment of the Trigger Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities
upon exercise of such Options or upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities.
(C) Issuance of Convertible Securities. In case
the Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder
are immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange (determined as
provided in the following sentence) shall be less than the Trigger
Price in effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall
- 8 -
<PAGE> 166
be deemed to have been issued for such price per share as of the date
of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding, provided that (x) except as
otherwise provided in paragraph (D) below, no adjustment of the Trigger
Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and (y) if any
such issue or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Trigger Price have been or
are to be made pursuant to paragraph (B), no further adjustment of the
Trigger Price shall be made by reason of such issue or sale. The price
per share for which Common Stock is issuable, as referred to in the
preceding sentence, shall be determined by dividing (a) the sum of (1)
the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities,
plus (2) the minimum aggregate amount of additional consideration, if
any, payable upon the conversion or exchange of such Convertible
Securities into Common Stock, by (b) the total maximum number of shares
of Common Stock issuable upon the conversion or exchange of such
Convertible Securities; the consideration received or receivable by the
Corporation shall in each case be determined in accordance with
paragraph (E).
(D) Change in Option Price or Conversion Rate.
Upon the happening of the following events, namely, if the purchase
price provided for in any outstanding Option referred to in paragraph
(B), the additional Consideration, if any, payable upon the conversion
or exchange of any outstanding Convertible Securities referred to in
paragraph (B) or (C), or the rate at which any such Convertible
Securities are convertible into or exchangeable for Common Stock shall
change at any time (except for an adjustment of the Series A Conversion
Rate or Series B Conversion Rate as provided in this Section 4.2.5),
the Trigger Price in effect at the time of such event shall forthwith
be readjusted to the Trigger Price which would have been in effect at
such time had such Options or Convertible Securities provided for such
changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold. On the
expiration or termination of any Option referred to in paragraph (B)
prior to the exercise thereof or the expiration or termination of any
right to convert or exchange any Convertible Securities referred to in
paragraph (B) or (C) prior to the exercise of such rights, the Trigger
Price then in effect hereunder shall forthwith be increased (but in no
case shall such Trigger Price be increased to a price greater than the
initial Trigger Price hereunder) to the Trigger Price which would have
been in effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding immediately
prior to such expiration or termination never been issued, and the
Common Stock issuable thereunder shall no longer be deemed to be
outstanding for the purposes of any calculation under paragraph (B) or
(C).
(E) Consideration for Securities. In case any
shares of Common Stock, Options or Convertible Securities shall be
issued or sold by the Corporation
- 9 -
<PAGE> 167
for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration
other than cash received by the Corporation shall be deemed to be the
fair value of such consideration as determined in good faith by the
Board of Directors of the Corporation (subject to the provisions of
Section 4.2.5(i)). In case any Common Stock, Option or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Corporation is the surviving corporation
(other than any consolidation or merger in which the previously
outstanding shares of Common Stock of the Corporation shall be changed
into or exchanged for the, stock or other securities of another
corporation) the amount of consideration therefor shall be deemed to be
the fair value as determined in good faith by the Board of Directors of
the Corporation (subject to the provisions of Section 4.2.5(i)) of such
portion of the assets and business of the nonsurviving corporation as
such Board may determine to be attributable to such shares of Common
Stock, Options or Convertible Securities, as the case may be. In the
event of any consolidation or merger of the Corporation in which the
Corporation is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Corporation shall be changed
into or exchanged for the stock or other securities of another
corporation, or in the event of any sale of all or substantially all of
the assets of the Corporation for stock or other securities of any
corporation, the Corporation shall be deemed to have issued a number of
shares of its Common Stock equal to the number of shares of Common
Stock used for computing the actual exchange ratio on which the
transaction was predicated and for a consideration equal to the fair
market value on the date of transaction of all such stock or securities
of the other corporation received by the holders of the capital stock
of the Corporation or by the Corporation and if such calculation
results in adjustment of the Trigger Price, the determination of the
number of shares of Common Stock issuable upon conversion immediately
prior to such merger, consolidation or sale, for purposes of paragraph
(H) shall be made after giving effect to such adjustment of the Trigger
Price.
(F) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation, and the
disposition or reissuance of any such shares shall be considered an
issue or sale of Common Stock for the purposes of this Section 4.2.5.
(G) Subdivision or Combination of Stock. In case
the Corporation shall at any time subdivide its outstanding shares of
Class A Common Stock into a greater number of shares, the Trigger Price
in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares
of Class A Common Stock of the Corporation shall be combined into a
smaller
- 10 -
<PAGE> 168
number of shares, the Trigger Price in effect immediately prior to such
combination shall be proportionately increased.
(H) Reorganization, Reclassification,
Consolidation, Merger or Sale. If any capital reorganization or
reclassification of the capital stock of the Corporation, or any
consolidation or merger of the Corporation with another corporation, or
the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Class A
Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for Class A Common Stock, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provisions shall be made whereby
the holders of Preferred Stock shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of the Class A Common Stock
of the Corporation immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such shares of
stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of outstanding shares of such Class A
Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of the holders of Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for
adjustment of the Series A Conversion Rate, Base Series B Conversion
Rate, the Additional Conversion Rate, the Trigger Price and the Series
C Conversion Rate) shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of the rights represented hereby
(including an immediate adjustment, by reason of such consolidation or
merger, of the Trigger Price to the value for the Class A Common Stock
reflected by the terms of such consolidation or merger if the value so
reflected is less than the Trigger Price in effect immediately prior to
such consolidation or merger). In the event of a merger or
consolidation of the Corporation with or into another corporation as a
result of which a number of shares of common stock of the surviving
corporation greater or lesser than the number of shares of Class A
Common Stock of the Corporation outstanding immediately prior to such
merger or consolidation are issuable to holders of Class A Common Stock
of the Corporation, then the Trigger Price in effect immediately prior
to such merger or consolidation shall be adjusted in the same manner as
though there were a subdivision or combination of the outstanding
shares of Class A Common Stock of the Corporation outstanding
immediately prior to such merger or consolidation.
(I) Notice of Adjustment. Upon any adjustment of
the Trigger Price or any determination of the Additional Conversion
Rate pursuant to Section 4.2.5(c), then and in each such case, the
Corporation shall give written notice thereof,
- 11 -
<PAGE> 169
by first class mail, postage prepaid, addressed to each holder of
Series A Preferred Stock or Series B Preferred Stock at the address of
such holder as shown on the books of the Corporation, which notice
shall state the Trigger Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares into which a
share of Series A Preferred Stock or Series B Preferred Stock would
then be convertible, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(J) Other Notices. In case at any time:
(I) the Corporation shall offer for
subscription to the holders of any of its
Class A Common Stock any additional shares of
stock of any class or other rights;
(II) there shall be any capital
reorganization, reclassification of the
capital stock of the Corporation or
consolidation or merger of the Corporation
with, or sale of all or substantially all of
its assets to, another corporation; or
(III) there shall be a voluntary or
involuntary dissolution, liquidation or
winding up of the Corporation;
then, in any one or more of said cases (unless a waiver of such notice
shall have been given by the holders of a majority of the outstanding
shares of Series A Preferred Stock, the holders of a majority of the
outstanding shares of Series B Preferred Stock and the holders of a
majority of the outstanding shares of Series C Preferred Stock), the
Corporation shall give, by first class mail, postage prepaid, addressed
to each holder of Preferred Stock at the address of such holder as
shown on the books of the Corporation, (i) at least 10 business days'
prior written notice of the date on which the books of the Corporation
shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect of
any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up and (ii) in the case of such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least 10 business days'
prior written notice of the date when the same shall take place. Any
notice required by clause (II) or (III) shall also specify the date on
which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
(K) Duty to Make Fair Adjustments in Certain
Cases. If any event occurs as to which in the opinion of any of (i)
the Board of Directors of the Corporation, (ii) the holders of a
majority of the shares of Series A Preferred Stock
- 12 -
<PAGE> 170
(the holders of such a majority being referred to as the "Series A
Preferred Holders") or (iii) the holders of a majority of the shares of
Series B Preferred Stock (the holders of such a majority being referred
to as the "Series B Preferred Holders") the provisions of this Section
4.2.5(b) are not strictly applicable or if strictly applicable would
not fairly protect the conversion rights of the holders of Series A
Preferred Stock or Series B Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors and the Series A Preferred Holders and Series B Preferred
Holders shall mutually agree upon an adjustment in the application of
such provisions (subject to the provisions of Section 4.2.5(i)(2)(to
the extent necessary)), in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid, but in
no event shall any such adjustment have the effect of increasing the
Trigger Price as otherwise determined pursuant to this Section
4.2.5(b)(ii) except in the event of an increase in option price,
additional consideration or conversion rate as contemplated by
paragraph (D), or a combination of shares of the type contemplated in
paragraph (H) and then in no event to an amount larger than the Trigger
Price as adjusted pursuant to paragraph (D) or paragraph (H).
(c) Conversion of Series B Preferred Stock. (i) Each
holder of Series B Preferred Stock shall have the right at any time to
convert, without the payment of any additional consideration, all or
any of its shares of Series B Preferred Stock into the number of fully
paid and nonassessable shares of Class A Common Stock determined by
multiplying the number of shares of Series B Preferred Stock being so
converted by the sum of (x) the Base Series B Conversion Rate and (y)
if a Fundamental Change has occurred, the Additional Conversion Rate.
The Base Series B Conversion Rate shall be 195 multiplied by the
Adjustment Fraction (as determined in accordance with Section
4.2.5(b)). The Additional Conversion Rate shall be determined upon the
first Fundamental Change. In connection with such determination, the
Conversion Rate shall be adjusted to include an Additional Conversion
Rate as provided in this Section 4.2.5(c). The determination of the
Additional Conversion Rate pursuant to this Section 4.2.5(c)(i) shall
be made one time only and shall be made on or before the effective date
of the Fundamental Change, and shall thereafter remain the same for all
conversions except for any adjustment provided in Section 4.2.5(c)(ii).
In order to determine the Additional Conversion Rate (as adjusted for
this Section 4.2.5(c)), the net fair market value of the aggregate
Class A Common Stock, Class B Common Stock, Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock of the
Corporation (the "Fair Market Value") shall first be determined. The
Fair Market Value shall be determined by the Board of Directors of the
Corporation, acting in good faith and based on the value placed on the
Corporation in the transaction constituting the Fundamental Change,
without adjustment for any changes that may occur after the date of
that transaction.
- 13 -
<PAGE> 171
The Additional Conversion Rate shall be determined pursuant to
this Section 4.2.5(c)(i) based on the relationship between (A) the
annualized rate of return on the shares of Series A Preferred Stock
from the date of original issuance (or, if shares of Series A Preferred
Stock have been issued at more than one time, a combined Series A
Preferred Stock annualized rate of return taking into account the
timing and amount of additional issues of Series A Preferred Stock),
calculated on the $1,000 per share original purchase price thereof,
taking into account dividends and other distributions, assuming the
Series A Preferred Stock were then being sold for cash at its net fair
market value, and compounding annually (the "Series A Rate of Return")
and (B) the percentage of the Fully Diluted Shares issuable to the
holders of the Series B Preferred Stock on account of the Additional
Conversion Rate. The Board of Directors shall determine the Additional
Conversion Rate as follows:
(1) First, the amount of the Fair Market Value
attributable to the Fully Diluted Shares shall be determined by
subtracting from the total Fair Market Value the sum of (i) the portion
of the Fair Market Value that is attributable to any Class B Common
Stock outstanding or issuable under outstanding options, warrants,
conversion rights or the like and to any Class A Common Stock issued in
respect of Class B Common Stock pursuant to Section 4.3.4, plus (ii)
the portion of the Fair Market Value that is attributable to any Series
C Preferred Stock outstanding or to any Class A Common Stock issued or
issuable upon conversion of Series C Preferred Stock. The portion of
the Fair Market Value attributable to the Class B Common Stock (or
Class A Common Stock issued in respect of Class B Common Stock pursuant
to Section 4.3.4) is 4.0626%, subject to reduction as provided in
Section 4.3.4. The portion of the Fair Market Value attributable to
the Series C Preferred Stock and any Class A Common Stock issued or
issuable upon conversion thereof is 7.905%. The percentages given in
this clause (1) for the portion of the Fair Market Value attributable
to the Class B Common Stock and the Series C Preferred Stock are based
on the number of authorized shares of capital stock as of ____________,
1997, and upon any amendment of this Certificate of Incorporation to
change the number of authorized shares, this clause (1) shall also be
amended to adjust those percentages in a manner that causes such change
to affect all authorized shares of capital stock as of ____________,
1997 proportionately on a fully diluted basis. The amount of the Fair
Market Value attributable to the Fully Diluted Shares is referred to as
the "Fully Diluted Fair Market Value."
(2) Second, the number of shares of Class A Common Stock
then issuable upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock shall be determined, assuming that the
Additional Conversion Rate is zero, and the resulting number of Fully
Diluted Shares shall be calculated. The Fully Diluted Fair Market Value
shall then be divided among the shares of Class A Common Stock issuable
upon conversion of the Series A Preferred Stock (the "Series A
Conversion Shares"), the shares of Class A Common Stock issuable upon
conversion of the Series
- 14 -
<PAGE> 172
B Preferred Stock (the "Series B Conversion Shares"), and all other
shares of Class A Common Stock included in Fully Diluted Shares (the
"Other Shares"), as so calculated, based on the number of shares in
each group.
(3) The Series A Rate of Return shall then be computed
based on a net fair market value for the Series A Preferred Stock equal
to the value allocated to the Series A Conversion Shares in (2) above.
If that Series A Rate of Return is less than 10%, the Additional
Conversion Rate shall be zero. If that Series A Rate of Return is 10%
or greater, the Additional Conversion Rate shall be determined as
provided in (4) below.
(4) Through an iterative trial and error process, the
Board of Directors shall increase the number of Series B Conversion
Shares (reallocating the Fully Diluted Fair Market Value among the
Series A Conversion Shares, the Series B Conversion Shares and the
Other Shares and recomputing the resulting Series A Rate of Return each
time as provided in (2) and (3) above) until the relationship between
the Series A Rate of Return and the percentage of the Fully Diluted
Shares represented by the increase in the number of Series B Conversion
Shares (the "Additional Series B Conversion Shares") meets the
requirements of the following table:
- 15 -
<PAGE> 173
Percentage of Fully Diluted Shares
Represented by Additional Series B
Series A Rate of Return Conversion Shares
- ----------------------- ---------------------------------------
Less than 10% 0
10% 9.640% (or so much thereof as does
not cause the Series A Rate of Return
to be less than 10%)
More than 10% but less than 20% Sum of (i) 9.640% plus (ii)(A) the
excess of Series A Rate of Return over
10% multiplied by (B) .9640, rounded to
the nearest .0001%
20% 19.280%
More than 20% but less than 45% Sum of (i) 19.280% plus (ii) (A) the
excess of Series A Rate of Return over
20% multiplied by (B) .57840, rounded to
the nearest .0001%
45% or more 33.740%
Examples of such computations (with some rounding) are set
forth in Appendix 1-B hereto.
All computations and determinations required by this subsection
(c) shall be made by the Board of Directors of the Corporation, acting
in good faith, subject to the provisions of Section 4.2.5(i).
(ii) If the Trigger Price is adjusted pursuant to Section
4.2.5(b) after the determination of the Additional Conversion Rate
pursuant to Section 4.2.5(c)(i) for an event not taken into account in
making the determination of the Additional Conversion Rate as provided
therein, the Additional Conversion Rate at the time of a conversion
shall be adjusted to equal the Additional Conversion Rate as initially
determined pursuant to Section 4.2.5(c)(i) multiplied by a fraction,
the numerator of which shall be the Trigger Price in effect at the time
the events giving rise to the determination of the Additional
Conversion Rate accrued and the denominator of which is the Trigger
Price in effect immediately prior to such conversion.
(d) Conversion of Series C Preferred Stock. Each holder
of Series C Preferred Stock shall have the right at any time to
convert, without the payment of
- 16 -
<PAGE> 174
any additional consideration, all or any portion of its shares of
Series C Preferred Stock into the number of fully paid and
nonassessable shares of Class A Common Stock determined by multiplying
the number of Shares of Series C Preferred Stock by the Series C
Conversion Rate, subject to adjustments as provided in this Section
4.2.5. The Series C Conversion Rate shall be determined by dividing
(a) 7.905% of the Assumed Common Shares (as defined below) as of the
Conversion Date by (b) 3000. For that purpose, the Assumed Common
Shares shall mean the quotient of (i) the number of shares of Common
Stock (regardless of class) that would be outstanding if all authorized
shares of Series A Preferred Stock (whether or not issued or
outstanding) and Series B Preferred Stock (whether or not issued or
outstanding) were then converted into Class A Common Stock and all
outstanding options or other rights to purchase or acquire Common Stock
(whether or not then exercisable) were then exercised, divided by (ii)
.92095. The 7.905% and .92095 figures given this Section 4.2.5(d) are
based on the number of authorized shares of capital stock as of
___________, 1997, and upon any amendment of this Certificate of
Incorporation to change the number of authorized shares, this Section
4.2.5(d) shall also be amended to adjust those figures in a manner that
causes such change to affect all authorized shares of capital stock as
of __________, 1997 proportionately on a fully diluted basis. If any
shares of Series C Preferred Stock are converted before the occurrence
of the first Fundamental Change, the Assumed Common Shares shall
include the number of Additional Series B Conversion Shares that would
be issuable upon conversion of the Series B Preferred Stock if a
Fundamental Change had occurred and the Series A Rate of Return were
45% or more. In that event, the additional shares issuable upon
conversion as a result of the inclusion of the Additional Series B
Conversion Shares in the Assumed Common Shares (the "Excess Shares")
shall be represented by a separate certificate that bears a legend
referring to the Corporation's right to recover Excess Shares under
this Section 4.2.5(d). If, upon the occurrence of the first
Fundamental Change after the conversion of any Series C Preferred
Stock, the Series A Rate of Return is less than 45%, then the Series C
Conversion Rate shall be recomputed based on a number of Assumed Common
Shares determined as of the Conversion Date, but taking into account
the actual number of Additional Series B Conversion Shares, and the
then holders of the Excess Shares (in proportion to their holdings
thereof) shall return to the Corporation for cancellation a number of
Excess Shares equal to the excess of the number of shares of Class A
Common Stock originally issued upon such conversion of Series C
Preferred Stock over the number of shares of Class A Common Stock that
would have been so issued based on the recomputed Series C Conversion
Rate. If, after the conversion of any Series C Preferred Stock but
prior to the conversion of all of the Series B Preferred Stock, the
Additional Conversion Rate is adjusted as provided in Section
4.2.5(c)(ii), the Series C Conversion Rate shall be redetermined as of
the Conversion Date, but taking into account the adjusted Additional
Conversion Rate, and the Corporation shall issue to the then holders of
the shares of Class A Common Stock issued upon such conversion, without
additional consideration, a number of shares of Class A Common
- 17 -
<PAGE> 175
Stock equal to the additional shares of Class A Common Stock that would
have been issued upon such conversion based on the recomputed Series C
Conversion Rate.
(e) No adjustment shall be required under Section
4.2.5(b), (c) or (d) unless such adjustment would require an increase
or decrease of at least 1% in the number of shares of Class A Common
Stock issuable upon conversion of a share of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, respectively;
provided, however, that any adjustments which by reason of this Section
4.2.5(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
(f)(i) The Corporation shall not effect any consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets, as
the case may be, shall assume by written instrument executed and mailed
or delivered to the holders of the Preferred Stock at the last address
of such holders appearing on the books of the Corporation, the
obligation to deliver to such holders such shares of stock, securities
or assets as, in accordance with the provisions of this Section 4.2.5,
are deliverable upon conversion of the Preferred Stock.
(ii) If a purchase, tender or exchange offer is made to and
accepted by the holders of more than 50% of the outstanding shares of
Common Stock, then the Corporation shall not effect any consolidation,
merger or sale with the Person (hereinafter defined) having made such
offer or with any Affiliate (hereinafter defined) of such Person
unless, prior to the consummation of such consolidation, merger or
sale, the holders of the Preferred Stock shall have been given a
reasonable opportunity to then elect to receive upon the conversion of
their shares of Preferred Stock either the stock, securities or assets
then issuable with respect to the Class A Common Stock or, if
different, the stock, securities or assets, of the equivalent, issued
to previous holders of the Class A Common Stock in accordance with such
offer, computed as though the holders of the Preferred Stock had been,
at the time of such offer, holders of the stock, securities or assets
then purchasable upon the exercise of the conversion rights represented
hereby.
(iii) As used in this Section 4.2.5(f), the term "Person"
shall include an individual, a partnership, a corporation, a limited
liability company, a trust, a joint venture, an unincorporated
organization and a government or any department or agency thereof, and
an "Affiliate" of any Person shall mean any Person directly or
indirectly controlling, controlled by or under direct or indirect
common control with, such other Person. A Person shall be deemed to
control a corporation if such Person possesses, directly or indirectly,
the power to direct or cause the direction of the
- 18 -
<PAGE> 176
management and policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise.
(g) No fractional shares of Class A Common Stock shall be
issued upon conversion of Preferred Stock. If more than one
certificate evidencing shares of Preferred Stock shall be surrendered
for conversion at one time by the holder, the number of full shared
issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Preferred Stock so surrendered. Instead
of any fractional share of Class A Common Stock that would otherwise be
issuable to a holder upon conversion of any shares of Preferred Stock,
the Corporation shall pay a cash adjustment in respect of such
fractional share in an amount equal to the value thereof based on the
value thereof as determined in good faith by the Board of Directors of
the Corporation.
(h) The Corporation shall at all times reserve and keep
available, free from preemptive rights out of its authorized and
unissued stock, solely for the purpose of effecting the conversion of
the Preferred Stock, such number of shares of its Class A Common Stock
as shall from time to time be sufficient to effect the conversion of
all shares of Preferred Stock from time to time outstanding.
(i)(1) If the Board of Directors of the Corporation makes a
determination pursuant to Section 4.2.5(b)(ii)(E) or makes a
determination of the Additional Conversion Rate pursuant to Section
4.2.5(c) and such determination is made without the affirmative vote or
consent of a Series B Director (including, without limitation, a
situation in which there is no Series B Director), the Series B Holders
may demand, by notice delivered to the Corporation by registered or
certified mail not later than 30 days after such holders were mailed
notice of such determination by the Corporation pursuant to Section
4.2.5(b)(ii)(I), that the correctness of such determination be
submitted to binding arbitration under the Commercial Arbitration Rules
of the American Arbitration Association. The arbitration shall be
conducted in Denver, Colorado before a single arbitrator jointly
selected by the Board of Directors of the Corporation (the "Board") and
the Series B Holders or, if they are unable to agree on an arbitrator,
before a panel of three arbitrators, one selected by the Board, one
selected by a majority of the Series B Holders and the third selected
by the other two arbitrators. Failing the selection of any required
arbitrator, the selection shall be made by the American Arbitration
Association.
(2) If the Board makes a determination pursuant to Section
4.2.5(b)(ii)(K) and such determination is made without the affirmative
vote or consent (i) of a majority of the members of the Board who have
been designated for election by a majority of the Series A Preferred
Holders (the "Series A Directors"), including, without limitation, a
situation in which there arc no Series A Directors, and (ii) of a
Series B Director, then the Series A Holders, if such affirmative vote
or consent of
- 19 -
<PAGE> 177
the Series A Directors was not obtained (the "Series A Disapproval"),
or the Series B Holders, if such affirmative vote or consent of a
Series B Director was not obtained (the "Series B Disapproval"), may
demand, by notice delivered to the Corporation by registered or
certified mail not later than 30 days after such holders were mailed
notice of such determination by the Corporation pursuant to Section
4.2.5(b)(ii)(I), that the correctness of such determination be
submitted to binding arbitration under the Commercial Arbitration Rules
of the American Arbitration Association. The arbitration shall be
conducted in Denver, Colorado before a single arbitrator jointly
selected by the Board, the Series A Holders (in the event of a Series A
Disapproval) and the Series B Holders (in the event of a Series B
Disapproval) or, if they are unable to agree on an arbitrator, before a
panel of three arbitrators, one selected by the Board, one selected by
a majority of the Series A Holders (in the event of a Series A
Disapproval) and the third selected by a majority of the Series B
Holders (in the event of a Series B Disapproval); provided, however,
that if there was not a Series A Disapproval or a Series B Disapproval,
as the case may be, then the third arbitrator shall be selected by the
other two arbitrators who were selected pursuant to the procedure
described above in this sentence. Failing the selection of any
arbitrator, the selection shall be made by the American Arbitration
Association.
(3) Where the dispute involves solely financial or
accounting matters, the arbitrator or arbitrators shall be certified
public accountants or other persons with appropriate financial and
accounting knowledge and experience to handle such matters; and where
it involves solely matters of legal interpretation, the arbitrator or
arbitrators shall be lawyers, law professors or other persons with
appropriate legal knowledge and experience to handle such matters.
Where the dispute involves mixed financial, accounting and legal
issues, a good faith attempt will be made by the parties to select an
arbitrator or arbitrators with an appropriate mix of knowledge and
experience to handle such matters. The determination of the
arbitrators shall be final and binding and shall replace the
determination previously made pursuant to Section 4.2.5(b)(ii)(E),
Section 4.2.5(c) or Section 4.2.5(b)(ii)(K), as the case may be. The
prevailing party or parties in any such arbitration shall be entitled
to all reasonable out-of-pocket costs and expenses, including fees and
expenses of the arbitrators and attorneys, incurred in connection
therewith. Notwithstanding anything to the contrary set forth in this
Section 4.2.5(i), the right of the Series A Holders or the Series B
Holders to demand arbitration shall be conditioned upon at least a
majority of the Series A Holders or at least a majority of the Series B
Holders, as the case may be, delivering to the Corporation their
agreement to be bound by the terms of the preceding sentence.
4.3 Common Stock. Except as otherwise provided in this
Certificate of Incorporation, the rights of Class A Common Stock and
the Class B Common Stock shall be identical in all respects on a
share-for-share basis.
- 20 -
<PAGE> 178
4.3.1 Voting. Each outstanding share of Class A Common
Stock shall have one vote on all matters submitted to a vote of the
stockholders. The Class A Common Stock shall vote as a single class
with the Preferred Stock. The holders of the Class B Common Stock
shall not be entitled to vote on any matter submitted to the
stockholders, except as otherwise required by Section 242 of the
Delaware General Corporation Law; provided, however, that the holders
of the Class B Common Stock shall not be entitled to vote on any
amendment to the Certificate of Incorporation that would increase or
decrease the number of authorized shares of Class B Common Stock.
4.3.2 Dividends. (a) Subject to the preferential rights of
the holders of Preferred Stock, the holders of the Class A Common Stock
shall be entitled to share in the payment of dividends as, when and if
declared by the Board of Directors out of funds legally available
therefor to the extent provided in Section 4.2.1(d).
(b) The holders of Class B Common Stock shall not
be entitled to receive any dividends and the Board of Directors shall
not declare or pay any dividends or make any other distributions (other
than distributions in liquidation permitted by Section 4.2.3) on the
Class B Common Stock.
4.3.3 Liquidation. Holders of Common Stock shall have the
right to participate in the assets of the Corporation upon the
liquidation, dissolution or winding up of the Corporation to the extent
provided in Section 4.2.3.
4.3.4 Conversion of Class B Common Stock. Effective
concurrently with the closing of an underwritten public offering
registered under the Securities Act of 1933, as amended from time to
time, of Common Stock of the Corporation, each share of the
Corporation's Class B Common Stock issued and outstanding as of such
time shall, without further action, be reclassified and changed into a
number of shares of fully paid and nonassessable share of Class A
Common Stock equal to the Class B Reclassification Rate, and all then
outstanding rights to purchase of otherwise acquire shares of Class B
Common Stock from the Corporation shall, without further action,
represent the right to purchase or otherwise acquire, for the same
aggregate consideration, a number of shares of Class A Common Stock
equal to the number of shares of Class B Common Stock covered thereby
multiplied by the Class B Reclassification Rate. The Class B
Reclassification Rate shall be determined by: (a) dividing the sum of
(i) the number of Fully Diluted Shares (determined as provided in
Section 4.2.5) plus (ii) the number of shares of Class A Common Stock
issued or issuable upon conversion of the Series C Preferred Stock, by
.959374; (b) multiplying the quotient obtained in (a) by 4.0626%; and
(c) dividing the product obtained in (b) by the total number of
authorized shares of Class B Common Stock. If less than all of the
Class B Common Stock has been issued or is subject to outstanding
options at the time of the reclassification under this Section 4.3.4,
(i) the 4.0626% number given
- 21 -
<PAGE> 179
above shall be reduced by multiplying such number by a fraction, the
numerator of which is the sum of the number of shares of Class B Common
Stock then outstanding and the number of shares of Class B Common Stock
issuable under then outstanding options (whether or not such options
are then exercisable), and the denominator of which is the total number
of authorized shares of Class B Common Stock, and (ii) the .959374
number given above shall be increased to a number determined by
subtracting the percentage obtained in (i), expressed as a decimal,
from 100. The 4.0626% and .959374 figures given in this Section 4.3.4
are based on the number of authorized shares of capital stock as of
__________, 1997, and upon any amendment of this Certificate of
Incorporation to change the number of authorized shares, this Section
4.3.4 shall also be amended to adjust those figures in a manner that
causes such change to affect all authorized shares of capital stock as
of ___________, 1997 proportionately on a fully diluted basis. The
holders of record of certificates for shares of Class B Common Stock as
of the time of such reclassification shall promptly surrender such
certificates in exchange for a certificate or certificates representing
the shares of Class A Common Stock into which such shares of Class B
Common Stock have been reclassified. Class B Common Stock so
reclassified may not be reissued.
SECOND: That the stockholders of said corporation duly adopted such
resolutions by written consent effective June __, 1997 in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware, and written notice thereof has been given as provided in such Section
228.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, RentX Industries, Inc. has caused this certificate
to be executed by Richard M. Tyler, its Vice President, and attested to by
Richard M. Tyler, its Secretary, on this ___ day of June, 1997.
RENTX INDUSTRIES, INC.
By: /s/ Richard M. Tyler
-------------------------------------
Richard M. Tyler, Vice President
- 22 -
<PAGE> 180
[COMPUTATIONS/EXAMPLE 1
NOT PROVIDED]
<PAGE> 181
APPENDIX B
[THIS DOCUMENT APPEARS IN EXHIBIT 10.5]
<PAGE> 182
APPENDIX C
[THIS DOCUMENT APPEARS IN EXHIBIT 10.4]
<PAGE> 183
SCHEDULE II TO
INVESTMENT AGREEMENT
HOLDER OF CLASS A COMMON STOCK
AT FIRST CLOSING
BACE 1,000 shares of Class A Common Stock
PURCHASERS OF PREFERRED SHARES AND BACE SHARES AT FIRST CLOSING
PURCHASER SHARES BEING PURCHASED
- --------- ----------------------
BACE(1) 200 BACE Shares
Mesirow 2,510 Preferred Shares
Edgewater 2,510 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT SECOND CLOSING
PURCHASER SHARES BEING PURCHASED
- --------- ----------------------
Trustees of Grinnell College ("Grinnell") 1,277 Preferred Shares
George A. Evans 300 Preferred Shares
Larry W. Davidson 200 Preferred Shares
Gary J. Kulesza 60 Preferred Shares
Charles D. Greenidge 50 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT THIRD CLOSING
PURCHASER SHARES BEING PURCHASED
- --------- ----------------------
Grinnell 340 Preferred Shares
Inroads Capital Partners, L.P. ("Inroads") 1,000 Preferred Shares
- ----------------------------------
(1) Included in this category are shares sold by BACE to B. Scott Pullara,
Robert J. Kilgore, and Jeffrey N. MacDowell pursuant to Stock Purchase
and Stock Transfer Agreements, dated April 1, 1997, April 25, 1997, and
April 10, 1997, respectively, and to Charles D. Greenidge pursuant to a
Stock Purchase Agreement (which also contains transfer restrictions),
dated June 9, 1997. Messrs. Pullara, Kilgore, MacDowell and Greenidge
also executed Irrevocable Proxies appointing BACE attorney to vote each
of their shares. Each buyer also executed Agreements to be Bound to the
Investment Agreement, the Stockholders Agreement and the Registration
Rights Agreement. The BACE Shares owned by Mr. Kilgore are subject to a
Stock Pledge Agreement, Security Agreements and Secured Promissory Notes,
dated April 30, 1997, in favor of Craig J. Zoellner and Richard M.
Tyler.
<PAGE> 184
PURCHASERS OF PREFERRED SHARES AT FOURTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Grinnell 675 Preferred Shares
Inroads 465 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT FIFTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Inroads 206 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT SIXTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Grinnell 271 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT SEVENTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 43 Preferred Shares
Edgewater 43 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT EIGHTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 451 Preferred Shares
Edgewater 451 Preferred Shares
Grinnell 358 Preferred Shares
Inroads 332 Preferred Shares
Arnold A. Bernstein 250 Preferred Shares
-2-
<PAGE> 185
PURCHASERS OF PREFERRED SHARES AT NINTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 355 Preferred Shares
Edgewater 355 Preferred Shares
Grinnell 439 Preferred Shares
Inroads 315 Preferred Shares
Lawrence R. Redwine 200 Preferred Shares
John H. Hays 170 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT TENTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 301 Preferred Shares
Edgewater 301 Preferred Shares
Grinnell 300 Preferred Shares
Inroads 208 Preferred Shares
PURCHASERS OF PREFERRED SHARES AT ELEVENTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Charles E. Baker 100 Preferred Shares
Thomas D. Nugent 125 Preferred Shares
Norman C. Kiser 200 Preferred Shares
Richard H. Baldwin 100 Preferred Shares
Gary J. Kulesza 40 Preferred Shares
Jeffrey A. Eide 200 Preferred Shares
-3-
<PAGE> 186
PURCHASERS OF PREFERRED SHARES AT TWELFTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Mesirow 142 Preferred Shares
Edgewater 142 Preferred Shares
Grinnell 142 Preferred Shares
Inroads 99 Preferred Shares
PURCHASER OF PREFERRED SHARES AT THIRTEENTH CLOSING
PURCHASER SHARES TO BE PURCHASED
- --------- ----------------------
Hershel A. Manning 200 Preferred Shares
PURCHASERS OF PREFERRED SHARES AND SERIES C PREFERRED SHARES AT
FOURTEENTH CLOSING
SHARES TO BE PURCHASED
----------------------
PURCHASER PREFERRED SHARES SERIES C PREFERRED SHARES
- --------- ---------------- -------------------------
Mesirow 263 Preferred Shares 813 Series C Preferred
Edgewater 263 Preferred Shares 813 Series C Preferred
Grinnell 263 Preferred Shares 813 Series C Preferred
Inroads 180 Preferred Shares 561 Series C Preferred
See Section 2.4 of Disclosure Schedule, as supplemented, for description of
possible purchases of Preferred Shares.
See Exhibit A hereto for a list of outstanding options granted to employees of
the Corporation to purchase its Class B Common Stock. All of the options have
an exercise price of $1.00 per share, except (i) Mr. Bernstein has the option to
acquire 38,462 shares at an exercise price of $0.15 per share and 64,984 shares
at an exercise price of $8.00 per share, (ii) Mr. Kulesza has the option to
acquire 19,231 shares at an exercise price of $0.10 per share and 32,532 shares
at an exercise price of $8.00 per share, (iii) Mr. Nugent has the option to
acquire 40,000 shares at an exercise price of $7.00 per share, and (iv) the
options granted May 22, 1997, and as of the Fourteenth Closing have an exercise
price of $5.00 per share.
-4-
<PAGE> 187
Exhibit A
OUTSTANDING EMPLOYEE STOCK OPTIONS
<TABLE>
<CAPTION>
No. of Shares
of Class B
Common Stock
Employee Title Subject to Options
-------- ----- ------------------
<S> <C> <C>
Arnold A. Bernstein President 103,446
Gary J. Kulesza Executive Vice President 51,763
Thomas D. Nugent Executive Vice President - 40,000
Chief Financial Officer
Charles E. Baker Assistant Director of Development 4,808
Stephen T. Carlson Controller 2,500
Larry W. Davidson Director of Operations 2,000
George A. Evans Director of Development 2,000
Mary Ann Milton Director of Human Resources 2,000
Hershel A. Manning* Director of Stores Western Region 1,300
Nola M. Greenwald Accounting Manager 1,250
Hubert G. Brown National Sales Manager 1,250
Lance A. White Purchasing/Merchandising Manager 1,250
James Waite Associate Counsel 1,000
Jeffrey K. Henderson Safety and Training Manager 1,000
Douglas L. Sharpe Area Manager (Denver) 1,000
Fredric J. Opp Area Manager (Mountains) 1,000
Lawrence Redwine Area Manager (Oklahoma) 1,000
Don Bedford Area Manager (Spokane) 1,000
John H. Hays Area Manager (Development/Arkansas) 1,000
Patricia A. Pipkin Area Manager (Arkansas) 1,000
Richard H. Baldwin Operations Manager 1,000
Daniel C. Showalter Assistant Manager and Special Events Manager 1,000
Jon Kevin Manning* Area Manager New Mexico 1,000
Christopher L. Titus* Area Manager Michigan 1,000
Jeffrey A. Eide* Area Manager 1,000
David Todd Manning* Assistant Area Manager New Mexico 750
Jeffrey W. Titus* Assistant Area Manager Michigan 750
Clint A. Gregory Senior Store Manager 300
(El Dorado, Arkansas)
Tom L. Overton Senior Store Manager 300
(Hot Springs, Arkansas)
Terry J. Hornick Senior Store Manager 300
(#201 Spokane)
Christopher T. Sideroff Area Sales Supervisor - Arkansas 300
</TABLE>
-5-
<PAGE> 188
<TABLE>
<CAPTION>
No. of Shares
of Class B
Common Stock
Employee Title Subject to Options
-------- ----- ------------------
<S> <C> <C>
Leonard Lee Sedillo* Senior Manager #42 New Mexico 300
Raquel C. Roysdon* Office Manager 300
Allan W. Miller Manager #101 Denver 150
Everett M. Schneider Manager #102 Denver 150
Mark D. Holt Manager #103 Denver 150
Dan E. Parker Manager #104 Denver 150
Robert L. Nibbe Manager #106 Denver 150
Glenn A. Davidson Manager #105 Denver 150
Steven J. Nelson Manager #107 Denver 150
Robert L. Patterson Manager #108 Denver 150
Michael J. Pfeifer Manager #109 Denver 150
Edward Crilly Manager #302 Mountains 150
Rance M. Ketterling Manager #303 Mountains 150
Donna M. Carter Manager #304 Mountains 150
William Tabor Manager #305 Mountains 150
Thomas R. Grote Manager #202 Spokane 150
Darline Muggli Manager #204 Spokane 150
Dave R. Kistler Project Manager - Computer Spokane 150
Michelle Pizello Manager #205 Spokane Special Event (Party) 150
Tim Campbell Manager #206 Spokane 150
Tod Campbell Manager #207 Spokane 150
John P. Redwine Manager #401 Oklahoma 150
Brett E. Dawkins Manager #402 Oklahoma 150
Kevin Bogdan Manager #403 Oklahoma 150
Frank L. Burroughs III Manager - Camden, Arkansas 150
Rodger S. Bays Manager - Magnolia, Arkansas 150
Christopher M. Adams Manager - Arkadelphia 150
Janine C. Leupold Area Accountant 150
Maureen C. Davidson Accounts Receivable Supervisor 150
Charles Lance Ikner Manager #404 Oklahoma 150
Douglas V. Richardson Manager - Denver 150
David E. Kite Manager #032 Virginia 150
Gary W. Durham Manager #033 Virginia 150
Harold D. Frazier Manager #034 Virginia 150
Gregory R. Funk Manager #036 Virginia 150
Robert R. Seward Manager #037 Virginia 150
Michael Joe Ormseth* Manager #43 New Mexico 150
Charles Wesley Manning* Manager #45 New Mexico 150
Mark Anthony Halvorsen* Manager #46 New Mexico 150
Michael G. Roberts* Manager Special Events Warehouse MI 150
</TABLE>
-6-
<PAGE> 189
<TABLE>
<CAPTION>
No. of Shares
of Class B
Common Stock
Employee Title Subject to Options
-------- ----- ------------------
<S> <C> <C>
Rolando S. Sales* Store Manager Novi Tool Michigan 150
Jerry Roffey* Store Manager Plymouth Michigan 150
Edward T. Spiker* Store Manager Brighton Michigan 150
Paul V. Scafuri* Store Manager Livonia Michigan 150
Joe Castile* Manager South Lyon Michigan 150
Carol J. McBride* Manager Novi Party Store Michigan 150
William T. Wright* Store Manager 150
Matthew J. Simonson* Store Manager 150
Sean F. Farwell* Store Manager 150
John J. Wooten* Store Manager 150
Rich R. Rainey Assistant Manager #101 Denver 75
Robert A. Howell Assistant Manager #102 Denver 75
David C. Takacs Assistant Manager #103 Denver 75
Charles W. Milhimes Assistant Manager #104 Denver 75
Sheila D. Nibbe Assistant Manager #105 Denver 75
Steven J. Shoreland Assistant Manager #106 Denver 75
Brian H. Treat Assistant Manager #107 Denver 75
Robert C. Doran Assistant Manager #109 Denver 75
Lonny R. Glatt Assistant Manager #201 Spokane 75
Roxine Campbell Assistant Manager #302 Mountains 75
Michael Siegfried Assistant Manager #204 Spokane 75
Kim A. Godfrey Assistant Manager #202 Spokane 75
Kenneth Geren Assistant Manager #203 Spokane 75
Shane E. Wade Assistant Manager #305 Mountains 75
Danny J. Williams Assistant Manager - Eldorado, Arkansas 75
Larry W. Talley Assistant Manager - Camden, Arkansas 75
Donna L. Gilzow Assistant Manager - Hot Springs, Arkansas 75
Jerry R. Poulsen Sales/Field - Denver 75
Dean Pfeifer Sales/Field - Denver 75
Donna J. Hamby Office Manager - El Dorado, Arkansas 75
Steve Franetovich Salesman - Oklahoma 75
Richard C. Fellet Assistant Manager - Denver 75
Lachele A. Campbell Assistant Manager - Spokane
Special Event (Party) 75
Thomas L. Harris Assistant Manager #032 Virginia 75
David W. Correll Assistant Manager #032 Virginia 75
Oliver G. Weaver Maintenance Supervisor #032 Virginia 75
Robert F. Dudley Assistant Manager #033 Virginia 75
Thomas R. Painter Maintenance Supervisor #033 Virginia 75
Charles L. Schartiger Assistant Manager #034 Virginia 75
</TABLE>
-7-
<PAGE> 190
<TABLE>
<CAPTION>
No. of Shares
of Class B
Common Stock
Employee Title Subject to Options
-------- ----- ------------------
<S> <C> <C>
Gerald R. Staley Assistant Manager #036 Virginia 75
Michael T. Osgood Special Events Manager #036 Virginia 75
Wenda F. Workman Assistant Manager #037 Virginia 75
Joseph Barry Muench* Assistant Manager #42 New Mexico 75
Luis G. Alarcon* Shop Supervisor #42 New Mexico 75
Barbara J. Rosa* Assistant Manager #43 New Mexico 75
Allen R. McCall* Tent Supervisor #43 New Mexico 75
James Leon Horcasitas* Assistant Manager #45 New Mexico 75
Harry Scott Pate* Assistant Manager #46 New Mexico 75
Michael John Tarazoff* Outside Sales New Mexico 75
Robert Hamilton Romer* Outside Sales New Mexico 75
Mary Lou Carey* Special Events Supervisor Michigan 75
John F. Kepke* Maintenance Mechanic Supervisor MI 75
Terri Gromacki* Assistant Store Manager Plymouth MI 75
Jacklyn S. Gagnon* Special Events Sales Michigan 75
Deborah L. Rader* Assistant Manager Party Livonia MI 75
Greg M. Karaim* Assistant Manager Tools Livonia MI 75
Glen Chamberlin* Service Manager Novi Michigan 75
John A. Mazur* Asst. Store Manager 75
Harry K. Braswell* Asst. Store Manager 75
George B. Westbrook* Asst. Store Manager 75
Greg A. Sanchez* Asst. Store Manager 75
Stacey M. Werner* Office Manager Michigan 75
Total 240,967
</TABLE>
- --------------------
* Options granted to these persons were or will be granted either on May 22,
1997 or on the date of the Fourteenth Closing.
-8-
<PAGE> 191
EXHIBIT 10.3
AMENDMENT NO. 6
TO
INVESTMENT AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 6 to Investment Agreement (this
"Amendment"), effective as of September 19, 1997 is made by and among RentX
Industries, Inc. ("RentX") and the other parties to the Investment Agreement
(as defined below). As provided in the Investment Agreement, this Amendment
shall become binding upon RentX and all such other parties when it has been
signed by RentX and the Majority Holders (as defined in the Investment
Agreement), whether or not it is signed by all of the persons for whom
signature spaces are provided below.
WHEREAS, RentX, Mesirow Capital Partners VI ("Mesirow"), The
Edgewater Private Equity Fund II, L.P. ("Edgewater") and BACE Investments, LLC
("BACE") have entered into that certain Investment Agreement, dated as of May
15, 1996 (as amended, the "Investment Agreement");
WHEREAS, Trustees of Grinnell College, Inroads Capital
Partners, L.P. and certain other persons have become parties to the Investment
Agreement at various times prior to the date hereof; and
WHEREAS, the parties desire to enter into this Amendment in
order to amend certain provisions of the Investment Agreement;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the respective parties hereto hereby agree as follows:
1. Effective Date. The Amendment set forth herein shall
automatically become effective upon the consummation of a Qualified Public
Offering (as that term is defined in the Stockholders Agreement by and among
RentX, Mesirow, Edgewater and BACE dated as of May 15, 1996, as heretofore or
hereafter amended); provided, however, that if a Qualified Public Offering has
not been consummated on or before December 31, 1997, this Amendment shall
terminate and shall not thereafter become effective. The date upon which this
Amendment becomes effective is referred to herein as the "Effective Date".
2. Deletion of Certain Sections. Effective on the
Effective Date, the Investment Agreement is amended by deleting therefrom
Sections 4.1, 4.3, 4.4, 5.1 through 5.8 and 5.11 through 5.14.
<PAGE> 192
3. Information. Effective on the Effective Date,
Section 4.2 of the Investment Agreement is hereby amended to read in its
entirety as follows:
4.2 Financial Statements and Other Information. The
Corporation will deliver to the Purchasers, Bace and any
subsequent holder of Shares or Bace Securities copies of all
reports filed by the Company with the Securities and Exchange
Commission, Nasdaq or any stock exchange on which the
Company's securities may be listed, and all press releases
made by the Company, promptly after such reports or releases
are filed or disseminated. The Company's obligations under
this Section 4.2 shall not run to any holder of Shares or Bace
Securities who purchases such Shares or Bace Securities in the
public market.
4. Default. Effective on the Effective Date, Article VI
of the Investment Agreement is hereby amended to read in its entirety as
follows:
ARTICLE VI
Events of Default
Section 6.1. Events of Default. If any of the following
events (each is herein referred to as an "Event of Default")
occur:
(a) default shall occur in the performance of or
compliance with any covenant contained herein which
shall continue uncured for more than 20 days (in the
case of a payment default) or 30 days (in the case of
any other default) after the Corporation becomes
aware of such default;
(b) a material breach by the Corporation of the
Registration Rights Agreement; or
(c) a material breach by the Corporation of the
Stockholders Agreement;
then, when any Event of Default has occurred and shall be
continuing, and unless the holder or holders of a majority or
more of the Shares at the time outstanding shall have waived
such Event of Default in writing, each holder of Shares or
Bace Securities shall have and may exercise all of the rights
and remedies provided in this Agreement, the
- 2 -
<PAGE> 193
Registration Rights Agreement and the Stockholders Agreement,
as well as any other rights of such holder in law or in
equity.
Section 6.2. Remedies on Default. (a) If an Event of Default
shall have occurred pursuant to Section 6.1, holders of the
Shares or Bace Securities shall be entitled to the rights
specified in Section 6.1, and, in addition, may proceed to
protect and enforce any or all other rights, powers and
remedies of such holders of Shares or Bace Securities, as the
case may be, by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance
of any covenant contained herein or in the Registration Rights
Agreement or the Stockholders Agreement or for an injunction
against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any right, power or remedy granted
hereby or thereby or available at law, in equity, by statute
or otherwise.
(b) No right, power or remedy conferred hereby or by
ownership of the Shares or the Bace Securities or now or
hereafter available at law, in equity, by statute or otherwise
shall be exclusive of any other right, power or remedy
referred to herein or therein or now or hereafter available at
law, in equity, by statute or otherwise; provided, however,
that the right of any holder of the shares or the Bace
Securities to make a claim against the Corporation for damages
for breach of representation or warranty shall only exist if
such breach of representation or warranty is of a type or
amount as to which indemnification could be sought under
Section 5.10.
5. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Illinois
without regard to its conflicts of law doctrine.
6. Counterparts. This Amendment may be executed in
several counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
(Signature Page follows)
- 3 -
<PAGE> 194
IN WITNESS WHEREOF, this Amendment No. 6 to Investment
Agreement has been duly executed and delivered by the undersigned as of the
date first above written.
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A BERNSTEIN
-----------------------------------
Name: ARNOLD A BERNSTEIN
---------------------------------
Title: PRESIDENT
--------------------------------
BACE INVESTMENTS, LLC
By: /s/ CRAIG J. ZOELLNER
-----------------------------------
Name: CRAIG J. ZOELLNER
---------------------------------
Title: MEMBER
--------------------------------
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.,
General Partner
By: /s/ THOMAS E. GALUHN
------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY
FUND II, L.P.
By: Gordon Management, Inc.,
General Partner
By: /s/ JAMES A. GORDON
------------------------------
James A. Gordon
President
(Signature Page to Amendment No. 6
to the Investment Agreement)
<PAGE> 195
TRUSTEES OF GRINNELL COLLEGE
By: /s/ DAVID S. CLAY
-----------------------------------
David S. Clay
Vice President for Business
and Treasurer
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partners,
L.P., General Partner
By: /s/ MARGARET G. FISHER
---------------------------
Margaret G. Fisher
General Partner
/s/ GEORGE A. EVANS
--------------------------------------
George A. Evans
/s/ LARRY W. DAVIDSON
--------------------------------------
Larry W. Davidson
/s/ GARY J. KULESZA
--------------------------------------
Gary J. Kulesza
/s/ CHARLES D. GREENIDGE
--------------------------------------
Charles D. Greenidge
/s/ ARNOLD A. BERNSTEIN
--------------------------------------
Arnold A. Bernstein
/s/ LAWRENCE R. REDWINE
--------------------------------------
Lawrence R. Redwine
(Signature Page to Amendment No. 6
to the Investment Agreement)
<PAGE> 196
/s/ JOHN H. HAYS
--------------------------------------
John H. Hays
/s/ B. SCOTT PULLARA
--------------------------------------
B. Scott Pullara
/s/ JEFFREY N. MACDOWELL
--------------------------------------
Jeffrey N. MacDowell
/s/ ROBERT J. KILGORE
--------------------------------------
Robert J. Kilgore
/s/ NORMAN C. KISER
--------------------------------------
Norman C. Kiser
/s/ RICHARD H. BALDWIN
--------------------------------------
Richard H. Baldwin
/s/ CHARLES E. BAKER
--------------------------------------
Charles E. Baker
/s/ THOMAS D. NUGENT
--------------------------------------
Thomas D. Nugent
/s/ JEFFREY A. EIDE
--------------------------------------
Jeffrey A. Eide
/s/ HERSHEL A. MANNING
--------------------------------------
Hershel A. Manning
(Signature Page to Amendment No. 6
to the Investment Agreement)
<PAGE> 1
EXHIBIT 10.4
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement"), dated as of
May 15, 1996, is among BACE Investments, LLC, a Colorado limited liability
company ("Bace"), Mesirow Capital Partners VI, an Illinois limited partnership
("Mesirow"), The Edgewater Private Equity Fund II, L.P., a Delaware limited
partnership ("Edgewater," Mesirow and Edgewater together with any other parties
to this Agreement who purchase shares of Preferred Stock pursuant to the
Investment Agreement (as each term is defined below) or successors or assigns
of such purchasers, being collectively referred to as the "Purchasers"),
Richard M. Tyler ("Tyler") and Craig J. Zoellner ("Zoellner"), and each other
holder of record of Common Stock, as defined herein, or an option to acquire
Common Stock who may execute this Agreement or hereafter execute a separate
agreement to be bound by the terms hereof ( Bace, Purchaser and each other
person that may become a party hereto as contemplated hereby are hereinafter
collectively referred to as the "Parties" and individually a "Party"), and
RentX Industries, Inc., a Delaware corporation (the "Corporation").
RECITALS
WHEREAS, the Corporation has authorized capital stock
consisting of 233,900 shares of Class A Common Stock, 12,350 shares of
nonvoting Class B Common Stock, 15,000 shares of convertible Series A Preferred
Stock, $1.00 par value per share (the "Series A Preferred"), and 200 shares of
convertible Series B Preferred Stock, $1.00 par value (the "Series B
Preferred") having the respective rights and powers set forth in the
certificate of incorporation of the Corporation (as amended from time to time,
the "Charter");
WHEREAS, the Parties are the legal and beneficial owners of
all of the issued and outstanding shares of Capital Stock (as defined below) of
the Corporation on the date hereof; and
WHEREAS, the Parties have agreed, among other things, to make
certain provisions for the management of the Corporation and its subsidiaries,
and to restrict the transfer of their Capital Stock.
NOW, THEREFORE, in consideration of the covenants and
agreements made herein, the Parties and the Corporation agree as follows:
<PAGE> 2
ARTICLE 1
CERTAIN DEFINED TERMS
1.1 Certain Terms. In addition to terms defined elsewhere in
this Agreement, for purposes of this Agreement, except as otherwise set forth
herein or the context otherwise requires, the following terms shall have the
following meanings:
"Accredited Investor" shall have the meaning set forth in
Regulation D or any successor rule then in effect.
"Accredited Party" has the meaning set forth in Section
3.1(c)(i).
"Affiliate" of a Party means (i) in all cases, any person or
entity controlling, controlled by or under common control with, such Party,
(ii) in the case of Mesirow, Mesirow Financial Services, Inc. ("MFS"), any of
the general or limited partners of Mesirow, any general or limited partners of
such partners, any person or entity controlling, controlled by or under common
control with Mesirow or MFS, Edgewater or any Affiliate of Edgewater, (iii) in
the case of Edgewater, Gordon Management, Inc. ("GMI"), any of the general or
limited partners of Edgewater, any general or limited partners of such
partners, any person or entity controlling, controlled by or under common
control with Edgewater or GMI, Mesirow or any Affiliate of Mesirow, (iv) in the
case of a Party who is a natural person, such Party's spouse, the issue of such
Party or such Party's spouse (including any by adoption), such Party's estate
and any trust entirely for the benefit of any one or more of such Party, such
Party's estate, such Party's spouse and the issue of such Party or such Party's
spouse (including any by adoption), (v) in the case of Bace, Tyler, Zoellner,
any Affiliate of Tyler, any Affiliate of Zoellner or any employee of Bace other
than Tyler or Zoellner (a "Bace Employee"), (vi) in the case of Tyler, any
Affiliate of Tyler or any Bace Employee, Zoellner or any Affiliate of Zoellner,
and (vii) in the case of Zoellner, any Affiliate of Zoellner or any Bace
Employee, Tyler or any Affiliate of Tyler.
"Board of Directors" means the board of directors of the
Corporation.
"Capital Stock" means the Common Stock, the Preferred Stock
and any other class of capital stock of the Corporation that may be outstanding
from time to time.
"Class A Common Stock" means the Class A Common Stock of the
Corporation, par value $.01 per share.
"Class B Common Stock" means the Class B Common Stock of the
Corporation, par value $.01 per share, which stock generally is nonvoting.
-2-
<PAGE> 3
"Common Stock" means the Class A Common Stock and the Class B
Common Stock.
"Common Stock Equivalents" means (without duplication with any
other Common Stock or Common Stock Equivalents) rights, warrants, options
(including, without limitation, employee stock options), convertible securities
or indebtedness, exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock and securities convertible or exchangeable into Common Stock,
whether at the time of issuance or upon the passage of time or the occurrence
of some future event, including (without limitation) the Series A Preferred and
the Series B Preferred.
"Fully Diluted Common Stock" means, at any time, the then
outstanding Common Stock of the Corporation plus (without duplication) all
shares of Common Stock issuable, whether at such time or upon the passage of
time or the occurrence of future events, upon the exercise, conversion or
exchange of all then outstanding Common Stock Equivalents.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Investment Agreement" means the Investment Agreement dated as
of May 15, 1996, among the Corporation, the Purchasers and Bace, as may be
amended from time to time.
"Preferred Stock" means the Series A Preferred Stock and the
Series B Preferred Stock of the Corporation, par value $1.00 per share.
"Qualified Public Offering" means the sale in an underwritten
public offering or a series of public offerings, registered under the
Securities Act, of Common Stock which results in public ownership of not less
than 25% of the Fully Diluted Common Stock of the Corporation, which shares of
Common Stock are listed upon the New York Stock Exchange, the American Stock
Exchange or are approved for quotation on the NASDAQ National Market and which
offerings shall have resulted in the receipt by the Corporation of aggregate
cash proceeds (after deduction of underwriting discounts and the costs
associated with the offerings) of at least $8 million and with the average
price in such offering or offerings reflecting a valuation of the Fully Diluted
Common Stock (excluding shares being issued in the offering or offerings)
aggregating at least $30 million.
"Regulation D" means Regulation D promulgated by the SEC under
the Securities Act, as amended from time to time.
"SEC" means the Securities and Exchange Commission or any
successor governmental agency.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
-3-
<PAGE> 4
"Subsidiary" means any corporation or other entity, a majority
of whose capital stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions is at the time held by the Corporation or any Subsidiary
thereof.
ARTICLE 2
MANAGEMENT OF THE CORPORATION AND CERTAIN ACTIVITIES
2.1 Board of Directors.
(a) The Parties and the Corporation hereby acknowledge and
agree that the Board of Directors shall consist of five members; provided, that
either the Purchasers or Bace may elect to increase the size of the Board of
Directors to seven members at any time by notice given to the Corporation.
Bace shall be entitled to designate two of the directors (or three if the Board
of Directors has seven members) and the Purchasers shall be entitled to
designate the remaining three directors (or four if the Board of Directors has
seven members) at all times during the term of this Agreement. Accordingly,
the Parties and the Corporation agree to take all action within their
respective power, including, but not limited to, the voting of Capital Stock,
required to cause the Board of Directors to at all times (i) consists of five
members (or seven at the election of the Purchasers or Bace) and (ii) include
two designees (or three if the Board of Directors has seven members) of Bace,
as determined in its sole discretion, and three designees (or four if the
Board of Directors has seven members) of the Purchasers, as determined in
their sole discretion. The Corporation agrees that it shall cause the board of
directors of any and all Subsidiaries of the Corporation to consist of the same
members as of the Board of Directors. The Parties further agree that, unless
the Board of Directors concludes in good faith that such person has committed
misconduct or otherwise is unfit to serve as an officer of the Corporation,
that the Parties agree to take all action within their respective power to
cause each of Tyler and Zoellner to continue to be elected as a vice president
of the Corporation.
(b) In the event that any director (a "Withdrawing Director")
designated pursuant to Section 2.1(a) is unable to serve, or once having
commenced to serve, is removed or withdraws from the Board of Directors, such
Withdrawing Director's replacement (the "Substitute Director") on the Board of
Directors will be designated by the persons or entities entitled to designate
such director pursuant to Section 2.1(a); provided, that a director designated
pursuant to Section 2.1(a) may only be removed by the person or entity entitled
to designate such director pursuant to Section 2.1(a). The Corporation and
each of the Parties agree to take all action within its or his power,
including, but not limited to, the voting of Capital Stock, to cause the
election of such Substitute Director as soon as practicable following such
designation.
(c) In the event a Party ceases to be entitled to designate
directors pursuant to this Agreement, the vacancy or vacancies resulting
therefrom shall be filled by the directors or
-4-
<PAGE> 5
by the stockholders in the manner provided by applicable law. In the event a
Party chooses not to designate any director or directors, such directorship or
directorships shall not otherwise be filled and the size of the Board of
Directors shall be correspondingly reduced until such time as such Party elects
to designate a director or directors in accordance with this Agreement.
(d) The Corporation and the Parties agree that no action
shall be taken at any meeting of the Board of Directors unless each director
shall receive at least one business day's notice of such meeting or shall waive
such notice. The Corporation and each of the Parties agree to take all action
within its or his power, including, but not limited to, the voting of Capital
Stock, to prevent action from being taken without such notice unless such
notice is waived by all of the members of the Board of Directors.
(e) The Corporation and the Parties shall vote to approve and
adopt by-laws and amendments to the Charter and to take such other actions in
furtherance of, and to give effect to, the agreements and provisions set forth
in this Agreement and the Investment Agreement, and shall not vote to repeal or
adopt any by-law or amendment to the Charter or take any other action in
violation of, or inconsistent with, such agreements and provisions, including,
without limitation, the provisions of Section 2.1(a) of this Agreement or of
the Investment Agreement.
2.2 Non-Compete; Fiduciary Duties. It is understood and
accepted that a Party may not have any interests (other than the ownership of
not more than 5% of the common stock of a publicly held entity in which such
party does not have any other involvement) or engage in any other business
ventures which compete in any material respect with the activities of the
Corporation and its Subsidiaries. Except as provided below in this Section
2.2, nothing in this Agreement, express or implied, shall relieve any officer
or director of the Corporation or any of its Subsidiaries, or any Party, of any
fiduciary or other duties or obligations they may have to the Corporation's
stockholders. Notwithstanding anything to the contrary set forth above in this
Section 2.2 or in the Corporation's Charter, the Parties acknowledge and agree
that the business of the Corporation (the "Business") shall be limited to
engaging in (a) construction and industrial equipment rentals, general tool and
equipment rentals, event and party rentals and related activities and (b) such
other business activities as the Corporation shall hereafter, with the consent
of a majority of the Board of Directors (including the approval of a majority
of the members of the Board of Directors designated by the Purchasers), be
engaged in or have determined to engage in. Consequently, (x) the "corporate
opportunities" doctrine shall not apply to: (i) any activities or opportunities
outside the scope of the Business set forth in clause (a) of the preceding
sentence or (ii) prior to a Qualified Public Offering, activities referred to
in clause (b) of the preceding sentence ("Non-RentX Activities") unless the
consent of Bace, Tyler, Zoellner or at least one member of the Board of
Directors designated by Bace, so long as Bace is permitted to make such
designation, has been given in connection with the determination for the
Corporation to engage in such activities; and (y) except as set forth in
subsection (x)(ii), no officer or director of the Corporation or any of its
Subsidiaries, or any Party, shall have any fiduciary or other duties,
obligations or liabilities with respect to any Non-RentX Activities which such
officer, director or Party pursues outside of the Corporation (it
-5-
<PAGE> 6
being understood that this provision in no way limits fiduciary or other
obligations to maintain the confidentiality of confidential information of the
Corporation or its Subsidiaries or refrain from using such information or other
assets of the Corporation in connection with Non-RentX Activities pursued
outside of the Corporation; provided, however, no such officer, director or
other Party shall have any obligation to maintain the confidentiality of, or
refrain from using, any confidential information with respect to Non-RentX
Activities (A) which becomes generally known to and available for use by the
public other than as a result of a disclosure by such officer, director or
other Party, (B) with respect to which such officer's, director's or other
Party's duty of confidentiality is waived by the Corporation, (C) if required
by applicable law, regulation or order of any governmental agency or court of
competent jurisdiction, (D) which was known to the public when received by such
officer, director or other Party or (E) which is lawfully obtained by such
officer, director or other Party from other sources).
2.3 Availability of Common Stock. The Parties and the
Corporation agree that the Corporation shall at all times when any shares of
Preferred Stock are outstanding have available and reserved sufficient shares
of authorized but unissued shares or treasury shares of Common Stock for
issuance upon any conversion of Preferred Stock, and the Parties and the
Corporation agree to take all action with their respective power, including,
but not limited to the voting of Capital Stock, required to cause all such
Common Stock to be available for such issuance upon conversion at all times.
2.4 Liquidity Events. The Parties agree that the Purchasers
shall have control over a merger or consolidation of the Corporation, the sale
or other disposition of all or a majority of its assets or capital, a public
offering of Capital Stock or a dissolution or liquidation of the Corporation
(collectively, "Liquidity Events") and agree to cooperate as reasonably
requested by the Purchasers and take all action within their respective power
(including, but not limited to, the voting of Capital Stock and using all
reasonable efforts to have their designees on the Board of Directors vote as
directors) to consummate a Liquidity Event designated by the Purchasers, it
being understood that the Corporation shall bear all of the Parties' reasonable
out-of-pocket expenses in connection therewith. Without limiting the
generality of the foregoing, each of Bace and the other Parties (other than the
Purchasers), agrees (i) to sell the shares of Common Stock and Common Stock
Equivalents held by him on the same basis as the Purchasers in connection with
any Liquidity Event structured as a sale of Common Stock or Common Stock
Equivalents, (ii) in connection with any Liquidity Event structured as a
merger, consolidation or sale of assets, to not perfect or enforce any rights
they might otherwise have to demand an appraisal for the shares of Common Stock
or Common Stock Equivalents held by them and (iii) to refrain from otherwise
attempting to impede, delay or prevent the consummation of a Liquidity Event
sought by the Purchasers.
-6-
<PAGE> 7
ARTICLE 3
TRANSFER OF SECURITIES
3.1 Transfers. During the term hereof, no Party shall sell,
transfer or otherwise dispose of, hypothecate or otherwise encumber
(voluntarily or involuntarily) (any such sale, transfer, disposition,
hypothecation or encumbrance being referred to as a "transfer") any Common
Stock or Common Stock Equivalents except as expressly permitted in any
subsection of this Section 3.1.
(a) A Party may transfer shares of Common Stock or Common
Stock Equivalents, to an Affiliate thereof; provided, that (i) such Party first
delivers to the Corporation the written representation of such Party and such
Affiliate, expressly for the benefit of the Corporation and the other Parties,
that such transfer is not being made for purposes of circumventing the
provisions of this Article 3 and that such Affiliate agrees to be bound by the
terms and provisions of this Agreement and (ii) the Corporation determines, in
its reasonable discretion, that such representation is true. Notwithstanding
the foregoing, none of Bace, Tyler, Zoellner or any Bace Employee may transfer
shares of Common Stock or Common Stock Equivalents pursuant to this Section
3.1(a) (other than to Tyler, Zoellner or Bace, so long as a majority of the
voting rights and equity ownership with respect to Bace continues to be held by
Tyler or Zoellner) unless Tyler, Zoellner and Bace (but only counting Bace if a
majority of the voting rights and equity ownership with respect to Bace
continues to be held by Tyler or Zoellner) continue to hold in the aggregate a
majority of Series B Preferred Stock and the Common Stock Equivalents relating
thereto.
(b) A Party may transfer shares of Common Stock or Common
Stock Equivalents pursuant to a registered public offering or pursuant to Rule
144 (other than Subsection (k) thereof) promulgated under the Securities Act or
any successor rule or regulation then in place.
(c) A Party (the "Transferor") may at any time give written
notice (the "Transferor's Notice") to the Corporation and the other Parties
(the "Other Parties") that it has received a bona fide written offer to
purchase any or all shares of such Party's Common Stock or Common Stock
Equivalents and that such Party desires to transfer any or all of such shares
or Common Stock Equivalents. The Transferor's Notice shall specify the
proposed transferee thereof, all material terms of the proposed transaction,
including the number of shares of Common Stock or Common Stock Equivalents to
be transferred and the amount and type of consideration to be received
therefor, shall be accompanied by a copy of such bona fide offer, and shall
contain an undertaking by the proposed transferee to honor any Participation
Offer (as defined below) which is made in accordance with the terms hereof and
shall contain the following offers:
(i) The Transferor shall offer to sell (the "First Option")
all such shares or Common Stock Equivalents to the Corporation for
cash at the same price per share or
-7-
<PAGE> 8
per Common Stock Equivalent as to be paid by the proposed transferee.
Regardless of whether the Corporation exercises the First Option, to
the extent the consideration to be paid by the proposed transferee
consists of assets other than cash, the cash equivalent of such
consideration shall be determined reasonably and in good faith by the
Corporation. The cash equivalent determination required by the
preceding sentence, as well as the decision whether or not the
Corporation will accept the First Option, in any particular instance
shall be made by the Board of Directors, excluding therefrom any
directors designated by the Transferor or the proposed transferee (or
any Affiliate thereof), who may be counted for quorum purposes but
shall abstain from any such decision, utilizing any method and/or
advisory assistance the Board of Directors deems appropriate, and the
Corporation shall give the Transferor and the Other Parties written
notice of such determination within 20 days after receipt of the
Transferor's Notice. If the Corporation (A) fails to notify the
Transferor in writing within 20 days after receipt of the Transferor's
Notice that it elects to accept the First Option or (B) by written
notice rejects the First Option, in whole or in part, the Transferor
shall offer to sell (the "Second Option") the shares or Common Stock
Equivalents not so purchased by the Corporation to the Other Parties
who are Accredited Investors and any Affiliate of an Other Party that
is not an Accredited Investor so designated by such Other Party if
such Affiliate is an Accredited Investor (collectively, the
"Accredited Parties") for cash at the same price as the Corporation is
entitled to purchase such shares or Common Stock Equivalents pursuant
to the First Option. The Accredited Parties may purchase the shares
or Common Stock Equivalents so offered in the proportions upon which
they mutually agree, or, if they are unable to agree upon an
allocation of such shares or Common Stock Equivalents among
themselves, then in proportion to the number of shares of Fully
Diluted Common Stock owned by each such Accredited Party who wishes to
participate in the purchase of such shares or Common Stock Equivalents
pursuant to the Second Option. The Second Option may be accepted by
one or more of such Accredited Parties by written notice delivered to
the Transferor within thirty days after receipt of the Transferor's
Notice. Unless, through exercise of the First Option and the Second
Option, all the shares or Common Stock Equivalents proposed to be
transferred in the Transferor's Notice are to be acquired by the
Corporation and Other Parties, the Transferor may transfer all shares
or Common Stock Equivalents covered by the Transferor's Notice to the
proposed transferee upon the terms of such transfer set forth in the
Transferor's Notice, and, if the Participation Offer described in
clause (ii) below has been accepted, subject to and in compliance with
the Participation Offer; provided, however, that such transfer must
occur no later than 75 days after the date the Transferor's Notice was
received by the Corporation or five days after the expiration or
termination of any waiting period applicable to such transfer pursuant
to the HSR Act, whichever is later. If the First Option or the Second
Option, as the case may be, is accepted in a manner such that all
shares or Common Stock Equivalents covered by the Transferor's Notice
are to be purchased, the Transferor shall, except as otherwise
required by clause (ii) below, transfer all such shares or Common
Stock Equivalents (free of all liens and encumbrances except this
Agreement) to the respective purchasers thereof
-8-
<PAGE> 9
within 20 days after the date such offer is accepted by the
Corporation and Accredited Parties, whichever is later, against
delivery by the purchasers of the consideration for such shares;
provided that, if the HSR Act is applicable to the First Option or the
Second Option, such date shall be extended to the date which is five
days after the date the applicable waiting period expires or is
terminated.
(ii) In the Transferor's Notice, the Transferor shall
offer (the "Participation Offer") to include in the proposed transfer
to the proposed transferee referred to in Section 3.1(c) a number of
shares or Common Stock Equivalents designated by any of the Other
Parties, not to exceed, in respect of any such Other Party, the number
of shares or Common Stock Equivalents equal to the product of (A) the
aggregate number of shares or Common Stock Equivalents to be
transferred by the Transferor to the proposed transferee and (B) a
fraction with a numerator equal to the number of shares of Fully
Diluted Common Stock that such Other Party owns and a denominator
equal to the number of shares of Fully Diluted Common Stock owned by
the Transferor and each Other Party who wishes to participate in the
proposed transfer pursuant to the Participation Offer; provided, that,
if the consideration to be received by the Transferor includes any
securities, only Accredited Parties shall be entitled to include their
shares or Common Stock Equivalents in such transfer. The Participation
Offer shall be conditioned upon the Transferor transferring shares or
Common Stock Equivalents pursuant to the First Option and/or the
Second Option or consummating (which it shall not be obligated to do)
the transactions contemplated in the Transferor's Notice with the
transferee named therein. If any Party or Other Parties have accepted
the Participation Offer, the Transferor shall reduce to the extent
necessary the number of shares or Common Stock Equivalents it
otherwise would have sold in the proposed transfer so as to permit
Other Parties who have accepted the Participation Offer to sell the
number of shares or Common Stock Equivalents that they are entitled to
sell under this clause (ii), and the Transferor and such other Party
or Other Parties shall transfer the number of shares or Common Stock
Equivalents specified in the Participation Offer as follows: (W) to
the Corporation, if it exercised the First Option in whole, or (X) if
the Corporation exercised the First Option in part and the Other Party
or other Parties who exercised the Second Option do so with respect to
the remaining shares or Common Stock Equivalents, to the Corporation
and the Other Party or other Parties, or (Y) if the Corporation did
not exercise the First Option, to the other Party or Other Parties who
exercised the Second Option in full, if any, or (Z) in all other
events, to the proposed transferee in accordance with the terms of
such transfer set forth in the Transferor's Notice.
(d) No shares of Common Stock or Common Stock Equivalents may
be transferred by a Party (other than pursuant to an effective registration
statement under the Securities Act otherwise permitted hereunder) unless, upon
the request of the Corporation, such Party first delivers to the Corporation an
opinion of counsel, reasonably satisfactory to the Corporation, to the effect
that such transfer is not required to be registered under the Securities Act.
-9-
<PAGE> 10
(e) Transfers pursuant to Sections 3.1(a) and 3.1(b) shall
not be subject to Section 3.1(c). Other than transfers pursuant to Section
3.1(b), no transfers of shares of Common Stock or Common Stock Equivalents
shall be made unless prior to the consummation thereof, the Party transferring
such shares delivers to the Corporation in form reasonably acceptable to the
Corporation a written agreement of the proposed transferee to become a Party
and be bound by the terms hereof.
(f) Any purported transfer of Common Stock or Common Stock
Equivalents by a Party which is not permitted by the foregoing provisions of
this Section, or which is in violation of such provisions, shall be void and of
no force and effect whatsoever.
(g) Notwithstanding any provision to the contrary, the pledge
of Common Stock or Common Stock Equivalents to secure indebtedness or other
liabilities of the Corporation at the Corporation's request (including, without
limitation, the pledge pursuant to the pledge agreement contemplated by the
Loan Documents, as such term is defined in the Investment Agreement), and any
sale or disposition pursuant to the terms of any such pledge, shall not
constitute a transfer pursuant to Section 3.
3.2 Certain Events Not Deemed Transfers. In no event shall
any of the following constitute a transfer of shares or Common Stock
Equivalents for purposes of Section 3.1: an exchange, reclassification or
other conversion of shares into any cash, securities or other property pursuant
to (i) the terms thereof (including, without limitation, the conversion of the
Preferred Stock into Common Stock), (ii) a merger, consolidation or
recapitalization of the Corporation or any Subsidiary with, or (iii) a sale or
transfer by the Corporation or any Subsidiary of all or substantially all its
assets to, any person or entity.
3.3 Control of Bace by Tyler and Zoellner. Tyler and
Zoellner agree that so long as Bace owns any Common Stock Equivalents they will
maintain ownership and control of a majority of the equity interest and voting
power in Bace.
3.4 Pledge of Shares at the Request of the Corporation. If
requested by the Board of Directors and approved by Purchasers holding at
least a majority of the Fully Diluted Common Stock then held by the Purchasers,
the Corporation may require all Parties (excepting those exempted as provided
in the last sentence of this Section 3.4) to pledge the shares of Capital Stock
held by them (or a portion thereof pro rata among all such Parties) to secure
indebtedness and other liabilities of the Corporation or its Subsidiaries.
Each Party shall be obligated to execute and deliver such pledge agreements,
consents, financing statements or other certificates, instruments, agreements,
notices or other documents as the Board of Directors and such Purchasers may
deem necessary or advisable in connection therewith. In the event such a
pledge of shares of Capital Stock occurs and the pledgee forecloses upon a
pledge by a Party in a manner disproportionate to that of any other Party
(except for events in which such Party is in default of a covenant under its
pledge agreement other than through an act or omission of the Corporation or a
Subsidiary thereof), all Parties shall contribute portions of their remaining
-10-
<PAGE> 11
shares of Capital Stock in order to make such foreclosure proportionate among
all Parties; provided, however, that any proceeds obtained by such Party from
such a foreclosure shall be distributed among such Party and all other Parties
making such a contribution in the proportion to the shares of Capital Stock
held by them after such contribution. A Party may be exempted from the
obligation to pledge shares of Capital Stock or to contribute shares of Capital
Stock and proceeds with respect to any indebtedness or liabilities under this
Section 3.4 if such exemption is approved by (i) the holders of a majority of
the Fully Diluted Common Stock represented by Series A Preferred and Class A
Common Stock into which Series A Preferred has been converted and (ii) the
holders of a majority of the Fully Diluted Common Stock represented by Series B
Preferred and Class A Common Stock into which Series B Preferred has been
converted (the "Series B Majority Holders").
ARTICLE 4
TERMINATION
4.1 Termination. All provisions of this Agreement shall
terminate (a) in respect of all Parties, upon the consummation of a Qualified
Public Offering (provided, that (x) the obligations of the Parties to vote for
two (or three if the Board of Directors has seven members) designees of Bace to
the Board of Directors and three (or four if the Board of Directors had seven
members) designees of the Purchasers, pursuant to Section 2.1(a) (it being
understood that the size of the Board of Directors may be increased beyond
seven members in connection with a Qualified Public Offering and that the
Purchasers shall have the right to designate all such additional directors but
with such designees being subject to the approval of the Series B Majority
Holders) and (y) the requirement to make a Participation Offer as provided in
Section 3.1(c)(ii) except in the case of a transaction or transfer otherwise
exempt from Article 3 or a tender offer or similar offer or transaction made
available to all Parties hereto, shall all survive for a period of two years
from such a termination upon the consummation of a Qualified Public Offering
or, if earlier, the time this Agreement would otherwise terminate pursuant to
this Section 4.1); (b) in respect of any Party, when such Party (and its
Affiliates who acquired shares of Common Stock from such Party) no longer owns
any Common Stock or Common Stock Equivalents; (c) in respect of all Parties,
upon the written consent of Parties who then own 80% or more of the Fully
Diluted Common Stock held by all of the Parties (including either Tyler or
Zoellner if Bace remains a Party); and (d) in any event, upon the dissolution
of the Corporation.
-11-
<PAGE> 12
ARTICLE 5
MISCELLANEOUS
5.1 Amendment. Subject to the following sentence, this
Agreement may be altered or amended by the written consent of the Corporation
and Parties who then own 80% or more of the Fully Diluted Common Stock held by
all of the Parties (including at least one of Tyler, Zoellner or Bace if any
of them remains a Party owning Common Stock Equivalents subject to the terms of
this Agreement), and such alteration or amendment shall be binding upon all
Parties to this Agreement and all other persons. No alteration or amendment
that adversely affects the rights of a Party hereto shall be enforceable
against such Party until such Party has consented in writing to such alteration
or amendment; provided that any alteration or amendment made for the purpose of
adding an additional Party hereto shall not be deemed to adversely affect the
rights of any other Party hereto.
5.2 Equitable Relief. The Parties and the Corporation
recognize that the obligations imposed on them in this Agreement are special,
unique, and of extraordinary character, and that in the event of breach by any
party, damages will be an insufficient remedy; consequently, it is agreed that
the Parties hereto and the Corporation may have specific performance,
injunction, injunctive or other equitable relief (in addition to damages) as a
remedy for the enforcement hereof, without proving damages.
5.3 Assignment. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
Parties and the Corporation. No such assignment shall relieve the assignor
from any liability hereunder. No assignment hereof shall be effective until
the Party making an assignment hereof delivers to the Corporation an executed
counterpart of this Agreement by the transferee or an agreement in writing
executed by the transferee to be bound by the terms hereof to the same extent
as if such transferee was a Party hereto.
5.4 Shares Subject to this Agreement. All shares of Common
Stock or Common Stock Equivalents now owned or hereafter acquired by any of the
Parties shall be subject to the terms of this Agreement.
5.5 Legend. Certificates evidencing shares of Common Stock or
Common Stock Equivalents owned by the Parties shall bear a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD, UNLESS IT
HAS BEEN REGISTERED UNDER SUCH SECURITIES ACT OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS SECURITY IS
SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING RESTRICTIONS AND
OTHER TERMS AND CONDITIONS SET FORTH IN
-12-
<PAGE> 13
THE STOCKHOLDERS AGREEMENT, DATED AS OF MAY 15, 1996, AS IT MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM THE
CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES.
5.6 Notices. Any and all notices, designations, consents,
offers, acceptances or any other communications provided for herein shall be
given in writing by personal delivery overnight courier or telecopy, which
shall be addressed, or sent, to the respective addresses set forth on the
signature pages hereto or such other address as designated by any Party by like
notice from time to time.
5.7 Counterparts. This Agreement may be executed in two or
more counterparts and each counterpart shall be deemed to be an original and
which counterparts together shall constitute one and the same agreement of the
parties hereto.
5.8 Section Headings. Headings contained in this Agreement
are inserted only as a matter of convenience and in no way define, limit or
extend the scope or intent of this Agreement or any provisions hereof.
5.9 Governing Law. This Agreement shall be governed by the
laws of the State of Delaware, without giving effect to the conflicts of laws
principles thereof.
5.10 Entire Agreement. This Agreement contains the entities
understanding of the parties hereto respecting the subject matter hereof, and
supersedes all prior agreements, discussions and understandings.
5.11 Cumulative Rights. The rights of the Parties and the
Corporation under this Agreement are cumulative and in addition to all similar
and other rights of the parties under other agreements, including the
Investment Agreement.
5.12 Severability. Should any particular provision of this
Agreement be adjudicated to be invalid or unenforceable, such provision shall
be deemed deleted and the remainder of the Agreement, nevertheless, shall
remain unaffected and fully enforceable; further, to the extent any provision
herewith is deemed unenforceable by virtue of its scope but may be made
enforceable by limitation thereof, the parties hereto agree the same shall,
nevertheless, be enforceable to the fullest extent permissible.
5.13 No Waiver. No delay on the part of any party hereunder
in exercising any right, power or privilege under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude other or further exercise
thereof, or the exercise of any other right, power of privilege.
-13-
<PAGE> 14
5.14 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
5.15 Attorneys' Fees. In the event of any action or suit
based upon or arising out of any actual or alleged breach by any party of any
representation, warranty or agreement in this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and expenses of
such action or suit from the other party, in addition to any other relief
ordered by the court.
5.16 Action by Purchasers. Any action, approval or notice
that can be given by the Purchasers as a group pursuant to this Agreement shall
be deemed to be taken or made if so taken or made by Purchasers holding at
least a majority of the Fully Diluted Common Stock then held by the Purchasers.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
RENTX INDUSTRIES, INC.
By: /s/ CRAIG J. ZOELLNER
--------------------------------
Craig J. Zoellner
Vice President
Address:
1522 Blake Street
Denver, Colorado 80202
Attention: Dirk M. Tyler
BACE INVESTMENTS, LLC
By: /s/ CRAIG J. ZOELLNER
--------------------------------
Craig J. Zoellner
Member
Address:
1522 Blake Street
Denver, Colorado 80202
Attention: Dirk M. Tyler
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services,
Inc., General Partner
By: /s/ THOMAS E. GALUHN
----------------------------
Thomas E. Galuhn
Vice President
Address:
350 North Clark Street
Chicago, Illinois 60610
Attention: Thomas E. Galuhn
<PAGE> 16
THE EDGEWATER PRIVATE EQUITY FUND
II, L.P.
By: Gordon Management, Inc.
General Partner
By: /s/ J. A. GORDON
-------------------------------
James A. Gordon
President
Address:
666 Grand Avenue
Suite 200
Des Moines, Iowa 50309
Attention: James A. Gordon
/s/ RICHARD M. TYLER
-------------------------------
Richard M. Tyler
Address:
1522 Blake Street
Denver, Colorado 80202
/s/ CRAIG J. ZOELLNER
-------------------------------
Craig J. Zoellner
Address:
1522 Blake Street
Denver, Colorado 80202
(Signature page to the RentX Industries, Inc.
Stockholders Agreement)
<PAGE> 17
AMENDMENT NO. 1
TO
STOCKHOLDERS AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 1 to the Stockholders Agreement (this "Amendment"),
entered into effective as of May 15, 1996, is by and among RentX Industries,
Inc. ("RentX"), Mesirow Capital Partners VI ("Mesirow"), The Edgewater Private
Equity Fund II, L.P. ("Edgewater"), BACE Investments, LLC ("Bace"), Trustees of
Grinnell College ("Grinnell") and Inroads Capital Partners, L.P. ("Inroads").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into that
certain Stockholders Agreement, dated as of May 15, 1996 (the "Stockholders
Agreement");
WHEREAS, Grinnell, in addition to certain other persons, became a party
to the Stockholders Agreement on May 29, 1996;
WHEREAS, Inroads became a party to the Stockholders Agreement on August
2, 1996;
WHEREAS, the parties desire to enter into this Amendment in order to
amend certain provisions of the Stockholders Agreement; and
WHEREAS, the Stockholders Agreement may be amended by the consent of the
parties hereto;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. DEFINITIONS. Unless stated otherwise, capitalized terms used in
this Amendment shall have the meanings specified in the Stockholders Agreement.
2. AMENDMENTS TO SECTION 1.1. Clause (v) of the definition of the
term "Affiliate" set forth in Section 1.1 of the Stockholders Agreement is
hereby amended to read in its entirety as follows:
<PAGE> 18
"(v) in the case of Bace, Tyler, Zoellner, any Affiliate of Tyler, any
Affiliate of Zoellner or any employee of or independent contractor to
Bace or Bace Industries, LLC other than Tyler or Zoellner (a "Bace
Employee"),"
3. AMENDMENT TO SECTION 3.1. Section 3.1(a) of the Stockholders
Agreement is hereby amended by adding the following sentence immediately before
the existing first sentence in Section 3.1(a):
"A Party who is or was a Bace Employee that holds shares of Common Stock
or Common Stock Equivalents may transfer such shares of Common Stock or
Common Stock Equivalents to Bace or any Affiliate of Bace (other than a
Bace Employee)."
4. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of Illinois without regard to
its conflicts of law doctrine.
5. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
-2-
<PAGE> 19
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
above written.
RENTX INDUSTRIES, INC.
By: /s/ Richard M. Tyler
-------------------------------------------------
Richard M. Tyler
Vice President
BACE INVESTMENTS, LLC
By: /s/ Craig J. Zoellner
-------------------------------------------------
Craig J. Zoellner
Member
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.,
General Partner
By: /s/ Thomas E. Galuhn
------------------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
By: Gordon Management, Inc.,
General Partner
By: /s/ James A. Gordon
------------------------------------------
James A. Gordon
President
(Signature page to Amendment No. 1 to
Stockholders Agreement)
-3-
<PAGE> 20
TRUSTEES OF GRINNELL COLLEGE
By: /s/ David S. Clay
-------------------------------------------------
David S. Clay
Vice President for Business and Treasurer
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partner, L.P.,
General Partner
By: /s/ Margaret G. Fisher
------------------------------------------
Margaret G. Fisher
General Partner
(Signature page to Amendment No. 1 to
Stockholders Agreement)
-4-
<PAGE> 21
AMENDMENT NO. 2
TO
STOCKHOLDERS AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 2 to the Stockholders Agreement (this "Amendment"),
entered into effective as of June 9, 1997, is by and among RentX Industries,
Inc. ("RentX"), Mesirow Capital Partners VI ("Mesirow"), The Edgewater Private
Equity Fund II, L.P. ("Edgewater"), BACE Investments, LLC ("Bace"), Trustees of
Grinnell College ("Grinnell") and Inroads Capital Partners, L.P. ("Inroads").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into that
certain Stockholders Agreement, dated as of May 15, 1996 (as amended by
Amendment No. 1 thereto, dated as of May 15, 1996, the "Stockholders
Agreement");
WHEREAS, Grinnell, in addition to certain other persons, became a party
to the Stockholders Agreement on May 29, 1996;
WHEREAS, Inroads became a party to the Stockholders Agreement on August
2, 1996;
WHEREAS, the parties desire to enter into this Amendment in order to
amend certain provisions of the Stockholders Agreement; and
WHEREAS, the Stockholders Agreement may be amended by the consent of the
parties hereto;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. DEFINITIONS. Unless stated otherwise, capitalized terms used in
this Amendment shall have the meanings specified in the Stockholders Agreement.
2. AMENDMENTS TO SECTION 1.1. Clause (v) of the definition of the
term "Affiliate" set forth in Section 1.1 of the Stockholders Agreement is
hereby amended to read in its entirety as follows:
<PAGE> 22
"(v) in the case of Bace, Tyler, Zoellner, any Affiliate of Tyler, any
Affiliate of Zoellner or any employee of or independent contractor to
Bace or Bace Industries, LLC other than Tyler or Zoellner (a "Bace
Employee") (and Charles D. Greenidge ("Greenidge") shall, for all
purposes of this Agreement, be considered a Bace Employee with respect
to the shares of Series B Preferred to be sold to Greenidge by Bace in
connection with the termination of his independent contractor
relationship with Bace),"
3. AMENDMENT TO SECTION 2.2. The first sentence of Section 2.2 of
the Stockholders Agreement is hereby amended to read in its entirety as
follows:
"It is understood and accepted that a Party may not have any interests
(other than the ownership of not more than 5% of the common stock of a
publicly held entity in which such party does not have any other
involvement) or engage in any other business ventures which compete in
any material respect with the activities of the Corporation or its
Subsidiaries; provided, however, that Greenidge may have such interests
and engage in such business ventures as are not prohibited by that
certain Brokerage Agreement dated as of June 9 , 1997 among the
Corporation, Greenidge & Associates, Inc. and Greenidge; provided,
further, that such Brokerage Agreement may not be amended without the
prior consent of the Majority Holders (as such term is defined in the
Investment Agreement)."
4. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of Illinois without regard to
its conflicts of law doctrine.
5. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
-2-
<PAGE> 23
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
above written.
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A. BERNSTEIN
-------------------------------------------------
Arnold A. Bernstein
President
BACE INVESTMENTS, LLC
By: /s/ RICHARD M. TYLER
-------------------------------------------------
Richard M. Tyler
Member
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.,
General Partner
By: /s/ THOMAS E. GALUHN
------------------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
By: Gordon Management, Inc.,
General Partner
By: /s/ JAMES A. GORDON
------------------------------------------
James A. Gordon
President
(Signature page to Amendment No. 2 to
Stockholders Agreement)
-3-
<PAGE> 24
TRUSTEES OF GRINNELL COLLEGE
By: /s/ JAMES A. GORDON
-------------------------------------------------
James A. Gordon
Authorized Agent
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partners, L.P.,
General Partner
By: /s/ MARGARET G. FISHER
------------------------------------------
Margaret G. Fisher
General Partner
(Signature page to Amendment No. 2 to
Stockholders Agreement)
-4-
<PAGE> 25
AMENDMENT NO. 3
TO
STOCKHOLDERS AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 3 to the Stockholders Agreement (this
"Amendment"), dated as of June 26, 1997, is by and among RentX Industries, Inc.
("RentX"), Mesirow Capital Partners VI ("Mesirow"), The Edgewater Private Equity
Fund II, L.P.("Edgewater"), BACE Investments, LLC ("Bace"), Trustees of Grinnell
College ("Grinnell") and Inroads Capital Partners, L.P. ("Inroads").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into
that certain Stockholders Agreement, dated as of May 15, 1996 (as amended by
Amendment No. 1 thereto, dated as of May 15, 1996, and Amendment No. 2 thereto,
effective as of June 9, 1997, the "Stockholders Agreement");
WHEREAS, Grinnell, in addition to certain other persons,
became a party to the Stockholders Agreement on May 29, 1996;
WHEREAS, Inroads became a party to the Stockholders Agreement
on August 2, 1996;
WHEREAS, the parties hereto desire to enter into this
Amendment in order to amend certain provisions of the Stockholders Agreement;
and
WHEREAS, the Stockholders Agreement may be amended by the
consent of the parties hereto;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. Definitions. Unless stated otherwise, capitalized
terms used in this Amendment shall have the meanings specified in the
Stockholders Agreement.
<PAGE> 26
2. Amendments to Section 1.1. (a) The definition of
the term "Common Stock Equivalents" set forth in Section 1.1 of the
Stockholders Agreement is hereby amended to read in its entirety as follows:
""Common Stock Equivalents" means (without duplication with
any other Common Stock or Common Stock Equivalents) rights,
warrants, options (including, without limitation, employee
stock options), convertible securities or indebtedness,
exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly
or indirectly, Common Stock and securities convertible or
exchangeable into Common Stock, whether at the time of
issuance or upon the passage of time or the occurrence of
some future event, including (without limitation) the Series
A Preferred, the Series B Preferred and the Series C
Preferred."
(b) The definition of the term "Preferred Stock" set forth in
Section 1.1 of the Stockholders Agreement is hereby amended to read in its
entirety as follows:
""Preferred Stock" means the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock of
the Corporation, par value $1.00 per share."
(c) Section 1.1 of the Stockholders Agreement is hereby
amended to include the definition of "Series C Preferred" as follows:
""Series C Preferred" means the 3,000 shares of convertible
Series C Preferred Stock, $1.00 par value per share, of the
Corporation."
3. Amendment to Section 3.4. The last sentence of Section
3.4 of the Stockholders Agreement is hereby amended to read in its entirety as
follows:
"A Party may be exempted from the obligation to pledge shares
of Capital Stock or to contribute shares of Capital Stock and
proceeds with respect to any indebtedness or liabilities
under this Section 3.4 if such exemption is approved by (i)
the holders of a majority of the Fully Diluted Common Stock
represented by Series A Preferred and Class A Common Stock
into which Series A Preferred has been converted, (ii) the
holders of a majority of the Fully Diluted Common Stock
represented by Series B Preferred and Class A Common Stock
into which Series B Preferred has been converted (the "Series
B Majority
- 2 -
<PAGE> 27
Holders"), and (iii) the holders of a majority of the Fully
Diluted Common Stock represented by Series C Preferred and
Class A Common Stock into which Series C Preferred has been
converted."
4. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Illinois
without regard to its conflicts of law doctrine.
5. Counterparts. This Amendment may be executed in
several counterparts, each of which will be deemed an original but all of which
together shall constitute one and the same instrument.
- 3 -
<PAGE> 28
IN WITNESS WHEREOF, this Amendment No. 3 to the Stockholders
Agreement has been duly executed and delivered by the duly authorized officers
of the parties hereto as of the date first above written.
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A. BERNSTEIN
--------------------------------
Name: Arnold A. Bernstein
Title: President - CEO
BACE INVESTMENTS, LLC
By: /s/ RICHARD M. TYLER
--------------------------------
Richard M. Tyler
Member
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services,
Inc., General Partner
By: /s/ THOMAS E. GALUHN
---------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY
FUND II, L.P.
By: Gordon Management, Inc.,
General Partner
By: /s/ J.A. GORDON
---------------------------
James A. Gordon
President
- 4 -
<PAGE> 29
TRUSTEES OF GRINNELL COLLEGE
By: /s/ J.A. GORDON
--------------------------------
James A. Gordon
Authorized Agent
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partners, L.P.
General Partner
By: /s/ MARGARET G. FISHER
---------------------------
Margaret G. Fisher
General Partner
(Signature Page to Amendment No. 3 to
the Stockholders Agreement)
- 5 -
<PAGE> 30
AMENDMENT NO. 4
TO
STOCKHOLDERS AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 4 to Stockholders Agreement (this "Amendment"), dated
as of September 19, 1997, is by and among RentX Industries, Inc. ("RentX"),
BACE Investments, LLC ("BACE") and the other parties to the Stockholders
Agreement (as defined below). As provided in the Stockholders Agreement, this
Amendment shall become binding upon RentX and all such other parties when it
has been signed by RentX and Parties (as defined in the Stockholders Agreement)
owning 80% or more of the Fully Diluted Common Stock (as defined in the
Stockholders Agreement) held by all of the Parties (including BACE), whether or
not it is signed by all of the persons for whom signature spaces are provided
below.
WHEREAS, RentX, BACE, Mesirow Capital Partners VI and The Edgewater
Private Equity Fund II, L.P. have entered into that certain Stockholders
Agreement, dated as of May 15, 1996 (as amended, the "Stockholders Agreement");
WHEREAS, Trustees of Grinnell College, Inroads Capital Partners, L.P.
and certain other persons have become parties to the Stockholders Agreement at
various times prior to the date hereof; and
WHEREAS, the parties hereto desire to enter into this Amendment in order
to amend certain provisions of the Stockholders Agreement;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. Amendment to Definition of Qualified Public Offering. The
definition of "Qualified Public Offering" in Section 1.1 of the Stockholders
Agreement is amended by changing the figure "25%" which appears therein to
"20%."
2. Amendment to Obligation to Vote for Designees to Board of
Directors. Sections 2.1 and 4.1 of the Stockholders Agreement obligate the
Parties to vote for certain designees of BACE and the Purchasers to the Board
of Directors. The Parties agree that the Board of Directors shall consist of
nine directors comprised of four designees of the Purchasers, three designees of
<PAGE> 31
BACE, the Chief Executive Officer of the Corporation and an independent
director chosen by unanimous vote of the other directors. The provisions of
Sections 2.1 and 4.1 shall obligate the parties to exercise all of their rights
with respect to the Corporation to create and maintain a Board of Directors so
comprised, subject to the survival and termination provisions of Section 4.1.
Either BACE or the Purchasers may defer the exercise of the right to designate
one or more directors without waiving that right and, in the event of such
deferral, the position shall remain vacant until such right is exercised or
terminates.
3. Governing Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of Illinois without regard to
its conflicts of laws doctrine.
4. Counterparts. This Amendment may be underlined in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(Signature Page follows)
- 2 -
<PAGE> 32
IN WITNESS WHEREOF, this Amendment No. 4 to Stockholders Agreement has
been duly executed and delivered by the undersigned as of the date first above
written.
RENTX INDUSTRIES, INC.
Date: September 19, 1997 By: /s/ ARNOLD A. BERNSTEIN
------------------------------------------
Name: ARNOLD A. BERNSTEIL
----------------------------------------
Title: PRESIDENT
---------------------------------------
BACE INVESTMENTS, LLC
Date: September 19, 1997 By: /s/ CRAIG J. ZOELLNER
------------------------------------------
Name: CRAIG J. ZOELLNER
----------------------------------------
Title: MEMBER
---------------------------------------
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services, Inc.,
General Partner
Date: September 19, 1997 By: /s/ THOMAS E. GALUHN
---------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY
FUND II, L.P.
By: Gordon Management, Inc.,
General Partner
Date: September 19, 1997 By: /s/ JAMES A. GORDON
----------------------------------
James A. Gordon
President
(Signature Page to Amendment No. 4 to
Stockholders Agreement)
- 3 -
<PAGE> 33
TRUSTEES OF GRINNELL COLLEGE
Date: September 19, 1997 By: /s/ DAVID S. CLAY
------------------------------------------
David S. Clay
Vice President for Business
and Treasurer
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partners, L.P.,
General Partner
Date: September 19, 1997 By: /s/ MARGARET G. FISHER
----------------------------------
Margaret G. Fisher
General Partner
Date: September 17, 1997 /s/ GEORGE A. EVANS
---------------------------------------------
George A. Evans, V.P. President
Date: September 19, 1997 /s/ LARRY W. DAVIDSON
---------------------------------------------
Larry W. Davidson
Date: September 15, 1997 /s/ GARY J. KULESZA
---------------------------------------------
Gary J. Kulesza
Date: September 16, 1997 /s/ CHARLES D. GREENIDGE
---------------------------------------------
Charles D. Greenidge
Date: September 19, 1997 /s/ ARNOLD A. BERNSTEIN
---------------------------------------------
Arnold A. Bernstein
(Signature Page to Amendment No. 4 to
Stockholders Agreement)
- 4 -
<PAGE> 34
Date: September 19, 1997 /s/ LAWRENCE R. REDWINE
---------------------------------------------
Lawrence R. Redwine
Date: September 19, 1997 /s/ JOHN H. HAYS
---------------------------------------------
John H. Hays
Date: September 15, 1997 /s/ B. SCOTT PULLARA
---------------------------------------------
B. Scott Pullara
Date: September 19, 1997 /s/ JEFFREY N. MACDOWELL
---------------------------------------------
Jeffrey N. MacDowell
Date: September 15, 1997 /s/ ROBERT J. KILGORE
---------------------------------------------
Robert J. Kilgore
Date: September 19, 1997 /s/ NORMAN C. KISER
---------------------------------------------
Norman C. Kiser
Date: September 17, 1997 /s/ RICHARD H. BALDWIN
---------------------------------------------
Richard H. Baldwin
Date: September 15, 1997 /s/ CHARLES E. BAKER
---------------------------------------------
Charles E. Baker
Date: September 19, 1997 /s/ THOMAS D. NUGENT
---------------------------------------------
Thomas D. Nugent
Date: September 15, 1997 /s/ JEFREY A. EIDE
---------------------------------------------
Jeffrey A. Eide
Date: September 15, 1997 /s/ HERSHEL A. MANNING
---------------------------------------------
Hershel A. Manning
(Signature Page to Amendment No. 4 to
Stockholders Agreement)
- 5 -
<PAGE> 1
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated
as of May 15, 1996, is among RentX Industries, Inc., a Delaware corporation
(the "Corporation"), Mesirow Capital Partners VI, an Illinois limited
partnership ("Mesirow"), The Edgewater Private Equity Fund II, L.P., a Delaware
limited partnership ("Edgewater," Mesirow, Edgewater and any other persons who
purchase shares of Preferred Stock pursuant to the Investment Agreement (as
each term is defined below) being collectively referred to as the "Investors")
and BACE Investments, LLC, a Colorado limited liability company ("Bace").
RECITALS
WHEREAS, the Investors are purchasing shares of convertible
Series A Preferred Stock, par value $1.00 per share (the "Preferred Stock")
convertible into shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock"), of the Corporation and Bace is purchasing shares of
convertible Series B Preferred Stock, par value $1.00 per share, convertible
into shares of Class A Common Stock (all shares of Class A Common Stock into
which the Preferred Stock or the Series B Preferred are converted or may be
convertible from time to time being referred to as the "Purchased Shares") as
contemplated by that certain Investment Agreement dated as of May 15, 1996 (the
"Investment Agreement"), among the Corporation, the Investors, and Bace;
provided that certain registration rights are granted to the Investors; and
WHEREAS, the Corporation deems it desirable for the
Corporation to grant certain registration rights to the Investors in order to
induce the Investors to purchase the Preferred Stock pursuant to the terms of
the Investment Agreement and to Bace.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) "Commission" means the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Common Stock" means the common stock of the
Corporation of any class.
<PAGE> 2
(c) "Person" means a natural person, a partnership,
a corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a
governmental entity or any department, agency or political subdivision thereof.
(d) "Registrable Shares" means at any time (i) the
Purchased Shares (whether or not such shares have been issued or are issuable
or are issuable upon conversion of the Preferred Stock or the Series B
Preferred); (ii) any shares of Common Stock then outstanding which were issued
as, or were issued directly or indirectly upon the conversion or exercise of
other securities issued as, a dividend or other distribution with respect to or
in replacement of other Registrable Shares; and (iii) any shares of Common
Stock then issuable directly or indirectly upon the conversion or exercise of
other securities which were issued as a dividend or other distribution with
respect to or in replacement of other Registrable Shares; provided, that
Registrable Shares shall not include any shares (i) the sale of which has been
registered pursuant to the Securities Act and which shares have been sold
pursuant to such registration or (ii) which have been sold to the public
pursuant to Rule 144 of the Commission under the Securities Act. For purposes
of this Agreement, a Person will be deemed to be a holder of Registrable Shares
whenever such Person has the then existing right to acquire such Registrable
Shares (by exercise, conversion or otherwise), whether or not such acquisition
has actually been effected.
(e) "Registration Expenses" has the meaning ascribed
to it in Section 6 of this Agreement.
(f) "Securities Act" means the Securities Act of
1933, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from time to
time.
(g) "Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended, or any similar federal statute, and the rules
and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
2. Demand Registrations.
(a) Requests for Registration. At any time after
May 15, 1999, the holders of at least 50% or more of the then outstanding
Registrable Shares at any time may request registration under the Securities
Act of all or part of their Registrable Shares for sale in the manner specified
in such request. Within ten days after receipt of any request pursuant to this
Section 2(a), the Corporation will give written notice of such request to all
other holders of Registrable Shares and will include in such registration all
Registrable Shares with respect to which the Corporation has received written
requests for inclusion therein within 15 days after the receipt of the
Corporation's notice. All registrations requested pursuant to this Section
2(a) are referred to herein as "Demand Registrations."
-2-
<PAGE> 3
(b) Number of Demand Registrations. The Corporation
shall be obligated to register Registrable Shares pursuant to a Demand
Registration on three occasions only; provided that a registration will not
count as a Demand Registration until it has become effective and unless the
holders of Registrable Shares requesting such Registration are able to register
and sell at least 90% of the Registrable Shares requested to be included in
such registration; provided that in any event the Corporation will pay all
Registration Expenses in connection with any registration requested hereunder;
provided, however, that a registration that is withdrawn at the request of the
holders of Registrable Shares who demanded such Demand Registration will count
as a Demand Registration unless the Company is reimbursed by holders of
Registrable Shares for all reasonable out-of-pocket expenses incurred by the
Company in connection with such registration. The Company shall not be
required to effect a Demand Registration if the number of shares requested to
be registered is less than 2% of the shares of Common Stock then outstanding.
(c) Priority on Demand Registrations. If a Demand
Registration is an underwritten public offering, the holders of a majority of
the Registrable Shares to be sold pursuant to such offering may designate the
managing underwriters for such offering; provided that the selection of such
managing underwriters is subject to the approval of the Corporation, which
approval may not be unreasonably withheld. If in such an underwritten public
offering the managing underwriters advise the Corporation in writing that in
their opinion the number of Registrable Shares and other securities requested
to be included exceeds the number of Registrable Shares and other securities
which can be sold in such offering, the Corporation will include in such
registration, prior to the inclusion of any securities which are not
Registrable Shares, the number of Registrable Shares requested to be included
which in the opinion of such underwriters can be sold, pro rata among the
respective holders on the basis of the number of Registrable Shares owned by
such holders, with further successive pro rata allocations among the holders of
Registrable Shares if any such holder of Registrable Shares has requested the
registration of less than all such Registrable Shares it is entitled to
register.
(d) Restrictions on Registrations. The Corporation
may postpone for up to four months the filing or the effectiveness of a
registration statement for a Demand Registration if the Corporation reasonably
believes that such Demand Registration will have a material adverse effect on
any proposal or plan by the Corporation or any of its subsidiaries to engage in
any acquisition of assets (other than in the ordinary course of business) or
any merger, consolidation, tender offer or other significant transaction;
provided that the Corporation shall have the right to so postpone such filing
or effectiveness only one time during any period of fourteen consecutive
months.
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Corporation
proposes to register any of its securities under the Securities Act (other than
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Shares (a "Piggyback
-3-
<PAGE> 4
Registration"), the Corporation will give prompt written notice to all holders
of Registrable Shares of its intention to effect such a registration (which
notice shall be given not less than 30 days prior to the date the registration
statement is to be filed) and will include in such registration all Registrable
Shares with respect to which the Corporation has received written requests for
inclusion therein within 15 days after the receipt of the Corporation's notice.
(b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the
Corporation, and the managing underwriters advise the Corporation in writing
that in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, the
Corporation will include in such registration (i) first, the securities the
Corporation proposes to sell, (ii) second, the Registrable Shares requested to
be included in such registration which in such opinion of such underwriters can
be sold, pro rata among the holders of such Registrable Shares on the basis of
the number of Registrable Shares owned by such holders, with further successive
pro rata allocations among the holders of Registrable Shares if any such holder
of Registrable Shares had requested the registration of less than all such
Registrable Shares it is entitled to register, and (iii) third, other
securities requested to be included in such registration.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Corporation's securities, and the managing underwriters advise the
Corporation in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold in
such offering, the Corporation will include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Shares requested to be included in
such registration which in such opinion of such underwriters can be sold, pro
rata among the holders of such Registrable Shares on the basis of the number of
Registrable Shares owned or deemed to be owned by such holders, with further
successive pro rata allocations among the holders of Registrable Shares if any
such holder of Registrable Shares has requested the registration of less than
all such Registrable Shares it is entitled to register, and (iii) third, other
securities requested to be included in such registration.
(d) Other Registrations. If the Corporation has previously
received a request for a Demand Registration pursuant to Section 2 or has
previously filed a registration statement with respect to Registrable
Securities pursuant to this Section 3, and if such previous request or
registration has not been withdrawn or abandoned, the Corporation will not file
or cause to be effected any other registration of any of its equity securities
or securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor form),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of 6 months has elapsed from the effective date of
such Demand Registration or previous registration, as the case may be.
-4-
<PAGE> 5
4. Holdback Agreements.
(a) Each of the holders of Registrable Shares agrees not to
effect any public sale or distribution of equity securities of the Corporation,
or any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the 90-day period beginning on
the effective date of any underwritten Demand Registration (except as part of
such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(b) The Corporation agrees (i) not to effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) use all reasonable efforts
to cause each holder of at least 1% (on a fully-diluted basis) of its equity
securities (other than equity securities acquired in a public trading market),
or any securities convertible into or exchangeable or exercisable for such
securities, purchased from the Corporation at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution of any such securities during such period
(except as part of such underwritten registration, if otherwise permitted),
unless the underwriters managing the registered public offering otherwise
agree.
5. Registration Procedures. Whenever the holders of
Registrable Shares have requested that any Registrable Shares be registered
pursuant to this Agreement, the Corporation will use its best efforts to effect
the registration and the sale of such Registrable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto the Corporation
will as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Shares and use its best efforts to
cause such registration statement to become and remain effective for such
period as may be reasonably necessary to effect the sale of such securities,
not to exceed nine months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than nine months (or such longer period as
is necessary for the underwriters in an underwritten offering to sell unsold
allotments) and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by
the sellers thereof set forth in such registration statement;
-5-
<PAGE> 6
(c) furnish to each seller of Registrable Shares and the
underwriters of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as such seller or underwriters may reasonably request
in order to facilitate the disposition of the Registrable Shares owned by such
seller or the sale of such securities by such underwriters;
(d) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable Shares
owned by such seller (provided, however, that the Corporation will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subsection or (ii)
consent to general service of process in any such jurisdiction);
(e) cause all such Registrable Shares to be listed or
authorized for quotation on each securities exchange or automated quotation
system on which similar securities issued by the Corporation are then listed or
quoted;
(f) provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such registration
statement;
(g) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Shares being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Shares (including, without limitation,
effecting a stock split or a combination of shares);
(h) make available for inspection by the seller of
Registrable Shares, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Corporation, and cause the
Corporation's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
(i) notify each seller of such Registrable Shares, promptly
after it shall receive notice thereof, of the time when such registration
statement has become effective or a supplement to any prospectus forming a part
of such registration statement has been filed;
(j) notify each seller of such Registrable Shares of any
request by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
-6-
<PAGE> 7
(k) prepare and file with the Commission, promptly upon the
request of any seller of such Registrable Shares, any amendments or supplements
to such registration statement or prospectus which, in the opinion of counsel
selected by the holders of a majority of the Registrable Shares being
registered, is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of Registrable Shares by such
seller;
(l) prepare and promptly file with the Commission and
promptly notify each seller of such Registrable Shares of the filing of such
amendment or supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading;
(m) advise each seller of such Registrable Shares, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
such purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued;
(n) at least forty-eight hours prior to the filing of any
registration statement or prospectus or any amendment or supplement to such
registration statement or prospectus, furnish a copy thereof to each seller of
such Registrable Shares and refrain from filing any such registration
statement, prospectus, amendment or supplement to which counsel selected by the
holders of a majority of the Registrable Shares being registered shall have
objected on the grounds that such amendment or supplement does not comply in
all material respects with the requirements of the Securities Act or the rules
and regulations thereunder, unless, in the case of an amendment or supplement,
in the opinion of counsel for the Corporation the filing of such amendment or
supplement is reasonably necessary to protect the Corporation from any
liabilities under any applicable federal or state law and such filing will not
violate applicable laws;
(o) at the request of any seller of such Registrable Shares
in connection with an underwritten offering, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel,
addressed to the underwriters and the sellers of Registrable Shares, covering
such matters as such underwriters and sellers may reasonably request and as are
customarily covered by the issuer's counsel in an underwritten offering; and
(ii) a letter or letters from the independent certified public accountants of
the Corporation addressed to the underwriters and the sellers of Registrable
Shares, covering such matters as such underwriters and sellers may reasonably
request and as are customarily covered in accountant's letters in connection
with an underwritten offering; and
-7-
<PAGE> 8
(p) otherwise use its best efforts to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement in accordance with the
intended method of disposition and to make generally available to its security
holders, as soon as reasonably practicable, an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
(q) Each holder of Registrable Shares that sells Registrable
Shares pursuant to a registration under this Agreement agrees that in
connection with registration as follows:
(i) Such seller shall cooperate as reasonably
requested by the Corporation with the Corporation in
connection with the preparation of the registration statement,
and for so long as the Corporation is obligated to file and
keep effective the registration statement, shall provide to
the Corporation, in writing, for use in the registration
statement, all such information regarding such seller and its
plan of distribution of the Registrable Shares as may be
reasonably necessary to enable the Corporation to prepare the
registration statement and prospectus covering the Registrable
Shares, to maintain the currency and effectiveness thereof and
otherwise to comply with all applicable requirements of law in
connection therewith.
(ii) During such time as such seller may be engaged
in a distribution of the Registrable Shares, such seller shall
comply with Rules 10b-6 and 10b-7 promulgated under the
Securities Exchange Act and pursuant thereto it shall, among
other things; (x) not engage in any stabilization activity in
connection with the securities of the Corporation in
contravention of such rules; (y) distribute the Registrable
Shares under the registration statement solely in the manner
described in the registration statement; and (z) cease
distribution of such Registrable Shares pursuant to such
registration statement upon receipt of written notice from the
Corporation that the prospectus covering the Registrable
Shares contains any untrue statement of a material fact or
omits a material fact required to be stated therein or
necessary to make the statements therein not misleading.
6. Registration Expenses.
(a) All expenses incident to the Corporation's performance of
or compliance with this Agreement, including, without limitation, all
registration and filing fees, fees of transfer agents and registrars, fees and
expenses of compliance with securities or blue sky laws, fees of the National
Association of Securities Dealers, Inc., printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for the Corporation
and its independent certified public accountants, underwriters (excluding
discounts and commissions attributable to the Registrable Shares included in
such registration) and other Persons retained by the Corporation (all such
expenses being herein called "Registration Expenses"), will be borne by the
Corporation. In addition, the Corporation will pay its internal expenses
(including, without
-8-
<PAGE> 9
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance obtained by the Corporation and
the expenses and fees for listing or authorizing for quotation the securities
to be registered on each securities exchange on which any shares of common
stock are then listed or quoted.
(b) In connection with each Demand Registration and Piggyback
Registration effected pursuant to this Agreement, the Corporation will
reimburse the holders of Registrable Shares covered by such registration for
the reasonable fees and disbursements of one counsel for the holders chosen by
the holders of a majority of such Registrable Shares.
7. Indemnification.
(a) The Corporation agrees to indemnify, to the fullest
extent permitted by law, each seller of Registrable Shares, its officers and
directors and each Person who controls such seller (within the meaning of the
Securities Act or the Exchange Act) against all losses, claims, damages,
liabilities and expenses (including, without limitation, attorneys' fees except
as limited by Section 7(c)) caused by any untrue or alleged untrue statement of
a material fact contained in any registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Corporation by such seller expressly for use therein or by such seller's
failure to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Corporation has furnished such
seller with a sufficient number of copies of the same. In connection with an
underwritten offering, the Corporation will indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act or the Exchange Act) to the same extent as
provided above with respect to the indemnification of the sellers of
Registrable Shares and in connection therewith the Corporation shall enter into
an underwriting agreement in customary form containing such provisions for
indemnification and contribution as shall be reasonably requested by the
underwriters. The reimbursements required by this Section 7(a) will be made by
periodic payments during the course of the investigation or defense, as and
when bills are received or expenses incurred.
(b) In connection with any registration statement in
which a seller of Registrable Shares is participating, each such seller will
furnish to the Corporation in writing such information and affidavits as the
Corporation reasonably requests for use in connection with any such
registration statement or prospectus and, to the fullest extent permitted by
law, will indemnify the Corporation, its directors and officers and each Person
who controls the Corporation (within the meaning of the Securities Act) against
any losses, claims, damages, liabilities and expenses (including, without
limitation, attorneys' fees except as limited by Section 7(c)) resulting from
any untrue statement of a material fact contained in the registration
-9-
<PAGE> 10
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such seller; provided that
the obligation to indemnify will be several, not joint and several, among such
sellers of Registrable Shares, and the liability of each such seller of
Registrable Shares will be in proportion to; provided further that such
liability will be limited to, the net amount received by such seller from the
sale of Registrable Shares pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give such
notice shall not limit the rights of such Person) and (ii) unless in such
indemnified party's reasonable judgment (with written advice of counsel) a
conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed, the indemnifying party will not be subject
to any liability for any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably withheld). An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment (with written advice of counsel) of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.
(d) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 7(a) or Section 7(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the holders or any underwriters or all of them were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 7(d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such
-10-
<PAGE> 11
indemnified party in connection with investigating or, except as provided in
Section 7(c), defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no holder shall be required to contribute an
amount greater than the dollar amount of the proceeds received by such holder
with respect to the sale of any Registrable Shares. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The holders' obligations in this
Section 7(d) to contribute shall be several in proportion to the amount of
Registrable Shares registered by them and not joint.
(e) The indemnification and contribution provided for under
this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified party and will survive the
transfer of securities. The Corporation also agrees to make such provisions as
are reasonably requested by any indemnified party for contribution to such
party in the event the Corporation's indemnification is unavailable for any
reason.
8. Compliance with Rule 144. In the event that the
Corporation (a) registers a class of securities under Section 12 of the
Exchange Act, (b) issues an offering circular meeting the requirements of
Regulation A under the Securities Act or (c) commences to file reports under
Section 13 or 15(d) of the Exchange Act, then the Corporation shall (i) make
and keep public information available, as those terms are understood and
defined in Rule 144 of the Commission, (ii) file with the Commission in a
timely manner all reports and other documents required of the Corporation under
the Securities Act and the Exchange Act and (iii) at the request of any holder
who proposes to sell securities in compliance with Rule 144, forthwith furnish
to such holder a written statement of compliance with the reporting
requirements of the Commission as set forth in Rule 144 as such rule may be
amended from time to time and make available to the public and such holders
such information as will enable the holders to make sales pursuant to Rule 144.
9. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is underwritten
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements.
10. No Inconsistent Agreements. The Corporation will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of the Registrable Shares
in this Agreement.
11. Adjustments Affecting Registrable Shares. The
Corporation will not take any action, or permit any change to occur, with
respect to its securities which would adversely affect the ability of the
holders of Registrable Shares to include such Registrable Shares in a
-11-
<PAGE> 12
registration undertaken pursuant to this Agreement or which would adversely
affect the marketability of such Registrable Shares in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
12. Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages caused by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
13. Amendments and Waivers. Except as otherwise
expressly provided herein, the provisions of this Agreement may be amended or
waived at any time only by the written agreement of the Corporation and the
holders of 80 percent of the Registrable Shares; provided that any such
amendment or waiver shall apply equally to all holders of Registrable Shares
except to the extent a holder of Registrable Shares adversely affected by
unequal treatment otherwise consents. Any waiver, permit, consent or approval
of any kind or character on the part of any such holders of any provision or
condition of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in writing.
14. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not. In addition and whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Shares are also for the benefit
of, and enforceable by, any subsequent holder of Registrable Shares who
consents in writing to be bound by this Agreement. However, any successor,
assign or holder to have the benefits of this Agreement must at the request of
the Corporation agree to be bound by the terms hereof.
15. Other Registration Rights. Except for the
registration rights granted hereunder, the Corporation will not grant to any
Persons the right to request the Corporation to register any equity securities
of the Corporation, or any securities convertible or exchangeable into or
exercisable for such securities, without the written consent of the holders of
at least two-thirds of the Registrable Shares. Except for registrations
pursuant to registration rights granted to the holders of Registrable Shares
hereunder or registrations of securities by the Corporation, the Corporation
shall not register any equity securities of the Corporation, or any securities
convertible or exchangeable into or exercisable for such securities, without
the written consent of the holders of at least two-thirds of the Registrable
Shares. The Corporation will not include in any Demand Registration any
securities which are not Registrable Shares (for the purposes of Section 2),
without the written consent of the holders of at least a majority of the
Registrable Shares requesting such registration.
-12-
<PAGE> 13
16. Final Agreement. This Agreement constitutes the
final agreement of the parties concerning the matters referred to herein, and
supersedes all prior agreements and understandings.
17. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
18. Descriptive Heading. The descriptive headings of
this Agreement are inserted for convenience of reference only and do not
constitute a part of and shall not be utilized in interpreting this Agreement.
19. Notices. Any notices required or permitted to be
sent hereunder shall be delivered personally or mailed, certified mail, return
receipt requested, or delivered by overnight courier service to the following
addresses, or such other addresses as shall be given by notice delivered
hereunder, and shall be deemed to have been given upon delivery, if delivered
personally, three business days after mailing, if mailed, or one business day
after delivery to the courier, if delivered by overnight courier service:
If to the holders of Registrable Shares, to the addresses set
forth on the stock record books of the Corporation;
with a copy to (in the case of notices to holders other than
Bace and its transferees):
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: John J. Sabl
20. Governing Law. The validity, meaning and effect of
this Agreement shall be determined in accordance with the laws of the State of
Illinois applicable to contracts made and to be performed in that state.
21. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and the Corporation.
-13-
<PAGE> 14
22. Attorneys' Fees. In the event of any action or suit
based upon or arising out of any actual or alleged breach by any party of any
representation, warranty or agreement in this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and expenses of
such action or suit from the other party, in addition to any other relief
ordered by the court.
-14-
<PAGE> 15
This Registration Agreement was executed on the date first set forth
above.
RENTX INDUSTRIES, INC.
By: /s/ CRAIG J. ZOELLNER
------------------------------------
Craig J. Zoellner
Vice President
MESIROW CAPITAL PARTNERS VI
By: Mesirow Private Equity
Investments, Inc.,
General Partner
By: /s/ THOMAS E. GALUHN
--------------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY FUND,
II L.P.
By: Gordon Management, Inc.
By: /s/ J.A. GORDON
------------------------------
James A. Gordon
President
BACE INVESTMENTS, LLC
By: /s/ CRAIG J. ZOELLNER
------------------------------
Craig J. Zoellner
Member
<PAGE> 16
AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
RENTX INDUSTRIES, INC.,
MESIROW CAPITAL PARTNERS VI,
THE EDGEWATER PRIVATE EQUITY FUND II, L.P.
AND
BACE INVESTMENTS, LLC
DATED AS OF MAY 15, 1996
This Amendment No. 1 to the Registration Rights Agreement
(this "Amendment"), dated as of June 26, 1997, is by and among RentX
Industries, Inc. ("RentX"), Mesirow Capital Partners VI ("Mesirow"), The
Edgewater Private Equity Fund II, L.P.("Edgewater"), BACE Investments, LLC
("Bace"), Trustees of Grinnell College ("Grinnell") and Inroads Capital
Partners, L.P. ("Inroads").
WHEREAS, RentX, Mesirow, Edgewater and Bace have entered into
that certain Registration Rights Agreement, dated as of May 15, 1996 (the
"Registration Rights Agreement");
WHEREAS, Grinnell, in addition to certain other persons,
became a party to the Registration Rights Agreement on May 29, 1996;
WHEREAS, Inroads became a party to the Registration Rights
Agreement on August 2, 1996;
WHEREAS, the parties hereto desire to enter into this
Amendment in order to amend certain provisions of the Registration Rights
Agreement; and
WHEREAS, the Registration Rights Agreement may be amended by
the consent of the parties hereto;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
respective parties hereto hereby agree as follows:
1. DEFINITIONS. Unless stated otherwise, capitalized
terms used in this Amendment shall have the meanings specified in the
Registration Rights Agreement.
<PAGE> 17
2. AMENDMENT TO SECTION 1.1(D). Section 1.1(d) is
hereby amended to read in its entirety as follows:
"(d) "Registrable Shares" means at any time (i) the Purchased
Shares (whether or not such shares have been issued or are
issuable or are issuable upon conversion of the Preferred
Stock or the Series B Preferred); (ii) all shares of Class A
Common Stock into which Series C Preferred Stock, par value
$1.00 per share ("Series C Preferred"), are converted or may
be convertible from time to time (whether or not such shares
have been issued or are issuable or are issuable upon
conversion of the Series C Preferred); (iii) any shares of
Common Stock then outstanding which were issued as, or were
issued directly or indirectly upon the conversion or exercise
of other securities issued as, a dividend or other
distribution with respect to or in replacement of other
Registrable Shares; and (iv) any shares of Common Stock then
issuable directly or indirectly upon the conversion or
exercise of other securities which were issued as a dividend
or other distribution with respect to or in replacement of
other Registrable Shares; provided, that Registrable Shares
shall not include any shares (i) the sale of which has been
registered pursuant to the Securities Act and which shares
have been sold pursuant to such registration or (ii) which
have been sold to the public pursuant to Rule 144 of the
Commission under the Securities Act. For purposes of this
Agreement, a Person will be deemed to be a holder of
Registrable Shares whenever such Person has the then existing
right to acquire such Registrable Shares (by exercise,
conversion or otherwise), whether or not such acquisition has
actually been effected."
3. GOVERNING LAW. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Illinois
without regard to its conflicts of law doctrine.
4. COUNTERPARTS. This Amendment may be executed in
several counterparts, each of which will be deemed an original but all of which
together shall constitute one and the same instrument.
- 2 -
<PAGE> 18
IN WITNESS WHEREOF, this Amendment No. 1 to the Registration
Rights Agreement has been duly executed and delivered by the duly authorized
officers of the parties hereto as of the date first above written.
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A. BERNSTEIN
-------------------------------
Name: Arnold A. Bernstein
Title: President - CEO
BACE INVESTMENTS, LLC
By: /s/ RICHARD M. TYLER
-------------------------------
Richard M. Tyler
Member
MESIROW CAPITAL PARTNERS VI
By: Mesirow Financial Services,
Inc., General Partner
By: /s/ THOMAS E. GALUHN
---------------------------
Thomas E. Galuhn
Vice President
THE EDGEWATER PRIVATE EQUITY
FUND II, L.P.
By: Gordon Management, Inc.,
General Partner
By: /s/ J.A. GORDON
---------------------------
James A. Gordon
President
- 3 -
<PAGE> 19
TRUSTEES OF GRINNELL COLLEGE
By: /s/ J.A. GORDON
------------------------------
James A. Gordon
Authorized Agent
INROADS CAPITAL PARTNERS, L.P.
By: Inroads General Partners, L.P.
General Partner
By: /s/ MARGARET G. FISHER
--------------------------
Margaret G. Fisher
General Partner
(Signature Page to Amendment No. 1 to
the Registration Rights Agreement)
- 4 -
<PAGE> 1
EXHIBIT 10.6
================================================================================
ASSET PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.
ZODIAC RENTALS, INC. and ZODIAC RENTALS, INC. III
AND GEORGE A. EVANS, MARILYN J. EVANS,
MAUREEN C. DAVIDSON AND LARRY W. DAVIDSON
DATED AS OF APRIL 3, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5. Closing; Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1. Representations and Warranties of the Seller and the Shareholders . . . . . . . . . . . . . . . . . 12
3.2. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2. Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3. Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.7. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.7. Satisfaction of Liabilities and Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.8. Collection of Guaranteed Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.9. Post-Closing Access to Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.2. Conditions to Obligation of the Seller and the Shareholders . . . . . . . . . . . . . . . . . . . . 32
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1. Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7.2. Indemnification Provisions for Benefit of the Seller and the Shareholders . . . . . . . . . . . . . 34
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.14. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
(ii)
<PAGE> 4
This Asset Purchase Agreement is entered into as of April 3,
1996 among RentX Industries, Inc., a Delaware corporation (the "Buyer"), Zodiac
Rentals, Inc., a Colorado corporation ("Zodiac One"), Zodiac Rentals, Inc.
III, a Colorado corporation ("Zodiac Three"), and George A. Evans, Marilyn J.
Evans, Maureen C. Davidson and Larry W. Davidson (individually, a
"Shareholder" and collectively, the "Shareholders").
Recitals
The Shareholders own all of the issued and outstanding capital
stock of Zodiac One and own or have the right to purchase all of the issued and
outstanding capital stock of Zodiac Three, which together operate an equipment
rental business under the Zodiac name. Each of Zodiac One and Zodiac Three
desires to sell, and the Buyer desires to purchase, substantially all of the
assets of Zodiac One and Zodiac Three as provided in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions.
1.1. Defined Terms. The following terms used in this
Agreement will have the meanings designated below:
Acquired Assets means all right, title and interest
of the Seller in and to all of the tangible and intangible assets of the Seller
except the Excluded Assets, but including, without limitation, all of the
Seller's (a) tangible personal property (such as machinery, equipment,
inventories, supplies, manufactured and purchased parts, furniture,
automobiles, trucks, tractors, trailers and tools), (b) real property
leaseholds, and those improvements and fixtures located on the Premises which
can be removed therefrom without causing damage to the buildings from which
they are removed unless such damage is repaired by the Buyer, (c) corporate
names and tradenames, other Intellectual Property and goodwill, licenses and
sublicenses granted and obtained with respect thereto and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein, (d) agreements, contracts, instruments, security interests, guaranties
and other similar arrangements and rights thereunder, except those representing
Employee Benefit Plans, Benefit Arrangements or other Liabilities that are not
Assumed Liabilities, (e) accounts, notes receivable and other receivables, (f)
securities, (g) $2,700 in cash, which will be left in the cash registers on the
Premises immediately after the Closing, (h) claims, deposits, payments,
refunds, causes of action, choses in action, rights of recovery, rights of
set-off and rights of recoupment (including any such item relating to the
payment of Taxes, other than the payment of income Taxes by the Shareholders),
(i) franchises, approvals, Permits, licenses, Orders in favor of the Seller,
registrations, certificates, variances and similar rights and items obtained
from Governmental
<PAGE> 5
Authorities, and rights thereunder, (j) the Assigned Vehicle Ownership Taxes,
and (k) books, records, ledgers, files, documents, correspondence, lists,
drawings, specifications, creative materials, advertising and promotional
materials, studies, reports and other printed or written materials.
Adverse Consequences means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, damages, costs, expenses and fees (including court costs and fees and
expenses of counsel and other experts), plus interest at a rate equal to the
prime rate quoted from time to time by Norwest Bank Colorado, N.A. plus two
percentage points accrued from the date any Adverse Consequence becomes a
liability of the party suffering the Adverse Consequence as determined in
accordance with GAAP.
Affiliated Group means any affiliated group within
the meaning of Code Section 1504 or any similar group defined under a similar
provision of state, local or foreign law.
Assigned Vehicle Ownership Taxes means specific
ownership tax payments made by the Seller or the Shareholders prior to the
Closing on the vehicles and mobile equipment included in the Acquired Assets,
to the extent such payments are attributable to the period from and after the
Closing Date and to the extent Colorado law permits such payments to be
assigned by the Seller and the Shareholders to the Buyer.
Assignment and Assumption Agreement means the
Assignment and Assumption Agreement between the Seller and the Buyer in the
form of Exhibit 1.1(a) to be entered into at the Closing, pursuant to which the
Seller will assign to the Buyer, and the Buyer will assume, the obligations of
the Seller arising after the Closing Date under certain contracts specified by
the Buyer which at the Closing will be identified on Schedule 1 thereto.
Assumed Debt means indebtedness and purchase price
payment obligations incurred by the Seller in connection with the purchase of
equipment approved by the Buyer, as described on Exhibit 1.1(b).
Assumed Liabilities means (a) the obligations of the
Seller arising after the Closing Date under those contracts which are
identified on Schedule 1 to the Assignment and Assumption Agreement with
respect to the period from and after the Closing Date, (b) the Assumed Debt,
(c) personal property taxes on the Acquired Assets for the period from and
after the Closing, determined by prorating personal property taxes for the
current year in proportion to the number of days in the year prior to and
including the date of the Closing compared to the number of days in the year
remaining after the date of the Closing, and (d) fees and specific ownership
taxes payable by the Buyer to Governmental Authorities upon the registration in
the Buyer's name after the Closing of the vehicles and mobile equipment
-2-
<PAGE> 6
included in the Acquired Assets. Assumed Liabilities will not include any
other Liability, including but not limited to the following: (i) any Liability
relating to or arising directly or indirectly out of any product sold, leased
or delivered or any service provided by the Seller or its predecessors prior to
the Closing, (ii) the failure of the Seller or any predecessor to comply with
any Environmental Obligation or Other Legal Requirement, (iii) any Liability
with respect to which the Buyer is entitled to indemnification pursuant to
Section 7, (iv) any Liability for Taxes arising in connection with the
consummation of the transactions contemplated hereby, (v) any Liability of the
Seller for the unpaid Taxes of any other Person under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local or foreign law), as
a transferee or successor by contract or otherwise, (vi) any Liability of the
Seller or any Shareholder for costs and expenses incurred in connection with
this Agreement, any Other Seller Agreement or any Other Shareholder Agreement
and the transactions contemplated hereby or thereby (including, without
limitation, those for which the Shareholders are responsible pursuant to
Section 9.10), (vii) any Liability of the Seller or any Shareholder under this
Agreement, any Other Seller Agreement or any Other Shareholder Agreement,
(viii) any Liability under COBRA or the Worker Adjustment and Retraining
Notification Act, as amended, or any similar state or local law arising out of
the consummation of the transactions contemplated by this Agreement or any
termination of the employment of any employee of the Seller, (ix) any Liability
under any Employee Benefit Plan or Benefit Arrangement, (x) any Liability of
the Seller to indemnify any Person by reason of the fact that such Person was a
director, officer, employee or agent of the Seller or was serving as a partner,
trustee, director, officer, employee or agent of another entity, (xi) any
Liability relating to any Excluded Asset, (xii) any Liability relating to or
arising out of any failure to comply with any bulk sales or fraudulent transfer
law in connection with the consummation of the transactions contemplated by
this Agreement and (xiii) any contingent Liability of the Seller in existence
at Closing or arising prior to Closing.
Benefit Arrangement means any employment, severance
or other similar contract, arrangement or policy and each plan or agreement
(whether written or oral) providing through insurance coverage or through
self-insured arrangements, workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation, reduced interest
or interest-free loans, mortgages, relocation assistance or post- retirement
insurance, compensation or other benefits (including without limitation any
contracts, arrangements or understanding relating to this Agreement) that (a)
is not an Employee Benefit Plan, (b) is entered into, maintained or contributed
to by the Seller and (c) benefits any employee or former employee of the Seller
or any relative thereof.
Business means the businesses conducted by the Seller
at any time within the period of 24 months prior to the Closing.
Business Day means any day other than a Saturday, a
Sunday or a day on which banks in Denver, Colorado are permitted or required by
law to be closed.
-3-
<PAGE> 7
Closing has the meaning given it in Section 2.5.
Closing Accounts Receivable means all accounts
receivable of the Seller which arose from the ordinary course of its business
and are included in the Acquired Assets, as set forth on the Closing Balance
Sheet.
Closing Balance Sheet means the balance sheet of the
Seller as of the Closing Date prepared in accordance with GAAP on an accrual
basis consistent (other than the preparation thereof on an accrual, rather than
cash, basis) with the Seller's past practice and audited, at the Buyer's
expense, by a certified public accounting firm chosen by the Buyer.
Closing Date has the meaning given it in Section 2.5.
Closing Inventory means the Seller's current
inventory of goods and equipment held for rent or sale in the ordinary course
of its business which are included in the Acquired Assets, as set forth on the
Closing Balance Sheet.
COBRA means the provisions currently contained in
Section 4980B of the Code and the regulations promulgated thereunder.
Code means the Internal Revenue Code of 1986, as
amended.
Confidential Information means any information
concerning the subject Person or the subject Person's business, products,
financial condition, prospects and affairs that is not generally available to
the public.
Employee Benefit Plan means any (a) nonqualified
deferred compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any Multiemployer Plan) or (d) Employee Welfare Benefit Plan.
Employee Pension Benefit Plan has the meaning set
forth in ERISA Section 3(2).
Employee Welfare Benefit Plan has the meaning set
forth in ERISA Section 3(1).
Employment Agreements means the Employment and
Noncompetition Agreements between the Buyer and each of George A. Evans and
Larry W. Davidson in the form of Exhibit 1.1(c) to be entered into at the
Closing.
-4-
<PAGE> 8
Encumbrance means any mortgage, pledge, conditional
sale agreement, charge, claim, interest of another Person, lien, security
interest, title defect or other encumbrance.
Environmental Obligations means all federal, state
and local laws, regulations, rules, orders, permits, licenses, approvals,
ordinances, judgments, injunctions, directives, and common law relating to land
use, public health, safety, welfare or the environment or to the impact of
business and activities upon land use, public health, safety, welfare or the
environment, including, but not limited to, all requirements of the following
federal statutes and regulations promulgated pursuant thereto, as amended from
time to time: the Clean Air Act; the Clean Water Act; the Resource
Conservation and Recovery Act; the Safe Drinking Water Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the National Environmental Policy
Act; the Comprehensive Environmental Response, Compensation, and Liability Act;
OSHA; the Emergency Planning and Community Right-to-Know Act; the Toxic
Substances Control Act; and any state or local law counterpart or supplement to
such Acts.
ERISA means the Employee Retirement Income Security
Act of 1974, as amended, and any regulations, rules or orders promulgated
thereunder.
Escrow Account means the account established at the
Closing to be held by the Escrow Agent pursuant to the Escrow Agreement.
Escrow Agent means Norwest Bank Colorado, N.A.
Escrow Agreement means the Escrow Agreement among the
Buyer, the Seller, the Shareholders and the Escrow Agent in the form of Exhibit
1.1(d) to be entered into at the Closing.
Escrow Period means the period commencing on the
Closing Date and ending on the first anniversary of the Closing Date.
Excluded Assets means (a) the Seller's corporate
charter, taxpayer and other identification numbers, seals, minute books, stock
transfer books and other documents relating solely to the organization,
maintenance and existence of the Seller as a corporation, (b) any rights of the
Seller under this Agreement and the Other Seller Agreements, (c) the land and
buildings which constitute the Premises, except the fixtures and improvements
which can be removed therefrom without causing damage to the buildings from
which they are removed unless such damage is repaired by the Buyer, (d)
agreements, contracts, plans or similar arrangements representing Employee
Benefit Plans or Benefit Arrangements and (e) claims for refunds of income
taxes paid by any Shareholder with respect to the Seller's business.
GAAP means generally accepted accounting principles as
in effect from time to time in the United States.
-5-
<PAGE> 9
Governmental Authority means (a) the United States of
America, (b) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like), (c) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof or (d) any
agency, authority or instrumentality of any of the foregoing, including,
without limitation, any court, tribunal, department, bureau, commission or
board.
Hazardous Materials means any material, chemical,
compound, mixture, substance or waste which is regulated by any Governmental
Authority having jurisdiction over any premises, including but not limited to
(a) any oil or petroleum compounds, flammable substances, explosives,
radioactive materials, or any other materials or pollutants which pose a hazard
to the premises or to persons in or about the premises or which cause the
premises to be in violation of any Legal Requirement, (b) asbestos,
asbestos-containing or presumed asbestos-containing material of any kind or
character, (c) polychlorinated biphenyls, (d) any materials or substances
designated as "hazardous substances" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251 et seq., (e) "economic poison," as defined in the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 135 et
seq., (f) "chemical substance," "new chemical substance," or "hazardous
chemical substance or mixture" pursuant to Sections 3, 6 and 7 of the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., (g) "hazardous
substances" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., and
(h) "hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq.
Henderson Noncompetition Agreement means the
Noncompetition Agreement between Jeffrey Henderson and Zodiac Three in the form
of Exhibit 1.1(e) to be executed and delivered by the parties thereto prior to
the Closing and assigned to the Buyer by Zodiac Three at the Closing.
Intellectual Property means (a) all inventions
(whether patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other
-6-
<PAGE> 10
proprietary rights and (h) all copies and tangible and intangible embodiments
thereof (in whatever form or medium).
Latest Balance Sheet has the meaning given it in
Section 3.1(f).
Legal Requirement means any constitution, statute,
ordinance, code, law, rule, regulation, order or other requirement, standard or
procedure enacted, adopted or applied by any Governmental Authority, including
judicial decisions applying common law or interpreting any other Legal
Requirement.
Liabilities Reserve means funds on deposit at any
time in the demand deposit account established on the Closing Date in the name
of the Buyer and the Seller in an amount equal to the Reserve Amount deposited
therein at the Closing less the aggregate amount of such funds applied since
the Closing to satisfy Reserved Liabilities.
Liability means any liability or obligation (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for Taxes.
Multiemployer Plan has the meaning set forth in ERISA
Section 3(37).
Orders means all applicable judgments, injunctions,
orders, decrees, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
OSHA means the Occupational Safety and Health Act of
1970, as amended, and any regulations, rules or orders promulgated thereunder.
Other Buyer Agreements means the Assignment and
Assumption Agreement, the Employment Agreements, the Escrow Agreement, the
Premises Leases and the other documents and instruments to be executed and
delivered by the Buyer pursuant to this Agreement.
Other Seller Agreements means the Assignment and
Assumption Agreement, the Escrow Agreement, the Henderson Noncompetition
Agreement, the bill of sale and other documents and instruments to be executed
and delivered by the Seller or any affiliate thereof pursuant to this
Agreement.
Other Shareholder Agreements means the Employment
Agreements, the Escrow Agreement, the Premises Leases and the other documents
and instruments to be executed and delivered by any or all of the Shareholders
pursuant to this Agreement.
-7-
<PAGE> 11
Permits means all permits, licenses, consents,
franchises, authorizations, approvals, privileges, waivers, exemptions,
exclusionary or inclusionary orders and other concessions, whether governmental
or private, including, without limitation, all environmental, public health or
safety permits required in connection with the Business.
Person means an individual, partnership, corporation,
association, joint stock company, trust, joint venture, limited liability
company, unincorporated organization or Governmental Authority.
Premises means the business premises leased by the
Seller, which are located and owned as set forth on Exhibit 1.1(f).
Premises Leases means the leases and assignments of
lease in the form of Exhibit 1.1(g) under which the Buyer will lease the
Premises from the Shareholders and take assignments of leases for Premises
owned by Persons other than the Shareholders at the Closing.
Price Allocation Schedule has the meaning given it in
Section 2.3(b).
Qualified Rental Equipment Payments means amounts
paid by the Seller prior to the Closing Date as the purchase price of all or
any part of the equipment described on Exhibit 1.1(b).
Reserve Amount means an amount equal to Reserved
Liabilities as of the Closing Date, as estimated in good faith by the
Shareholders and the Buyer on the day before the Closing occurs.
Reserved Liabilities means all Liabilities relating
to the Seller, the Business or the Acquired Assets (including Liabilities which
at the time of calculation are accrued but not yet payable) except the Assumed
Liabilities.
Right means any right, property interest, concession,
patent, trademark, trade name, copyright, know-how or other proprietary right
of another Person.
Seller means either or both of Zodiac One and Zodiac
Three, as the context requires.
Shareholders has the meaning given it in the preamble
to this Agreement.
Subsidiary means any corporation with respect to
which a specified Person directly or indirectly owns a majority of the common
stock or has the power to vote or direct the voting of sufficient securities to
elect a majority of the directors.
-8-
<PAGE> 12
Survival Period means the applicable periods after
the Closing Date during which representations and warranties survive pursuant
to Section 3.3.
Tax means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, documentary, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated or other tax of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not.
Tax Return means any return, declaration, report,
claim for refund or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
Vehicle Fee and Tax Reimbursement means an amount
equal to the Assigned Vehicle Ownership Taxes plus vehicle licensing fees on
the vehicles and mobile equipment included in the Acquired Assets which are
paid by the Seller or the Shareholders prior to the Closing and attributable to
periods after the Closing Date.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to purchase from the
Seller, and the Seller agrees to sell to the Buyer, all the Acquired Assets
free and clear of any Encumbrance for the consideration specified in Section
2.3. The Buyer will have no obligation under this Agreement to purchase less
than all of the Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the
terms and conditions set forth in this Agreement, the Buyer agrees to assume
and become responsible for all of the Assumed Liabilities at the Closing. The
Buyer will not assume or have any responsibility with respect to any Liability
not included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment. (a) The consideration for
the Acquired Assets will consist of $10,939,217 (plus interest on the deferred
portion thereof as described below) plus (i) an amount equal to the Vehicle Fee
and Tax Reimbursement and (ii) an amount equal to Qualified Rental Equipment
Payments, payable as described below, and the assumption by the Buyer of the
Assumed Liabilities. At the Closing the Buyer will pay to the Seller, by wire
transfer or other delivery of immediately available funds to an account
designated by the Seller prior to the Closing, an amount equal to $9,252,700
plus an amount equal to the Vehicle Fee and Tax Reimbursement as estimated in
good faith by the Buyer and the Seller on the day before the Closing. As soon
as practicable after the Closing the Buyer and the Seller will determine the
precise amount of the Vehicle Fee and Tax Reimbursement. Promptly after such
-9-
<PAGE> 13
determination they will instruct the Escrow Agent to disburse to the Buyer from
the Escrow Account the amount, if any, by which the estimated Vehicle Fee and
Tax Reimbursement paid by the Buyer at the Closing exceeds the Vehicle Fee and
Tax Reimbursement as finally determined, or the Buyer will pay to the Seller
the amount, if any, by which the Vehicle Fee and Tax Reimbursement as so
determined exceeds the estimated Vehicle Fee and Tax Reimbursement paid to the
Seller at the Closing. If the parties agree prior to the Closing that the
Buyer will assume any debt or payment obligation of the Seller or the
Shareholders in addition to the Assumed Debt, either the purchase price payable
by the Buyer at the Closing will be reduced by the amount of such debt or
payment obligation or the Seller or the Shareholders whose debt or payment
obligation is assumed will pay to the Buyer at the Closing cash in the amount
of such debt or obligations, as agreed by the parties prior to the Closing. At
the Closing the parties will arrange for any security for such additional debt
or payment obligations and the liability of the Seller and the Shareholders
with respect to the assumed debt or payment obligation to be released by the
creditor.
The Buyer will pay to the Seller, by wire transfer or other
delivery of immediately available funds to an account designated by the Seller
prior to the Closing, the deferred purchase price payments together with
interest set forth in Exhibit 2.3(a) on the dates set forth therein.
At the Closing the Buyer will deposit $750,000 into the Escrow
Account by wire transfer or other delivery of immediately available funds.
Such escrow deposit will be the property of the Seller subject to the Seller's
and the Shareholders' indemnification obligations set forth in this Agreement,
and will be held, invested, administered and disbursed according to Section
7.1(b) hereof and the Escrow Agreement. The Shareholders, on the one hand, and
the Buyer, on the other, each will pay one-half of the Escrow Agent's fees and
reimbursable expenses as and when due.
(b) If a reduction in the capital gains or
ordinary income tax rate, or any deduction or exclusion from capital gains or
ordinary income tax, is enacted into law which is effective as to the
transactions contemplated by this Agreement and which reduces the Liability of
the Shareholders or the Seller for capital gains or ordinary income tax from
the amount which they would be required to pay under the law and regulations in
effect as of the date of this Agreement, the purchase price for the Acquired
Assets will be reduced by one-half of the reduction in the Seller's and the
Shareholders' capital gains or ordinary income tax caused by such enactment.
The amount of such reduction in liability will be calculated by Mr. Norman
Pester and paid to the Buyer by the Shareholders as promptly as practicable
after such reduction, deduction or exclusion is enacted or adopted, but in no
event later than April 15 of the year following enactment or adoption. The
Price Allocation Schedule described below automatically will be deemed amended
to reflect a corresponding reduction in the amount of the purchase price
allocated to goodwill and, to the extent, if any, that the reduction in the
purchase price exceeds the total purchase price allocated to goodwill in the
Price Allocation Schedule at the Closing, a reduction in the amount of the
purchase price allocated to equipment in the Price Allocation Schedule as of
the Closing. Mr. Pester promptly will provide to the
-10-
<PAGE> 14
Buyer and the Shareholders his written explanation of the calculation
contemplated by this paragraph (b). The Buyer will give notice to the
Shareholders of any disagreement with the calculation within 20 days after
receipt of the written explanation. The parties will attempt in good faith to
resolve any disagreement about the calculation promptly, and if they cannot do
so the disagreement will be submitted to arbitration pursuant to this
Agreement. Each of the Buyer, on the one hand, and the Shareholders, on the
other, will pay one-half of the fee charged by Mr. Pester for the calculation
described in this paragraph (b).
(c) As soon as practicable after the Closing, the
parties will prepare and initial a "Price Allocation Schedule" allocating the
total consideration for the Acquired Assets as of the Closing Date between the
categories of Acquired Assets described below. In preparing the Price
Allocation Schedule, the parties will allocate the total consideration for the
Acquired Assets among the Acquired Assets in the following manner:
(i) to Closing Inventory, equipment,
leasehold improvements and the other tangible property included in
Acquired Assets, the current book value thereof as reflected on the
Closing Balance Sheet (but determined on a tax, rather than GAAP,
basis), and to Closing Accounts Receivable the current book value
thereof as reflected on the Closing Balance Sheet, which in each case
the parties agree is the fair market value thereof; and
(ii) the entire balance to the goodwill
of the Business, or at the Buyer's sole discretion to the Seller's
other intangible assets which are included in the Acquired Assets.
The parties acknowledge that such allocations were determined pursuant to arm's
length bargaining regarding the fair market values of the Acquired Assets in
accordance with the provisions of Code Section 1060. The parties agree to be
bound by the allocations set forth in the Price Allocation Schedule for all
federal, state and local Tax purposes, including for purposes of determining
any income, gain, loss, depreciation or other deductions in respect of such
assets. The parties further agree to prepare and file all Tax Returns
(including Form 8594 under the Code) in a manner consistent with such
allocations and not to take any position contrary to such allocations in any
administrative or judicial proceeding.
(d) Satisfaction of Reserved Liabilities. At the
Closing the Shareholders will deposit into a demand deposit account in the name
of the Buyer and the Seller an amount equal to the Reserve Amount. Such
Liabilities Reserve will be applied to the payment of Reserved Liabilities, by
disbursements from that account, as they become due and payable. Reserved
Liabilities representing accrued vacation and other accrued employee benefits
will be satisfied by payment of the amount thereof to the Buyer as the Buyer
provides such benefits or makes cash payments in lieu thereof to employees.
The Buyer will give notice to any of the Shareholders when any Reserved
Liability becomes due and payable or is about to become due and payable. Such
notices will be given not more frequently than once each day,
-11-
<PAGE> 15
and not less frequently than once each week if any Reserved Liabilities become
due and payable during that week. The Buyer will use its best efforts to
process the payment of all Reserved Liabilities in accordance with the Seller's
historical practice. The Shareholders promptly will take all actions necessary
to cause the Liabilities Reserve to be applied to satisfy Reserved Liabilities
and, if the Liabilities Reserve has been exhausted, the Shareholders will
provide additional funds as required to satisfy Reserved Liabilities. Nothing
in this Agreement will be deemed to limit the joint and several obligations of
the Shareholders and the Sellers to pay the Reserved Liabilities in full.
After all Reserved Liabilities have been satisfied, any excess Liabilities
Reserve on deposit in the account created pursuant to this paragraph will be
paid to the Seller. Any disputes concerning the Liabilities Reserve will be
settled by arbitration as provided in this Agreement.
2.4. Sales Taxes, Etc. The Shareholders will pay all
sales, use, transfer and other Taxes, fees and charges, if any, payable in
respect of the sale and transfer of the Acquired Assets to the Buyer pursuant
to this Agreement (except licensing fees payable upon the transfer to the Buyer
of title to the vehicles and mobile equipment included in the Acquired Assets,
which are addressed in other provisions of this Agreement, and sales taxes on
accounts receivable collected by the Buyer after the Closing, which are
addressed by Section 5.8).
2.5. Closing; Effective Date. The closing of the
transactions contemplated by this Agreement (the "Closing") will take place on
a date agreed to by the parties, but in any event on or before April 30,1996,
commencing at 8:00 a.m. local time in Denver, Colorado, at the offices of
Sherman & Howard L.L.C. All transactions contemplated by this Agreement, the
Other Seller Agreements and the Other Shareholder Agreements will be effective
at 11:59 p.m. local time in Denver, Colorado on the day immediately preceding
the Closing (such effective time being the "Closing Date").
2.6. Deliveries at the Closing. At the Closing, (a) the
Seller and the Shareholders will deliver, or cause to be delivered, to the
Buyer the certificates, instruments and documents referred to in Section 6.1,
(b) the Buyer will deliver to the Seller and the Shareholders the certificates,
instruments and documents referred to in Section 6.2, (c) the Seller will
deliver to the Buyer instruments transferring to the Buyer title to the
Acquired Assets free and clear of any Encumbrances and (d) the Buyer will pay
and deposit the purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Seller and the
Shareholders. The following representations and warranties as they apply to
the Seller will be deemed to apply to each of Zodiac One and Zodiac Three
individually and to Zodiac One and Zodiac Three collectively. The Seller and
the Shareholders jointly and severally represent and warrant to the Buyer that
the statements contained in this Section 3.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made
-12-
<PAGE> 16
then and as though the Closing Date were then substituted for the date of this
Agreement throughout this Section 3.1).
(a) Certain Shareholder Matters. Each
Shareholder has full and absolute right, power, authority and legal capacity to
execute, deliver and perform this Agreement and all Other Shareholder
Agreements to which such Shareholder is a party, and this Agreement
constitutes, and such Other Shareholder Agreements will when executed and
delivered constitute, the legal, valid and binding obligations of, and be
enforceable in accordance with their respective terms against, such
Shareholder. The execution, delivery and performance of this Agreement and the
Other Shareholder Agreements to which the Shareholder is a party, and the
consummation of the transactions contemplated hereby and thereby, will not (i)
violate any Legal Requirement or Order to which the Shareholder is subject, or
(ii) violate, with or without the giving of notice or the lapse of time or
both, or conflict with or result in the breach or termination of any provision
of, or constitute a default under, or give any Person the right to accelerate
any obligation under, or result in the creation of any Encumbrance upon any
properties or assets of the Shareholder pursuant to, any indenture, mortgage,
deed of trust, lien, lease, agreement, instrument or other arrangement to which
the Shareholder is a party or by which the Shareholder or any of the
Shareholder's assets is bound or subject. No Shareholder need give any notice
to, make any filing with or obtain any authorization, consent or approval of
any Governmental Authority or other Person in order to consummate the
transactions contemplated hereby.
(b) Organization, Good Standing, Power, Etc.
Each of Zodiac One and Zodiac Three is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado, which is
the only jurisdiction in which the nature of the business conducted by each of
them or the properties owned, leased or operated by each of them make such
qualification necessary. Each of Zodiac One and Zodiac Three has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The copies of the articles of
incorporation (certified by the Secretary of State of Colorado) and the bylaws
of each of Zodiac One and Zodiac Three, all as amended to date, which have been
delivered to the Buyer by the Shareholders are complete and correct, and
neither Zodiac One nor Zodiac Three is in default under or in violation of any
provision of its articles of incorporation or bylaws. The minute books
(containing the records of meetings of the shareholders, the board of directors
and any committees of the board of directors held or actions taken by any of
them) and the stock certificate books and the stock record books of each of
Zodiac One and Zodiac Three, copies of which have been delivered to the Buyer
by the Shareholders, are correct and complete. This Agreement and the Other
Seller Agreements and the consummation of the transactions contemplated hereby
and thereby have been duly and unanimously approved by the board of directors
and shareholders of each of Zodiac One and Zodiac Three, and this Agreement has
been duly executed and delivered by each of Zodiac One, Zodiac Three and the
Shareholders. Each of Zodiac One and Zodiac Three has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Seller
Agreements, and this Agreement
-13-
<PAGE> 17
constitutes, and the Other Seller Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of each of Zodiac One and
Zodiac Three, and will be enforceable in accordance with their respective terms
against each of Zodiac One and Zodiac Three.
(c) Capitalization, Etc. The authorized capital
stock of Zodiac One consists of 49,000 shares of common stock, no par value.
The authorized capital stock of Zodiac Three consists of 50,000 shares of
common stock, no par value. Jeffrey Henderson owns 100 shares of common stock
of Zodiac Three, which will be purchased by Mr. Evans and Mr. Davidson prior to
the Closing. At the Closing the Shareholders will own the following shares of
capital stock of Zodiac One and Zodiac Three:
<TABLE>
<CAPTION>
Zodiac One Zodiac Three
---------- ------------
<S> <C> <C>
George Evans 627 150
Marilyn Evans 156 2/3 0
Maureen Davidson 156 2/3 0
Larry Davidson 627 150
</TABLE>
(collectively, the "Shares"), which constitute all of the outstanding shares of
capital stock of Zodiac One and Zodiac Three, beneficially and of record, free
and clear of any Encumbrance or Tax. There are no existing rights of first
refusal, buy-sell arrangements, options, warrants, rights, calls or other
commitments or restrictions of any character relating to any of the Seller's
stock. The Seller has no authorized or outstanding securities convertible into
or exchangeable for, or any authorized or outstanding option, warrant or other
right to subscribe for or to purchase, or convert any obligation into, any
unissued shares of its capital stock, and has not agreed to issue securities so
convertible or exchangeable or any such option, warrant or other right. There
are no authorized or outstanding stock appreciation, phantom stock, profit
participation or similar rights with respect to either Zodiac One or Zodiac
Three. There are no voting trusts, voting agreements, proxies or other
agreements or understandings with respect to any capital stock of the Seller.
(d) No Subsidiaries or Affiliates. The Seller
has no Subsidiaries and no interest in any other corporation, partnership,
limited partnership, limited liability company, association or joint venture.
(e) No Violation of Agreements, Etc. The
execution, delivery and performance of this Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby will not (i) violate any Legal Requirement or Order to which the Seller
is subject or any provision of the articles of incorporation or bylaws of the
Seller or (ii) violate, with or without the giving of notice or the lapse of
time or both, or conflict with or result in the breach or termination of any
provision of, or constitute a default under, or give any Person the right to
accelerate any obligation under, or result in the
-14-
<PAGE> 18
creation of any Encumbrance upon any properties, assets or business of the
Seller pursuant to, any indenture, mortgage, deed of trust, lien, lease,
license, agreement, instrument or other arrangement to which the Seller is a
party or by which the Seller or any of its assets and properties is bound or
subject. Except for notices that will be given and consents that will be
obtained by the Seller prior to the Closing (which are set forth in Exhibit
3.1(e)), the Seller need not give any notice to, make any filing with or obtain
any authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement and the Other Seller Agreements.
(f) Financial Statements. The audited balance
sheets of the Seller as of December 31, 1994 and December 31, 1995, and the
related statements of income, shareholders' equity and cash flows for the
fiscal years then ended, the unaudited balance sheets of the Seller as of
December 31, 1992 and December 31, 1993, and the related statements of income,
shareholders' equity and cash flows for the fiscal years then ended, and the
unaudited balance sheet of the Seller as of January 31, 1996 (the latter being
referred to as the "Latest Balance Sheet"), and the related statement of
income, shareholders' equity and cash flows for the one-month period then ended
have been prepared in accordance with GAAP on a basis consistent with those of
prior years, are in accordance with the books and records of the Seller (which
books and records are complete and correct), are accurate and fairly present
the financial position and results of operations of the Seller as of those
dates and for each of the periods indicated. Copies of the financial
statements described in this Section 3.1(f) are attached as Exhibit 3.1(f). To
the best knowledge of the Shareholders and the Seller, such balance sheets make
full and adequate provision for all Liabilities of the Seller as of their
respective dates.
(g) Absence of Undisclosed Liabilities. All
Liabilities of the Seller have been paid when due or, if not yet due, have been
accrued properly. The Seller has no Liability (and there is no basis for the
assertion of any Liability) arising out of any transaction entered into at or
prior to the Closing Date, any action or inaction at or prior to the Closing
Date or any state of facts existing at or prior to the Closing Date or
otherwise, except (i) Liabilities reflected on the Latest Balance Sheet and
(ii) current Liabilities which have arisen after the date of the Latest Balance
Sheet in the ordinary course of business. All Liabilities of the Seller due on
or prior to the Closing Date will have been paid by the Seller prior to the
Closing.
(h) Absence of Certain Changes or Events. Since
November 1, 1995, the Seller has not: (i) incurred any debt, indebtedness or
Liability, except Assumed Debt and current Liabilities incurred in the ordinary
course of business; (ii) delayed or postponed the payment of accounts payable
or other Liabilities except in accordance with past practice; (iii) accelerated
the collection of any receivable; (iv) leased, except in the ordinary course of
business, or sold or otherwise transferred any of its equipment or other assets
or properties; (v) subjected any of its assets or properties to any
Encumbrance; (vi) settled, compromised or expensed any receivable which is set
forth on Exhibit 3.1(h) or which arises between the date
-15-
<PAGE> 19
of this Agreement and the Closing; (vii) except as set forth in Exhibit 3.1(h),
changed in any way the manner in which it conducts business; (viii) except as
set forth in Exhibit 3.1(h), cancelled, compromised, waived or released any
right, debt or claim; (ix) transferred or granted any rights under any leases
(except to customers in the ordinary course of business), licenses or
agreements or with respect to any Intellectual Property; (x) except as set
forth in Exhibit 3.1(h), made or granted any individual wage or salary increase
in excess of 10% or any general wage or salary increase, entered into any
employment, agency or consulting contract, changed or increased the rate of
compensation payable through salary, bonus, pension or contract or changed any
term of employment with respect to, any shareholder, officer, director,
employee or consultant or any affiliate thereof for any period before or after
November 1, 1995; (xi) adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance or other plan, contract or commitment for
the benefit of any of its shareholders, officers, directors, employees or any
affiliate thereof (or taken any such action with respect to any other Employee
Benefit Plan); (xii) except as otherwise expressly permitted by this Section
3.1(h), entered into contracts or agreements, or made commitments, involving
more than $10,000 in the aggregate; (xiii) suffered any adverse fact or change,
including, without limitation, to or in its business, financial condition,
prospects, customer relationships or properties; (xiv) except as set forth in
Exhibit 3.1(h), entered into any contract or commitment to make capital
expenditures in excess of $10,000 in the aggregate; (xv) purchased, redeemed or
otherwise acquired any shares of its capital stock or any other securities;
(xvi) made any loan to or given a guarantee for any Person or entered into any
transaction with (including, without limitation, any agreement or other
arrangement providing for employment of, furnishing of services by, rental of
real or personal property from, or otherwise requiring payment to) any
shareholder, officer or director or any affiliate thereof; (xvii) permitted any
Person to withdraw assets from the Seller except cash withdrawn upon prior
notice to the Buyer; (xviii) made any payment or transfer to or for the benefit
of any shareholder, officer or director or any affiliate thereof, other than
payments in the form of cash; (xix) made or pledged to make any charitable or
other contribution; (xx) accelerated, terminated, modified or cancelled any
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) involving more than $10,000 individually or in
the aggregate to which the Seller is a party or by which it is bound; (xxi)
rented any equipment or sold or otherwise transferred any inventory or services
at below-normal rental rates or margins; (xxii) changed its method of
depreciation; (xxiii) suffered any other material occurrence, event, incident,
action, failure to act or transaction outside the ordinary course of business;
or (xxiv) agreed to incur, take, make or permit any of the matters described in
clauses (i) through (xxiii).
(i) Permits. The Seller owns or holds all
Permits necessary to permit it to own, lease and operate its properties and to
conduct its business. Each of such Permits is listed on Exhibit 3.1(i). All
of such Permits are currently in full force and effect, no action or claim is
pending or threatened to revoke, modify or terminate any Permit or render any
Permit invalid, and all of the Permits are transferable to the Buyer at the
Closing without any action by any Person.
-16-
<PAGE> 20
(j) Tax Matters. There has been duly and timely
filed in proper form by or on behalf of the Seller, or a filing extension from
the appropriate Governmental Authorities has been obtained with respect to, all
Tax Returns required to be filed by applicable Legal Requirement on or prior to
the date of this Agreement. All assessments, Taxes, fees or other charges
imposed on the Seller or any of its properties, or on any of its Shareholders
pursuant to the Seller's "S" corporation election, in respect of the periods
covered by such Tax Returns have been paid or adequate reserves have been
provided for with respect to the payment of all Taxes (whether or not disputed)
payable in respect of periods through the date of this Agreement and all prior
periods and all Tax Liabilities arising out of transactions entered into or
states of fact existing prior to the date of this Agreement. There is no
unpaid interest, penalty or addition to any Tax due or claimed due from the
Seller, or from any of its Shareholders pursuant to the Seller's "S"
corporation election, or any Tax deficiency, determination or assessment
outstanding against the Seller or against any of its Shareholders pursuant to
the Seller's "S" corporation election. No audit of any Tax Return of the
Seller is pending or, to the best knowledge of the Seller and the Shareholders,
has been threatened, and the Seller has not waived any statute of limitations
relating to the assessment or payment of Taxes, which waiver has not yet
expired. All Tax Returns, or extensions thereof required to be filed, and all
Taxes required to be paid, prior to the Closing by or on behalf of the Seller
and by the Shareholders with respect to the Seller will have been so filed or
paid prior to the Closing. The Seller and the Shareholders will pay all Taxes
attributable to Seller's business through the Closing Date, including all Taxes
attributable to the transactions contemplated by this Agreement, on or before
the due date of such Tax Returns.
(k) Assets and Properties.
(i) The Seller does not own any real
property interest other than its leasehold interests in the Premises.
The Seller leases all buildings, and either owns or leases all
machinery, equipment and other assets necessary for the conduct of its
businesses as presently conducted. To the best knowledge of the
Shareholders and the Seller, the Premises comply in all respects with
the Americans with Disabilities Act, are free from defects, have been
maintained in accordance with normal industry practice, are in good
operating condition and repair and are suitable for the purposes for
which they presently are used. To the best knowledge of the
Shareholders and the Seller, the Premises have received all approvals
of Governmental Authorities (including Permits) required in connection
with the occupation and operation thereof and have been occupied,
operated and maintained in accordance with applicable Legal
Requirements. The Premises are supplied with all utilities and other
services necessary for the operation of said facilities. All of the
tangible Acquired Assets are located on the Premises. The Seller owns
all of the Acquired Assets, including, without limitation, the
properties and assets reflected in the Latest Balance Sheet or
acquired since the date thereof, free and clear of all Encumbrances.
The Seller has not received notice of violation of any Legal
Requirement, Order or Permit relating to its operations or its owned
or leased properties.
-17-
<PAGE> 21
(ii) All leases for the Premises are
valid and in full force and effect in accordance with their respective
terms and there is not, under any of such leases, any existing default
or event of default or event which, with notice or lapse of time or
both, would constitute a default. No party to any such lease has
repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
One or more of the Shareholders have good and marketable title to the
Premises described in Exhibit 1.1(f) as being owned by them, and to
the best knowledge of the Seller, the Shareholders and directors and
officers (and employees responsible for lease matters) of the Seller,
the other Persons have good and marketable title to the Premises
described in Exhibit 1.1(g) as being owned by them, in each case free
and clear of any Encumbrance, easement, covenant or other restriction,
except for installments of special assessments not yet delinquent and
recorded easements, covenants and other restrictions which do not
impair the current use, occupancy or value, or the marketability of
title, of the property subject thereto. Except as set forth in
Exhibit 3.1(k) the Seller does not sublease any real or personal
property.
(iii) The Acquired Assets constitute all
of the assets and properties used by the Seller and the Shareholders
in connection with the rental business and related businesses operated
by them.
(l) Lists of Properties, Contracts and Other
Data. The Seller will deliver to the Buyer pursuant to Section
3.1(af) a correct and complete list designated as Exhibit 3.1(l)
setting forth the following:
(i) the original cost, depreciation and
current book value of all items of tangible personal property included
in the Acquired Assets, including all items of tangible personal
property which as of the date of this Agreement have no book value
(except those items each of which was acquired by the Seller for
$1,000 or less and which have been expensed by the Seller);
(ii) all rights, licenses and leases to
which the Seller is a party which relate to the Acquired Assets or the
Assumed Liabilities;
(iii) all assignments, licenses,
indemnifications or other agreements which relate to the Acquired
Assets or the Assumed Liabilities;
(iv) all guaranty, warranty and indemnity
agreements which relate to the Acquired Assets or the Assumed
Liabilities, including those with respect to products or services
sold, leased, delivered or provided by the Seller;
(v) all contracts or agreements for the
purchase or sale of raw materials, supplies, products or other
personal property or for the furnishing or receipt of services which
relate to the Acquired Assets or the Assumed Liabilities;
-18-
<PAGE> 22
(vi) all contracts or agreements of the
Seller concerning any partnership, joint venture or investment;
(vii) all claims, deposits, causes of
action, choses in action, rights of recovery, rights of setoff and
rights of recoupment which relate to the Acquired Assets or the
Assumed Liabilities;
(viii) all franchises, approvals, Permits,
licenses, orders, registrations, certificates, variances and similar
rights;
(ix) all contracts or agreements
concerning confidentiality or prohibiting the Seller from freely
engaging in its business as now conducted or proposed to be conducted
or from competing anywhere in the world;
(x) all other contracts, agreements,
instruments, guarantees and commitments (including mortgages, deeds of
trust, indentures, loan agreements and credit agreements and including
a description of any oral contracts) which relate to the Acquired
Assets or the Assumed Liabilities to which the Seller is a party or by
which it or its assets is bound;
(xi) the names and annual rates of
compensation as of June 30, 1995 (and the increases in such rates
through the date hereof and through the Closing) of all officers and
directors of the Seller, all other management employees, and each
other employee whose annual rate of compensation is $30,000 or more;
(xii) the names of all retired employees,
if any, of the Seller who are receiving or are entitled to receive any
payments which are not fully covered by any Employee Pension Benefit
Plan of the Seller which is qualified under Code Section 401(a), their
ages and their current annual funded and unfunded benefits;
(xiii) the name of each bank or other
financial institution or entity in which the Seller has an account or
safe deposit box (with the identifying account number or symbol) and
the names of all persons authorized to draw thereon or to have access
thereto; and
(xiv) all outstanding notes or accounts
receivable relating to accounts with the Seller, or advances by the
Seller, to any shareholder, officer, director, employee or consultant
or affiliate thereof as of the date of this Agreement.
True and complete copies of the documents referred to in such list have been
delivered to the Buyer. All such rights, licenses, leases, registrations,
applications, contracts, agreements and commitments and other items referred to
in such list are valid, in full force and effect, enforceable in accordance
with their respective terms for the period stated therein, no party has
-19-
<PAGE> 23
repudiated any provision thereof and no breach or default will result from the
execution, delivery and performance of this Agreement, the Other Seller
Agreements, the Other Shareholder Agreements or the transactions contemplated
hereby or thereby. Neither the Seller nor any other party thereto is in breach
or default in performance of any of their respective obligations thereunder and
no event exists which, with the giving of notice or lapse of time or both,
would constitute a breach, default or event of default on the part of a party
to any of the foregoing that is continuing unremedied.
(m) Litigation, Etc. There is no outstanding
Order against, nor is there any litigation, proceeding, arbitration or
investigation by any Governmental Authority or other Person pending or
threatened against, the Seller, its properties or business or relating to the
transactions contemplated by this Agreement, nor is there any basis for any
such action.
(n) Notes and Accounts Receivable. The notes
receivable, if any, and accounts receivable of the Seller reflected on the
Latest Balance Sheet, and all notes and accounts receivable arising prior to
the Closing Date, arose and will arise from bona fide transactions by the
Seller in the ordinary course of business, are valid receivables with trade
customers subject to no setoffs or counterclaims, and are current and
collectible. The Seller and the Shareholders guarantee the collection by the
Buyer of accounts receivable, including sales taxes thereon, in an amount
described in Section 5.8 (all of which will consist of accounts receivable
arising from transactions prior to the Closing) within 180 days after the
Closing.
(o) Product Quality, Warranty Claims. All
products and services sold, leased, delivered or provided by the Seller to
customers on or prior to the Closing Date conform to applicable contractual
commitments, express and implied warranties, product and service specifications
and quality standards, and the Seller has no Liability (and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against the Seller giving rise to any
Liability) for replacement or repair thereof or other damages in connection
therewith. No product or service sold, leased, delivered or provided by the
Seller 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 or lease.
(p) Product Liability. The Seller has no
Liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
the Seller which might give rise to any Liability) arising out of any injury to
a Person or property as a result of the ownership, possession, provision or use
of any product or service sold, leased or delivered by the Seller on or prior
to the Closing Date. All product or service liability claims that have been
asserted against the Seller since January 1, 1991, whether covered by insurance
or not and whether litigation has resulted or not, are listed and summarized on
Exhibit 3.1(p).
-20-
<PAGE> 24
(q) Inventory. The inventory of the Seller
consists of goods which are merchantable, is fit for the purpose for which it
was procured and is held by the Seller, is usable in the ordinary course of
business and is good and not overvalued.
(r) Insurance. The Seller has policies of
insurance (i) covering risk of loss on the Acquired Assets, (ii) covering
products and services liability and liability for fire, property damage,
personal injury and workers' compensation coverage and (iii) for business
interruption, all with responsible and financially sound insurance carriers in
adequate amounts and in compliance with governmental requirements and in
accordance with good industry practice. To the best knowledge of the
Shareholders and the Seller, all such insurance policies are valid, in full
force and effect and enforceable in accordance with their respective terms and
no party has repudiated any provision thereof. All such policies will remain
in full force and effect until midnight on the Closing Date. Neither the
Seller, nor to the best knowledge of the Shareholders and the Seller any other
party to any such policy, is in breach or default (including with respect to
the payment of premiums or the giving of notices) in the performance of any of
their respective obligations thereunder, and no event exists which, with the
giving of notice or the lapse of time or both, would constitute a breach,
default or event of default, or permit termination, modification or
acceleration under any such policy. There are no claims, actions, proceedings
or suits arising out of or based upon any of such policies nor, to the best
knowledge of the Seller, the Shareholders and the directors and officers (and
employees responsible for insurance matters) of the Seller, does any basis for
any such claim, action, suit or proceeding exist. Descriptions, including
current premium amounts and the date and amount of the most recent premium
increase for each of the policies of insurance are set forth on Exhibit 3.1(r).
All premiums have been paid on such policies as of the date of this Agreement
and will be paid on such policies through the Closing Date, and the Seller has
not received notice of any increase in any such premium except as set forth on
Exhibit 3.1(r). The Seller has been covered during the five years prior to the
date of this Agreement by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. All claims made during such five-year period with respect to any
insurance coverage of the Seller, other than those described on Exhibit 3.1(p),
are set forth on Exhibit 3.1(r). The Seller does not engage in any
self-insurance activities.
(s) Compliance with Applicable Laws and Rights.
To the best knowledge of the Shareholders and the Seller, the Seller is not in
violation of any applicable Legal Requirement, Order or Right. The Seller has
not received notice from any Governmental Authority or other Person of any
violation of any Legal Requirement, Order or Right, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed, commenced or threatened against the Seller alleging any such
violation. To the best knowledge of the Shareholders and the Seller, the
Seller's property, including its facilities, machinery and equipment, conforms
with applicable Legal Requirements and Orders, including, without limitation,
environmental and zoning laws and building codes, and is in compliance with
OSHA and the Americans with Disabilities Act. Neither the Seller, any
Shareholder nor any director or officer (or employee responsible for OSHA
matters) of the Seller has any
-21-
<PAGE> 25
knowledge of any pending or proposed OSHA regulations or amendments to OSHA
regulations (including toxic chemical regulations) which would require any
change in any of the Seller's facilities, equipment, operations or procedures
or affect the Business or the Seller's costs of conducting its business as now
conducted. The Seller has never made any payments for political contributions,
or any bribes, kickback payments or other illegal contributions.
(t) Pension and Employee Benefit Matters.
(i) The Buyer will not suffer any
Liability or Adverse Consequence from the Seller's administration or
termination of any of its Employee Benefit Plans or Benefit
Arrangements or from any failure of any post-Closing distribution of
benefits to employees of the Seller to be made by the Seller in
compliance with all applicable Legal Requirements.
(ii) The Buyer will have no obligation to
employ any employee of the Seller or to continue any Employee Benefit
Plan or Benefit Arrangement, and will have no obligation or Liability
under any such plan or arrangement maintained by the Seller. Except
for related Liabilities included in the Assumed Liabilities, the
Seller will remain liable for all costs of employee compensation,
including (A) all employee benefits and claims under any Employee
Benefit Plan or Benefit Arrangement, (B) Taxes relating to employment
and employees attributable to periods through the Closing Date,
whether reported by the Closing Date or thereafter, and (C) all group
health plan continuation coverage to which any employee, former
employee or dependent is entitled because of a qualifying event (as
defined in Section 4980B(f)(3) of the Code) occurring through the
Closing Date or as a result of termination of employment with the
Seller because of the transactions contemplated by this Agreement and
any benefit or excise tax liability or penalty or other costs arising
from any failure by the Seller to provide group health plan
continuation coverage.
(iii) The Seller has not incurred any
Liability under Title IV of ERISA arising in connection with any
termination or partial termination of any Employee Pension Benefit
Plan or any withdrawal from any Multiemployer Plan. None of the
assets of the Seller is the subject of any lien arising under Section
302(f) of ERISA or Section 412(n) of the Code; the Seller has not been
required to post any security under Section 307 of ERISA or Section
401(a)(29) of the Code; and no fact or event exists that could
reasonably be expected to give rise to any such lien or requirement to
post any such security.
(u) Employees and Labor. Except as set forth in
Exhibit 3.1(u), the Seller has not received any notice, nor, to the best
knowledge of the Seller, the Shareholders and the directors and officers (and
employees having responsibility for employment matters) of the Seller, is there
any reason to believe that any executive or key employee of the Seller or any
group of employees of the Seller has any plans to terminate his, her or its
employment
-22-
<PAGE> 26
with the Seller. No executive or key employee is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Seller prior to the Closing Date and, if such person becomes an
employee of the Buyer, to the affairs of the Buyer after the Closing Date. The
Seller has complied with all Legal Requirements relating to the employment of
labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
Taxes. The Seller will not be required to give any notice under any plant
closing or similar law as a result of this Agreement, the Other Seller
Agreements or the transactions contemplated hereby or thereby. The Seller does
not have any labor relations problems or disputes, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Seller's facilities, and no union organization effort has been threatened,
initiated or is in progress with respect to any employees of the Seller. The
Seller is not indebted to any Shareholder or any officer, director, employee or
consultant or any affiliate thereof, whether by loan, advance or otherwise,
other than for salaries accrued but not yet payable and reimbursable out-of-
pocket expenses incurred in the ordinary course of business and not yet
payable, nor is any Shareholder or any officer, director, employee or
consultant or any affiliate thereof so indebted to the Seller.
(v) Supplier and Customer Relationships. Exhibit
3.1(v) lists each supplier or customer that individually or with its affiliates
accounted for 2% or more of the Seller's purchases of supplies or sales or
rental revenues, respectively, during the fiscal years ending December 31,
1993, 1994 and 1995 and the two-month period ending February 29, 1996. The
Seller has good commercial working relationships with its customers and since
June 30, 1995 no customer or supplier accounting for 2% or more of the Seller's
gross sales or rental revenues or purchases of supplies has cancelled or
otherwise terminated its relationship with the Seller, materially decreased or
limited its purchases or rentals or materials supplied to the Seller, or
threatened to take any such action. The Seller and the Shareholders have no
basis to anticipate any problems with the Seller's business or customer
relationships. No customer has any plans to reduce its purchases or rentals
below levels prevailing in recent periods, and the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
will not adversely affect the relationship of the Seller with any supplier or
customer prior to the Closing Date or of the Buyer with any supplier or
customer after the Closing Date.
(w) Condition, Adequacy and Type of Equipment.
All of the machinery, equipment and other tangible personal property included
in the Acquired Assets has been well maintained, its operating condition is
adequate for its current use and it is suitable for the purposes for which it
is presently used and is sufficient for the conduct of the Seller's business as
now conducted. However, the Buyer acknowledges that at any particular time a
certain dollar amount of the Seller's equipment is in need of repair or is
being repaired. The Seller and the Shareholders represent and warrant that the
dollar amount of the Seller's
-23-
<PAGE> 27
equipment which is in need of repair or is being repaired as of the Closing
Date will not be greater than that amount which usually is in need of repair or
is being repaired. The Seller has not experienced material problems or
deficiencies with respect to such machinery, equipment and other tangible
personal property, and, to the best knowledge of the Seller, the Shareholders
and directors and officers (and employees with responsibility for such
machinery, equipment and other tangible personal property) of the Seller, there
is no basis to anticipate any such problems or deficiencies.
(x) Environmental Obligations. To the best
knowledge of the Shareholders and the Seller, the Seller is conducting, and the
Seller and its predecessors at all times have conducted their respective
businesses and operations, and have occupied and operated the Premises and all
other real property and facilities previously owned, occupied or operated by
the Seller or any predecessor, in accordance with and in compliance with all
Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on the Seller's business or
activities. To the best knowledge of the Seller, the Shareholders and
directors and officers (and employees responsible for environmental matters) of
the Seller, there is no basis to believe or suspect that the Seller's business
has been conducted or is being conducted in violation of any Environmental
Obligations, and the Seller, the Shareholders and directors and officers (and
employees responsible for environmental matters) of the Seller do not have any
knowledge of pending or proposed changes to any Environmental Obligations which
would require any changes in any of the Seller's facilities, equipment,
operations or procedures or affect the Seller's business or its cost of
conducting its business as now conducted.
(y) Compliance, Disclosure of Environmental
Conditions. To the best knowledge of the Shareholders and the Seller, no
conditions, circumstances or activities have existed or currently exist with
respect to the Premises, any other real property or facilities previously
owned, occupied or operated by the Seller or any predecessor, or the Seller's
business, facilities or property which could give rise to any Liability,
including but not limited to the recovery by any Governmental Authority or
other Person of any remedial or removal costs, response costs, natural resource
damages or other costs, expenses or damages arising from or relating to any
release or threat of release of any Hazardous Material or any alleged injury or
threat of injury or harm to public health, safety or the environment. No
conditions, circumstances or activities have existed or currently exist with
respect to the Premises, any other real property or facilities previously
owned, occupied or operated by the Seller or any predecessor, or the Seller's
business, facilities or property which could subject the Seller or the Buyer to
any administrative, civil or criminal liability, injunctive relief, penalty or
obligation, whether under common law, equitable theory or pursuant to
Environmental Obligations, or which in the future could result in or in the
past may have resulted in actual or threatened damage, harm or impairment of,
or a threat to, public health, safety, welfare or the environment. Exhibit
3.1(y) identifies all real property and facilities, including the addresses
thereof, which have been owned, occupied or operated by the Seller or its
predecessors at any time on or prior to the Closing.
-24-
<PAGE> 28
(z) No Outstanding Orders or Actions. There are
no outstanding Orders or any pending or threatened investigations of any kind
against the Seller or any Shareholder concerning any environmental, public
health, safety, welfare or land use matters or other Environmental Obligations,
including, but not limited to, the emission, discharge or release of hazardous
or toxic substances or wastes, pollutants or contaminants into the environment
or work place, or the handling, storage, treatment, disposal or transportation
of hazardous or toxic substances or wastes, pollutants or contaminants. There
are no actions, suits or administrative, arbitral or other proceedings alleged,
claimed, threatened, pending against or affecting the Seller or any Shareholder
at law or in equity with respect to any environmental, public health, safety or
land use matters or other Environmental Obligations, and the Seller, the
Shareholders and directors and officers (and employees responsible for
environmental matters) of the Seller have no knowledge of any existing grounds
on which any such action, suit or proceedings might be commenced.
(aa) No Waste Disposal. All chemicals and
chemical compounds and mixtures which are included among the assets of the
Seller are integral to and required for the conduct of the Seller's business,
have not been processed, have not been and are not intended to be discarded,
and are not waste or waste materials. The Seller has not generated, used,
transported or disposed of Hazardous Materials. All waste materials which are
or were generated as part of the business of the Seller are and have been
handled, stored, treated, disposed of and transported in accordance with
applicable Legal Requirements and Environmental Obligations.
(ab) Intellectual Property.
(i) Exhibit 3.1(ab) lists each item of
Intellectual Property owned by the Seller or any Shareholder or which
is used by the Seller in the Business and, in each case where the
Seller is not the owner, the owner of the Intellectual Property. The
Seller owns or has the legal right to use each such item of
Intellectual Property, and none of such Intellectual Property is
subject to any Encumbrance. Each item of Intellectual Property
described on Exhibit 3.1(ab) will be owned or available for use by the
Buyer on identical terms and conditions after the Closing. The Seller
has taken all necessary and desirable action to maintain and protect
each item of Intellectual Property that it owns or uses.
(ii) The Seller has not interfered with,
infringed upon, misappropriated or otherwise come into conflict with
any Intellectual Property rights of any other Person, and none of the
Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Seller has
ever received any charge, complaint, claim, demand, or notice alleging
any such interference, infringement, misappropriation or violation
(including any claim that the Seller must license or refrain from
using any Intellectual Property rights of any other Person). The
continued operation of the Business as currently conducted will not
interfere with,
-25-
<PAGE> 29
infringe upon, misappropriate or conflict with any Intellectual
Property rights of another Person. To the best knowledge of the
Shareholders, the Seller and the directors and officers (and employees
with responsibility for Intellectual Property matters) of the Seller,
no other Person has interfered with, infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property rights
of the Seller.
(iii) The Seller has not granted any
license, sublicense or permission with respect to any Intellectual
Property owned or used in the Business. With respect to each item of
Intellectual Property required to be identified in Exhibit 3.1(ab), no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand is pending or is threatened which challenges the
legality, validity, enforceability, use or ownership of the item and
the Seller has never agreed to indemnify any Person for or against any
interference, infringement, misappropriation or other conflict with
respect to the item.
(iv) The Seller is not obligated to pay
any royalty or license or sublicense fee with respect any Intellectual
Property. With respect to each item of Intellectual Property required
to be identified in Exhibit 3.1(ab) which is not owned by the Seller:
(A) the license, sublicense, agreement or permission under which the
Seller has the right to use the item is legal, valid, binding,
enforceable and in full force and effect and (B) no party to the
license, sublicense, agreement or permission is in breach or default,
and no event has occurred which, with notice or lapse of time or both,
would constitute a breach, default or repudiation or permit
termination, modification or acceleration thereunder.
(ac) Guaranties. The Seller is not a guarantor of
or otherwise liable for any Liability (including indebtedness) of any other
Person.
(ad) Powers of Attorney. There are no outstanding
powers of attorney executed on behalf of the Seller.
(ae) Brokers' Fees. Except for the obligations of
the Shareholders to Greenidge and Associates, Inc., neither the Seller nor any
Shareholder has any Liability to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this
Agreement.
(af) Disclosure. Each of the Exhibits referred to
throughout this Section 3.1 will be delivered to the Buyer as soon as
practicable after the execution of this Agreement, but in no event less than
five Business Days prior to the Closing. The Buyer will accept or reject the
contents of such Exhibits, in its sole discretion, by telephonic notice to any
or all of the Shareholders no later than the Business Day prior to the Closing.
Acceptance by the Buyer of each of such Exhibits will be a condition to the
Buyer's obligation to consummate the purchase of the Acquired Assets, as set
forth in Section 6.1(l). Considered together, the
-26-
<PAGE> 30
(i) documents and information provided to the Buyer by the Seller, any
Shareholder or any agent or employee thereof in the course of the Buyer's due
diligence investigation and the negotiation of this Agreement (including the
financial statements of the Seller as of December 31, 1995, December 31, 1994,
December 31, 1993 and December 31, 1992) and (ii) Section 3.1 of this Agreement
and the disclosure Exhibits referred to therein, including the financial
statements referred to above in Section 3.1, do not contain any untrue
statement of any material fact and do not omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. There is no fact which materially adversely affects the business,
prospects, condition, affairs or operations of the Seller or any of its
properties or assets which has not been set forth in this Agreement or such
Exhibits, including such financial statements. Nothing in the disclosure
Exhibits referred to in Section 3.1 will be deemed adequate to disclose an
exception to a representation or warranty made herein unless the applicable
disclosure Exhibit identifies the exception with particularity and describes
the relevant facts in reasonable detail. Without limiting the generality of
the foregoing, the mere listing (or inclusion of a copy) of a document or other
item will not be deemed adequate to disclose an exception to a representation
or warranty made herein (unless the representation or warranty has to do with
the existence of the document or other item itself). The Seller and the
Shareholders acknowledge and agree that the fact that they have made
disclosures pursuant to Section 3.1 or otherwise of matters, or did not have
knowledge of matters, which result in Adverse Consequences to the Buyer will
not relieve the Seller and the Shareholders of their obligation to indemnify
and hold the Buyer harmless from all Adverse Consequences pursuant to Section
7.
3.2. Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Seller and the Shareholders that the
statements contained in this Section 3.2 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. This Agreement and the Other Buyer
Agreements and the transactions contemplated hereby and thereby have been duly
approved by all requisite corporate action of the Buyer. The Buyer has full
corporate power and authority to execute, deliver and perform this Agreement
and the Other Buyer Agreements, and this Agreement constitutes, and the Other
Buyer Agreements will when executed and delivered constitute, the legal, valid
and binding obligations of the Buyer, and will be enforceable in accordance
with their respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The
execution, delivery and performance of this Agreement and the Other Buyer
Agreements, and the consummation of the transactions contemplated hereby and
thereby, will not (i) violate any Legal Requirement or Order to which the Buyer
is subject or any provision of the certificate of incorporation or
-27-
<PAGE> 31
bylaws of the Buyer or (ii) violate (with or without the giving of notice or
the lapse of time or both), conflict with or result in the breach or
termination of any provision of, constitute a default under, give any Person
the right to accelerate any obligation under, or result in the creation of any
Encumbrance upon any properties, assets or business of the Buyer pursuant to,
any indenture, mortgage, deed of trust, lien, lease, license, agreement,
instrument or other arrangement to which the Buyer is a party or by which the
Buyer or any of its assets and properties is bound or subject. Except for
notices and consents that will be given or obtained by the Buyer prior to the
Closing, the Buyer does not need to give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental Authority or
other Person in order for the parties to consummate the transactions
contemplated by this Agreement.
3.3. Survival of Representations. The representations and
warranties contained in Sections 3.1 and 3.2 and the Liability of the parties
with respect thereto will survive any investigation thereof by the parties and
will survive the Closing for four years, except that the Liability of the
Seller and the Shareholders with respect to matters set forth in Sections
3.1(a), 3.1(b), 3.1(e), 3.1(j), 3.1(k), 3.1(t), 3.1(x), 3.1(y), 3.1(z),
3.1(aa), 3.1(ac) and 3.1(af), and the Liability of the Buyer with respect to
matters set forth in Section 3.2(b), will survive without termination.
3.4. Representations as to Knowledge. The representations
and warranties contained in Article 3 hereof will in each and every case where
an exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of each such party and be exercised always in a reasonable manner and within
reasonable times. For purposes of Section 3.1, the term "Seller" will, when
used in reference to a statement made to the "best knowledge," "best of
knowledge" or "knowledge" of Seller, include each Shareholder.
4. Pre-Closing Covenants. The parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best
efforts to take all actions necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including the satisfaction, but not the waiver, of the closing conditions set
forth in Section 6) and the other agreements contemplated hereby.
4.2. Operation of Business. The Seller will not, and
Shareholders will not cause or permit the Seller to, engage in any practice,
take any action or enter into any transaction outside its ordinary course of
business or which would result in a breach of any covenant, representation or
warranty of the Seller or the Shareholders in this Agreement.
-28-
<PAGE> 32
4.3. Preservation of Business. The Seller will keep its
business and properties, including its current operations, physical facilities,
working conditions, and its relationships with lessors, licensors, suppliers,
customers and employees, intact.
4.4. Full Access. The Seller will permit the Buyer and
its agents to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Seller, to all
premises, properties, personnel, books, records (including Tax records),
contracts and documents of or pertaining to the Seller. If for any reason the
Closing does not occur, the Buyer will not disclose to any other Person any
confidential information concerning the Seller which was provided to the Buyer
by the Seller or the Shareholders and which is not publicly available or known
to other industry participants and which was not available to the Buyer from
another source.
4.5. Notice of Developments. The Seller will give prompt
written notice to the Buyer of any material development which occurs after the
date of this Agreement and affects the assets, Liabilities, business, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Seller.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.6. Exclusivity. Neither the Seller nor any Shareholder
will, and no Shareholder will cause or permit the Seller to, (a) solicit,
initiate or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any portion of the assets of, the Seller (including any acquisition structured
as a merger, consolidation or share exchange) or (b) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. No Shareholder will
vote shares of the Seller's stock in favor of any such transaction. The Seller
and Shareholders will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
4.7. Announcements. Prior to the Closing no party will
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
parties.
5. Post-Closing Covenants. The parties agree as follows with
respect to the period following the Closing.
5.1. Further Assurances. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, each of the parties will take such further action (including
the execution and delivery of such further instruments and documents) as any
other party reasonably may request, all at the sole cost and expense of
-29-
<PAGE> 33
the requesting party (unless the requesting party is entitled to
indemnification therefor under Section 7).
5.2. Transition. Each of the Shareholders will assist
with the transition of the Business to the Buyer during the first year
following the Closing at no cost to the Buyer. Neither the Seller nor the
Shareholders will take any action at any time that is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier or
other business associate of the Seller from establishing a business
relationship with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any
party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(a) any transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving the Acquired Assets or the Business, each of the other parties will
cooperate with her, him or it and her, his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as the other party deems necessary and requests in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending party (unless the contesting or defending party is
entitled to indemnification therefor under Section 7).
5.4. Confidentiality. The Seller and the Shareholders
will treat and hold as confidential all Confidential Information concerning the
Business and the Buyer, refrain from using any such Confidential Information
and deliver promptly to the Buyer or destroy, at the request and option of the
Buyer, all of such Confidential Information in its or their possession.
5.5. Post-Closing Announcements. Following the Closing,
neither the Seller nor any Shareholder will issue any press release or make any
public announcement relating to the subject matter of this Agreement without
the prior written approval of the Buyer.
5.6. Financial Statements. The Seller and the
Shareholders will, upon the request of the Buyer, cooperate with the Buyer to
produce such historical and on-going financial statements and audits as the
Buyer may request, all at the sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities and Other Obligations.
The Shareholders and the Seller will pay and perform, as and when due, all
Liabilities relating to the Seller, the Business and the Acquired Assets other
than the Assumed Liabilities. In addition, the Shareholders and the Seller, at
their expense, promptly will take or cause to be taken any action necessary to
remedy any failure of the Premises or the Business at the Closing Date to
comply with any Legal Requirement or Order upon receipt of notice from the
Buyer at any time. However, the Shareholders and the Seller will be required
to remedy such a failure
-30-
<PAGE> 34
involving the non-compliance of the Premises with the Americans with
Disabilities Act only if the Buyer becomes aware thereof, or such a condition
is required to be remedied, in connection with an event occurring after the
Closing (including, by way of example only, a remodeling of any of the Premises
or an investigation or inspection by a Governmental Authority). The
Shareholders and the Seller will pay to the Buyer, promptly after their receipt
of notice from the Buyer stating the amount payable by them and a copy of the
invoices from Governmental Authorities relating thereto, the portion of the
personal property taxes on the Acquired Assets attributable to the period from
January 1, 1996 to and including the date on which the Closing occurs. The
amount of such taxes payable by the Shareholders and the Seller will be
determined by prorating personal property taxes on the Acquired Assets for 1996
in proportion to the number of days in the year prior to and including the date
on which the Closing occurs compared to the number of days in the year
remaining after the date on which the Closing occurs. The Buyer will pay all
Assumed Liabilities as and when due (except to the extent the validity thereof
or the liability therefor is contested by the Buyer in good faith) if the
Closing occurs.
5.8. Collection of Guaranteed Receivables. The
Shareholders and the Seller guarantee that within 180 days after the Closing
the Buyer will have collected accounts receivable generated by transactions
occurring prior to the Closing in an aggregate amount equal to the amount
agreed to by the Seller, the Shareholders and the Buyer at or prior to the
Closing, inclusive of sales taxes (the "Guaranteed Receivable Amount"). If the
amount of accounts receivable from transactions prior to the Closing collected
by the Buyer within 180 days after the Closing is less than the Guaranteed
Receivable Amount, the Seller and the Shareholders will pay to the Buyer
immediately after the expiration of the 180 day period the difference between
the Guaranteed Receivable Amount and the amount of receivables from
transactions prior to the Closing collected by the Buyer within that period.
The Buyer acknowledges that such accounts receivable will include amounts
payable by customers as sales tax, which after collection the Buyer will be
required to remit to applicable Governmental Authorities.
5.9. Post-Closing Access to Records. The Shareholders and
the Seller will have reasonable access after the Closing during normal business
hours, at their own expense and upon at least 48 hours' prior notice to the
Buyer, to the books and records of the Business to the extent necessary for any
reasonable business purpose.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The
obligation of the Buyer to consummate the purchase of the Acquired Assets is
subject to satisfaction of the following conditions:
-31-
<PAGE> 35
(a) the Seller's and each Shareholder's
representations and warranties will be correct and complete at and as of the
Closing and any written notices delivered to the Buyer pursuant to Section 4.5
and the subject matter thereof will be satisfactory to the Buyer;
(b) the Seller and the Shareholders will have
performed and complied with all of their covenants and agreements hereunder
through the Closing;
(c) the Seller and the Shareholders will have
given all notices and procured all of the third-party consents, authorizations
and approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding will be pending
or threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets or to conduct the
Business, and no such Order will be in effect;
(e) there will have been no adverse change in the
Acquired Assets or the Business between the date of execution of this Agreement
and the Closing;
(f) the Seller will have delivered to the Buyer a
certificate to the effect that each of the conditions specified in Sections
6.1(a) through (e) is satisfied in all respects;
(g) the Buyer will have completed its due
diligence with respect to the Seller, the Business and the Acquired Assets with
results satisfactory to it;
(h) the Other Seller Agreements and the Other
Shareholder Agreements will have been executed and delivered by the Seller and
the Shareholders which are parties thereto;
(i) the Buyer will have received from counsel to
the Seller and the Shareholders an opinion in form and substance as set forth
in Exhibit 6.1(i) addressed to the Buyer and its debt and equity financing
sources and dated as of the Closing;
(j) financing necessary for the consummation of
the transactions contemplated hereby and the operation of the Business will be
available to the Buyer on terms and conditions satisfactory to the Buyer;
(k) a written report of the results of a "Phase
I" environmental study of the Premises will have been completed at the
Shareholders' expense and supplied to the
-32-
<PAGE> 36
Buyer, and the contents of such report and the conditions described therein
will be satisfactory to the Buyer;
(l) the disclosure Exhibits to be delivered to
the Buyer pursuant to Section 3.1(af) will have been delivered to the Buyer by
the Seller and the Shareholders within the time period permitted by that
Section, and the contents of each will have been accepted by the Buyer in its
sole discretion;
(m) the Seller will have delivered to the Buyer
possession and control of the Acquired Assets;
(n) each of Zodiac One and Zodiac Three will have
authorized, prepared, executed and delivered to the Buyer an amendment to its
articles of incorporation for the purpose of changing its name to Marilyn and
Maureen, Ltd. and Marilyn and Maureen, Ltd. III, respectively which amendments
will not be filed until the Closing; and
(o) the Seller and the Shareholders will have
delivered, or caused the Seller to deliver, to the Buyer a waiver and release
executed by Jeffrey Henderson, a waiver and release executed by Greenidge and
Associates, Inc., an assignment of the Henderson Noncompetition Agreement, an
assignment of the Assigned Vehicle Ownership Taxes and such other instruments,
certificates and documents as are reasonably requested by the Buyer in order to
consummate the transactions contemplated by this Agreement, all in form and
substance reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Seller and the
Shareholders. The obligation of the Seller and the Shareholders to consummate
the sale of the Acquired Assets is subject to satisfaction of the following
conditions:
(a) the Buyer's representations and warranties
will be correct and complete at and as of the Closing;
(b) the Buyer will have performed and complied
with all of its covenants hereunder through the Closing;
(c) the Buyer will have delivered to the Seller a
certificate to the effect that each of the conditions specified above in
Sections 6.2(a) and (b) is satisfied in all respects;
(d) the Other Buyer Agreements will have been
executed and delivered by the Buyer;
-33-
<PAGE> 37
(e) the Seller and Shareholders will have
received from counsel to the Buyer an opinion in form and substance as set
forth in Exhibit 6.2(e), addressed to the Seller and Shareholders and dated as
of the Closing; and
(f) the Buyer will have paid and deposited the
purchase price for the Acquired Assets pursuant to Section 2.3.
The Seller may waive any condition specified in this Section 6.2 at or prior to
the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) If the Seller or a Shareholder breaches (or
if any Person other than the Buyer alleges facts that, if true, would mean the
Seller or a Shareholder has breached) any of the representations or warranties
contained herein and the Buyer gives notice thereof to the Seller or any
Shareholder within the Survival Period, or if the Seller or a Shareholder
breaches (or if any Person other than the Buyer alleges facts that, if true,
would mean the Seller or a Shareholder has breached) any covenant contained
herein or in the Other Seller Agreements or the Other Shareholder Agreements
and the Buyer gives notice thereof to the Seller or any Shareholder, then the
Seller and the Shareholders agree jointly and severally to indemnify the Buyer
from and against any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to or caused by any of the foregoing regardless of
whether the Adverse Consequences are suffered during or after the Survival
Period. In addition, the Seller and the Shareholders agree jointly and
severally to indemnify the Buyer from and against any Adverse Consequences the
Buyer may suffer which result from, arise out of, relate to or are caused by
the consummation of the transactions contemplated by this Agreement whether or
not such matter was known to the Buyer or was disclosed on any Exhibit hereto
or is a matter with respect to which the Seller or any or all of the
Shareholders did or did not have knowledge, including, without limitation, (i)
any act or omission of the Seller or any Shareholder with respect to, or any
event or circumstance related to, the Seller's or any predecessor's ownership
or operation of the Acquired Assets or the Excluded Assets or the conduct of
its business, which act, omission, event or circumstance occurred or existed
prior to or at the Closing Date, without regard to whether a claim with respect
to such matter is asserted before or after the Closing Date, (ii) any Liability
not included in the Assumed Liabilities, (iii) the use, presence, generation,
handling, remediation, removal, transportation, release or disposal of
Hazardous Materials on, to or from any of the Premises or other real property
or facilities owned or occupied by the Seller or any predecessor prior to the
Closing Date, (iv) the failure of the Seller or any predecessor or of any
Shareholder to comply with any Environmental Obligation or other Legal
Requirement or Order or the violation by any of them of any Right, (v) any
claim that the transactions contemplated by this Agreement violate the Worker
Adjustment and Retraining Notification Act, as amended, or any similar state or
local Legal Requirement or any fraudulent conveyance laws of any jurisdiction,
and any Liability resulting therefrom, or
-34-
<PAGE> 38
(vi) any Liability resulting from any failure of the parties to comply with any
bulk sales or transfer law or other similar Legal Requirement of any applicable
jurisdiction in connection with the transactions contemplated by this
Agreement. If any dispute arises concerning whether any indemnification is
owing which cannot be resolved by negotiation among the parties within a
reasonable time, the dispute will be resolved by arbitration pursuant to this
Agreement.
(b) Amounts needed to cover any indemnification
claims resolved in favor of the Buyer against the Seller or the Shareholders
during the Escrow Period will be paid to the Buyer first out of the Escrow
Account, along with interest from the Closing Date at the rate applicable to
the escrowed funds. The Seller and the Shareholders will have joint and
several Liability for any additional amounts needed to cover such claims, which
amounts will be paid directly to the Buyer. At the end of the Escrow Period
amounts that may be needed to cover pending indemnification claims made by the
Buyer (such amounts to be determined by the Buyer based upon the reasonable
exercise of its business judgment) will be retained in the Escrow Account until
such claims are resolved, and any excess on deposit therein, including any
accrued interest, will be paid to the Seller. Nothing in this Section 7.1(b)
will be construed to limit the Buyer's right to indemnification to amounts on
deposit in the Escrow Account. The Buyer, the Shareholders and the Seller will
jointly give instructions to the Escrow Agent to carry out the intent of this
Section 7.1(b). The Shareholders will provide the Escrow Agent with
instructions to invest amounts held in the Escrow Account in one or more funds
chosen by the Shareholders the assets of which consist solely of securities
rated A-1, P-1 or higher. Any disputes concerning the escrowed funds will be
settled by arbitration as provided in this Agreement.
(c) The Shareholders and the Seller will not be
required, in the aggregate, to indemnify the Buyer for any amount in excess of
$10,000,000.
7.2. Indemnification Provisions for Benefit of the Seller
and the Shareholders. If the Buyer breaches (or if any Person other than the
Seller and the Shareholders alleges facts that, if true, would mean the Buyer
has breached) any of its representations or warranties contained herein and the
Seller or the Shareholders gives notice of a claim for indemnification against
the Buyer within the Survival Period, or if the Buyer breaches (or if any
Person other than the Seller and the Shareholders alleges facts that, if true,
would mean the Buyer has breached) any of its covenants contained herein or in
the Other Buyer Agreements, then the Buyer agrees to indemnify Seller and the
Shareholders from and against any Adverse Consequences the Seller and the
Shareholders may suffer resulting from, arising out of, relating to, or caused
by the breach or alleged breach, regardless of whether the Adverse Consequences
are suffered during or after the Survival Period. If any dispute arises
concerning whether any indemnification is owing which cannot be resolved by
negotiation among the parties within a reasonable time, the dispute will be
resolved by arbitration pursuant to this Agreement.
-35-
<PAGE> 39
7.3. Matters Involving Third Parties.
(a) If any third party notifies any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right,
at its sole cost and expense, to defend the Indemnified Party against the Third
Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within 10 days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to or caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently. If the Indemnifying
Party does not elect to assume control of or otherwise participate in the
defense or settlement of any Third Party Claim, it will be bound by the results
obtained by the Indemnified Party with respect to the Third Party Claim.
(c) So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with Section
7.3(b) above, (i) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party Claim,
(ii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (iii) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party (not to be
withheld unreasonably).
(d) In the event any of the conditions in Section
7.3(b) above is or becomes unsatisfied, however, (i) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it reasonably
may deem appropriate (and the Indemnified Party need not consult
-36-
<PAGE> 40
with, or obtain any consent from, any Indemnifying Party in connection
therewith), (ii) the Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys' fees and expenses), and (iii) the
Indemnifying Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to or
caused by the Third Party Claim to the fullest extent provided in this Section
7.
7.4. Right of Offset. The Buyer will have the right to
offset any Adverse Consequences it may suffer against any amounts payable
pursuant to this Agreement or any Other Seller Agreement or Other Shareholder
Agreement to the Seller or any Shareholder or any current or future affiliate
of any of the foregoing at or after the Closing. The Buyer will give notice to
the Shareholders of its intent to make such an offset, and if there is a
dispute concerning the Buyer's right to indemnification for any such Adverse
Consequences, the Buyer will not deduct that amount from payments to be made by
the Buyer until the dispute is resolved by agreement of the parties or
arbitration.
7.5. Other Remedies. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common law remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate
this Agreement as provided below:
(a) the Buyer, the Seller and the Shareholders
may terminate this Agreement by mutual written consent at any time prior to the
Closing;
(b) the Buyer may terminate this Agreement by
giving written notice to the Seller and the Shareholders at any time prior to
the Closing (i) in the event the Seller or any Shareholder has breached any
representation, warranty or covenant contained in this Agreement in any
material way, the Buyer has notified the Seller and the Shareholders of the
breach, and the breach has not been cured within 10 days after the notice of
breach or (ii) if the Closing has not occurred on or before April 30, 1996
because of the failure of any condition precedent to the Buyer's obligations to
consummate the Closing (unless the failure results primarily from the Buyer
breaching any representation, warranty or covenant contained in this
Agreement); and
(c) the Seller and the Shareholders may terminate
this Agreement by giving written notice to the Buyer at any time prior to the
Closing (i) if the Buyer has breached any representation, warranty or covenant
contained in this Agreement in any material way, the Seller has notified the
Buyer of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before April 30,
1996
-37-
<PAGE> 41
because of the failure of any condition precedent to the Seller's and the
Shareholders' obligations to consummate the Closing (unless the failure results
primarily from the Seller or any Shareholder breaching any representation,
warranty or covenant contained in this Agreement).
8.2. Effect of Termination. The termination of this
Agreement by a party pursuant to Section 8.1 will in no way limit any
obligation or liability of any other party based on or arising from a breach or
default by such other party with respect to any of its representations,
warranties, covenants or agreements contained in this Agreement, and the
terminating party will be entitled to seek all relief to which it is entitled
under applicable law.
8.3. Confidentiality. If this Agreement is terminated,
each party will treat and hold as confidential all Confidential Information
concerning the other parties which it acquired from such other parties in
connection with this Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will
not confer any rights or remedies upon any Person other than the parties and
their respective successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements or representations
by or among the parties, written or oral, to the extent they relate in any way
to the subject matter hereof.
9.3. Succession and Assignment. This Agreement will be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Neither the Seller nor any Shareholder may
assign this Agreement or any of their rights, interests or obligations
hereunder without the prior written approval of the Buyer. The Buyer may
assign its rights and obligations hereunder as permitted by law, including,
without limitation, to any lending institution that provides financing for the
Buyer's purchase of the Acquired Assets.
9.4. Counterparts. This Agreement may be executed in one
or more counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
9.5. Headings. The section headings contained in this
Agreement are inserted for convenience only and will not affect in any way the
meaning or interpretation of this Agreement.
-38-
<PAGE> 42
9.6. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder will be deemed duly given if it is sent
by registered or certified mail, return receipt requested, postage prepaid, or
by courier, and addressed to the intended recipient as set forth below:
If to the Seller or
the Shareholders:
George and Marilyn Evans and Maureen and Larry Davidson
8157 East Hunters Hill Drive 3241 South Richfield St.
Englewood, Colorado 80112 Aurora, Colorado 80013
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street,
Denver, Colorado 80202 Suite 3000
Attn: President Denver, Colorado 80202
Attn: B. Scott Pullara
Notices will be deemed given five days after mailing if sent by certified mail,
and when delivered if sent by courier. Any party may change the address to
which notices, requests, demands, claims and other communications hereunder are
to be delivered by giving the other parties notice in the manner herein set
forth.
9.7. Governing Law. This Agreement will be governed by
and construed in accordance with the domestic laws of the State of Colorado
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Colorado or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Colorado.
9.8. Amendments and Waivers. No amendment of any
provision of this Agreement will be valid unless the same is in writing and
signed by the Buyer, the Seller and the Shareholders. No waiver by any party
of any default, misrepresentation or breach of warranty or covenant hereunder,
whether intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
will not affect the validity or enforceability
-39-
<PAGE> 43
of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other
jurisdiction.
9.10. Expenses. The Buyer will bear its own costs and
expenses (including, without limitation, legal fees and expenses) incurred
either before or after the date of this Agreement in connection with this
Agreement or the transactions contemplated hereby. The Shareholders, and not
the Seller, will bear all costs and expenses (including, without limitation,
all legal, accounting and tax related fees and expenses and all fees,
commissions, expenses and other amounts payable to any broker, finder or agent
and the costs of the Phase I environmental study to be delivered pursuant to
Section 6.1(k)) incurred by the Shareholders or the Seller either before or
after the date of this Agreement in connection with this Agreement or the
transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, will be submitted to binding arbitration
under the Commercial Arbitration Rules of the American Arbitration Association
under the authority of federal and state arbitration statutes, and will not be
the subject of litigation in any forum. The arbitration will be conducted only
in Denver, Colorado, before a single arbitrator selected by the parties or, if
they are unable to agree on an arbitrator, before a panel of three arbitrators,
one selected by the Buyer, one selected by the Seller and the third selected by
the other two arbitrators. The award of the arbitrators will be final and
binding and judgment on the award may be entered by any court of competent
jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE SPECIFICALLY
ENFORCEABLE. The prevailing party or parties in any such arbitration (as
determined by the arbitrator or arbitrators) or in any action to enforce this
agreement to arbitrate will be entitled to all reasonable costs and expenses,
including fees and expenses of the arbitrators and attorneys, incurred in
connection therewith. Notwithstanding the foregoing provisions of this Section
9.11, in any legal proceeding commenced by a Governmental Authority or other
Person against a party to this Agreement, that party will have the right to
bring a third party claim for indemnification against any other party which has
an obligation to indemnify it pursuant to this Agreement.
9.12. Construction. The parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement will be
construed as if drafted jointly by the parties and no presumption or burden of
proof will arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement. The word "including" will mean
including without limitation. The parties intend that each representation,
warranty and covenant contained herein will have independent significance. If
any party breaches any representation, warranty or covenant contained herein in
any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
-40-
<PAGE> 44
9.13. Incorporation of Exhibits. The Exhibits identified
in this Agreement are incorporated herein by reference and made a part hereof.
9.14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original and all of
which together will be deemed to be one and the same instrument. The execution
of a counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
------------------------------------
Name: Richard M. Tyler
----------------------------------
Title: President
---------------------------------
ZODIAC RENTALS, INC.
By: /s/ MARILYN J. EVANS
------------------------------------
Name: Marilyn J. Evans
----------------------------------
Title: President
---------------------------------
ZODIAC RENTALS, INC. III
By: /s/ GEORGE A. EVANS
------------------------------------
Name: George A. Evans
----------------------------------
Title: Vice President
---------------------------------
-41-
<PAGE> 45
SHAREHOLDERS:
/s/ GEORGE A. EVANS
---------------------------------------
George A. Evans
/s/ MARILYN J. EVANS
---------------------------------------
Marilyn J. Evans
/s/ MAUREEN C. DAVIDSON
---------------------------------------
Maureen C. Davidson
/s/ LARRY W. DAVIDSON
---------------------------------------
Larry W. Davidson
-42-
<PAGE> 1
EXHIBIT 10.7
================================================================================
STOCK PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.
AND THE
SHAREHOLDERS
OF
A TO Z RENTALS AND SALES, INC.
DATED AS OF MAY 29, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1. Defined Terms . . . . . . . . . . . . . . . . . . 3
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . 11
2.1. Basic Transaction . . . . . . . . . . . . . . . . . 11
2.2. Purchase Price; Payment . . . . . . . . . . . . . . 11
2.3. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . 12
2.4. Closing; Effective Date . . . . . . . . . . . . . . 12
2.5. Deliveries at the Closing . . . . . . . . . . . . . 12
3. Representations and Warranties. . . . . . . . . . . . . . . 12
3.1. Representations and Warranties of the Shareholders . 12
3.2. Representations and Warranties of the Buyer . . . . 30
3.3. Survival of Representations . . . . . . . . . . . . 31
3.4. Representations as to Knowledge . . . . . . . . . . 31
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . 31
4.1. General . . . . . . . . . . . . . . . . . . . . . . 31
4.2. Operation of Business . . . . . . . . . . . . . . . 32
4.3. Preservation of Business . . . . . . . . . . . . . . 32
4.4. Full Access . . . . . . . . . . . . . . . . . . . . 32
4.5. Notice of Developments . . . . . . . . . . . . . . . 32
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . 33
4.7. Announcements . . . . . . . . . . . . . . . . . . . 33
4.8. Confirmatory Conveyance . . . . . . . . . . . . . . 33
4.9. Closing Date Liabilities and Distribution. . . . . . 33
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . 34
5.1. Further Assurances . . . . . . . . . . . . . . . . . 34
5.2. Transition . . . . . . . . . . . . . . . . . . . . . 34
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . 34
5.4. Confidentiality . . . . . . . . . . . . . . . . . . 34
5.5. Post-Closing Announcements . . . . . . . . . . . . . 34
5.6. Financial Statements . . . . . . . . . . . . . . . . 34
5.7. Termination of Obligations . . . . . . . . . . . . . 35
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . 35
6.1. Conditions to Obligation of the Buyer . . . . . . . 35
6.2. Conditions to Obligation of the Shareholders . . . . 37
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Remedies for Breaches of This Agreement . . . . . . . . . . 38
7.1. Indemnification Provisions for Benefit of the Buyer
and the Company . . . . . . . . . . . . . . . . . . 38
7.2. Indemnification Provisions for Benefit of the
Shareholders . . . . . . . . . . . . . . . . . . . . 40
7.3. Matters Involving Third Parties . . . . . . . . . . 41
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . 42
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . 42
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1. Termination of Agreement . . . . . . . . . . . . . . 42
8.2. Effect of Termination . . . . . . . . . . . . . . . 42
8.3. Confidentiality . . . . . . . . . . . . . . . . . . 43
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 43
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . 43
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . 43
9.3. Succession and Assignment . . . . . . . . . . . . . 43
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . 43
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . 43
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . 43
9.7. Governing Law . . . . . . . . . . . . . . . . . . . 44
9.8. Amendments and Waivers . . . . . . . . . . . . . . . 44
9.9. Severability . . . . . . . . . . . . . . . . . . . . 44
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . 44
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . 45
9.12. Construction . . . . . . . . . . . . . . . . . . . . 45
9.13. Incorporation of Exhibits . . . . . . . . . . . . . 45
9.14. Shareholders' Agent. . . . . . . . . . . . . . . . . 45
</TABLE>
Exhibits:
<TABLE>
<S> <C> <C>
Exhibit 1.1(a) Exhibit 3.1(b) Exhibit 3.1(r)
Exhibit 1.1(b) Exhibit 3.1(c) Exhibit 3.1(s)
[EXHIBIT 1.1(C) Exhibit 3.1(e) Exhibit 3.1(t)
INTENTIONALLY OMITTED] Exhibit 3.1(f) Exhibit 3.1(v)
Exhibit 1.1(d) Exhibit 3.1(g) Exhibit 3.1(x)
Exhibit 1.1(e) Exhibit 3.1(h) Exhibit 3.1(y)
Exhibit 1.1(f) Exhibit 3.1(j) Exhibit 3.1(z)
Exhibit 1.1(g) Exhibit 3.1(k) Exhibit 3.1(aa)
Exhibit 1.1(h) Exhibit 3.1(k)(ii) Exhibit 3.1(ab)
Exhibit 1.1(i) Exhibit 3.1(k)(iii) Exhibit 3.1(ac)
Exhibit 1.1(j) Exhibit 3.1(l) Exhibit 4.2
Exhibit 2.2 Exhibit 3.1(m) Exhibit 6.1(i)
Exhibit 3.1(a) Exhibit 3.1(p) Exhibit 6.2(f)
Exhibit 3.1(q)(ii)
</TABLE>
(ii)
<PAGE> 4
This Stock Purchase Agreement (this "Agreement") is entered
into as of May 29, 1996 among RentX Industries, Inc., a Delaware corporation
(the "Buyer"), Milton L. Neumann and Alice E. Neumann, husband and wife (each,
an "Individual Shareholder" and collectively, the "Individual Shareholders"),
and Milt and Alice Neumann Charitable Remainder Unitrust, Milt and Alice
Neumann Charitable Remainder Annuity Trust, Cheryl Kettrick Charitable Trust,
Steve Neumann Charitable Trust, Cheryl Kettrick Charitable Remainder Unitrust,
Steve Neumann Charitable Remainder Unitrust and Jody Depew Charitable Remainder
Unitrust (each, a "Trust Shareholder" and collectively, the "Trust
Shareholders").
Recitals
The Shareholders own, in the aggregate, all of the issued and
outstanding capital stock of A to Z Rentals and Sales, Inc., a Washington
corporation (the "Company"). The Shareholders desire to sell, and the Buyer
desires to purchase, all of such capital stock as provided in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged,
the parties agree as follows:
1. Definitions.
1.1. Defined Terms. The following terms used in this
Agreement shall have the meanings designated below:
Adverse Consequences means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, damages, costs, expenses and fees (including court costs and fees and
expenses of counsel and other experts), plus interest at a rate equal to the
prime rate quoted from time to time by Norwest Bank Colorado, N.A. plus two
percentage points accrued from the date any Adverse Consequence becomes a
liability of a party as determined in accordance with GAAP.
Affiliate means, with respect to any Person, (a) any
Person in which such Person directly or indirectly holds an equity or profits
interest, (b) any Person controlling, controlled by or under common control
with such Person or (c) any Person to whom such Person provides or has provided
financial assistance. As used in this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or voting interests, by contract or otherwise.
<PAGE> 5
Affiliated Group means any affiliated group within
the meaning of Code Section 1504 or any similar group defined under a similar
provision of state, local or foreign law.
Assets means all right, title and interest of the
Company in and to all of the tangible and intangible assets of the Company
except the Excluded Assets, but including, without limitation, all of its (a)
tangible personal property (such as machinery, equipment, inventories,
supplies, manufactured and purchased parts, furniture, automobiles (if any),
trucks, tractors, trailers and tools), (b) all real property (other than the
Excluded Real Property), leaseholds, improvements, fixtures, fittings,
easements, rights-of-way and appurtenances, including, without limitation, the
Company Improvements, Fixtures and Fittings, (c) Intellectual Property and
goodwill, corporate names and tradenames, licenses and sublicenses granted and
obtained with respect thereto and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein, (d)
agreements, contracts, instruments, security interests, guaranties, other
similar arrangements, and rights thereunder, (e) accounts, notes and other
receivables, (f) securities, (g) $1,600 in cash ($400 of which will be left in
the cash register of each of the Company's four stores on the Premises as of
the Closing), (h) claims, deposits, payments, refunds, causes of action, choses
in action, rights of recovery, rights of set-off and rights of recoupment
(including any such item relating to the payment of Taxes), (i) franchises,
approvals, Permits, licenses, orders, registrations, certificates, variances,
and similar rights obtained from governments and governmental agencies and (j)
books, records, ledgers, files, documents, correspondence, lists, drawings,
specifications, creative materials, advertising and promotional materials,
studies, reports, and other printed or written materials.
Benefit Arrangement means any employment, severance
or other similar contract, arrangement or policy and each plan or agreement
(written or oral) providing through insurance coverage or through any self-
insured arrangement, workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, deferred
compensation, profit sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation, reduced interest or interest free
loans, mortgages, relocation assistance or post-retirement insurance,
compensation or other benefits (including, without limitation any contracts,
arrangements, or understandings relating to the sale of the Company) that (a)
is not an Employee Benefit Plan, (b) is entered into, maintained or contributed
to by the Company, and (c) benefits any employee or former employee of the
Company or any relative thereof.
Business means all business conducted by the Company
at any time within 36 months prior to the Closing.
Closing has the meaning given it in Section 2.4.
Closing Balance Sheet means the balance sheet of the
Company as of the Closing Date, after giving effect to the transactions
required by Section 4.8, prepared in
4
<PAGE> 6
accordance with GAAP and audited by the Buyer's certified public accounting
firm at the Buyer's expense.
Closing Date has the meaning given it in Section 2.4.
Closing Date Distribution has the meaning given it in
Section 4.9.
Closing Date Liabilities has the meaning given it in
Section 4.9.
Closing Date Trade Payables means trade payables of
the Company incurred in the ordinary course of business on or prior to the
Closing Date, which are in existence as of the Closing Date but are not then
due and payable in accordance with their normal stated terms consistent with
past practice (but without deferral, extension, modification, delay or
postponement), but excluding in all cases any trade payables of the Company to
any Shareholder or Affiliate or relative thereof, as set forth on the Closing
Balance Sheet.
Code means the Internal Revenue Code of 1986, as
amended.
Company Improvements, Fixtures and Fittings has the
meaning set forth in the definition of Excluded Real Property.
Company Transaction Expenses has the meaning set forth
in Section 9.10.
Confidential Information means any information
concerning the subject Person or the subject Person's business, products,
financial condition, prospects and affairs that is not already generally
available to the public.
Current Rental Equipment has the meaning set forth in
Section 4.2.
Current Rental Equipment Decreases has the meaning
set forth in Section 4.2.
Current Rental Equipment Receivable means any note or
account receivable of the Company which arose or arises as consideration for
the sale by the Company of any Current Rental Equipment as set forth on Exhibit
4.2.
Douglas Lease has the meaning set forth in the
definition of Premises Leases.
Employee Benefit Plan means any (a) nonqualified
deferred compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee
5
<PAGE> 7
Pension Benefit Plan (including any Multiemployer Plan) or (d) Employee Welfare
Benefit Plan.
Employee Pension Benefit Plan has the meaning set
forth in ERISA Section 3(2).
Employee Welfare Benefit Plan has the meaning set
forth in ERISA Section 3(1).
Employment Agreements means the Employment and
Noncompetition Agreements between the Buyer and each of Steven L. Neumann and
Cheryl L. Kettrick in the forms of Exhibits 1.1(a) and 1.1(b) to be entered
into at the Closing.
Encumbrance means any mortgage, pledge, conditional
sale agreement, charge, claim, interest of another, lien, security interest,
title defect or other encumbrance.
Environmental Liability means any Liability or
Adverse Consequence directly or indirectly arising from, resulting from,
relating to or caused by (a) any condition, circumstance or activity
previously, now or hereafter existing on, in or under or previously, now or
hereafter affecting any of the Premises or any other real property or
facilities previously owned, occupied, used or operated by the Company or any
predecessor at any time, regardless of the source or cause thereof, (b) the
use, presence, generation, handling, remediation, storage, treatment, removal,
transportation, release or disposal of any Hazardous Material by the Company or
any predecessor at any time, (c) the failure by the Company, any predecessor or
any lessor to comply with any Environmental Obligation, (d) the requirements of
any Governmental Authority or other Person that any studying, testing,
monitoring, reporting or remediation of environmental conditions be undertaken,
(e) any action, proceeding or claim of a Governmental Authority or any other
Person asserted in connection with any of the foregoing and (f) any impairment
following the Closing Date to the value or use of the Premises or of the
Business arising from, resulting from, relating to or caused by any of the
foregoing.
Environmental Obligations means all federal, state
and local laws, regulations, rules, orders, permits, licenses, approvals,
ordinances, judgments, injunctions, directives, and common law relating to land
use, public health, safety, welfare or the environment or to the impact of
business and activities upon public health, safety, welfare, land use or the
environment, including, but not limited to, all requirements of the following
federal statutes, as amended, and regulations promulgated pursuant thereto as
in effect from time to time: the Clean Air Act; the Clean Water Act; the
Resource Conservation and Recovery Act; the Safe Drinking Water Act; the
Federal Insecticide, Fungicide and Rodenticide Act; the National Environmental
Policy Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; OSHA; the Emergency Planning and Community Right-to-Know Act;
the Toxic Substances Control Act; and any state or local law counterpart or
supplement to such Acts.
6
<PAGE> 8
ERISA means the Employee Retirement Income Security
Act of 1974, as amended, and any regulations, rules or orders promulgated
thereunder.
ERISA Controlled Group means any Persons which
together are treated as a single employer under Section 4001(b)(i) of ERISA or
Sections 4014(b), (c), (m) or (o) of the Code.
Excluded Assets means (a) all cash of the Company on
hand as of the Closing Date (other than the $1,600 described in clause (g) of
the definition of Assets) and (b) the Excluded Real Property.
Excluded Real Property means the land and buildings
comprising the Premises (and the easements, rights of way and appurtenances
thereto), and the improvements and fixtures located thereon or attached thereto
which are identified on Exhibit 1.1(d) (such improvements and fixtures
identified on Exhibit 1.1(d) are referred to collectively as the "Individual
Shareholders Improvements and Fixtures"); provided, however, that all
improvements, fixtures and fittings located thereon or attached thereto which
are not the Individual Shareholders Improvements and Fixtures shall be owned by
the Company as of the Closing Date and shall be the subject of the confirmatory
conveyance to the Company prior to the Closing Date as required by Section 4.8
(the improvements, fixtures and fittings which are to be so owned by the
Company as of the Closing Date are referred to collectively as the "Company
Improvements, Fixtures and Fittings").
GAAP means generally accepted accounting principles as
in effect from time to time in the United States.
Governmental Authority means (a) the United States of
America, (b) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like), (c) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof or (d) any
agency, authority or instrumentality of any of the foregoing, including,
without limitation, any court, tribunal, department, bureau, commission or
board.
Hazardous Materials means any material, chemical,
compound, mixture, substance or waste which is regulated by any Governmental
Authority having jurisdiction over any premises, including but not limited to
(a) any oil or petroleum compounds, flammable substances, explosives,
radioactive materials, or any other materials or pollutants which pose a hazard
to the premises or to persons in or about the premises or which cause the
premises to be in violation of any Legal Requirement, (b) asbestos,
asbestos-containing material or presumed asbestos-containing material of any
kind or character, (c) polychlorinated biphenyls, (d) any materials or
substances designated as "hazardous substances" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C. Section 1251 et seq., (e) "economic poison," as
defined in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Section 135 et seq., (f) "chemical substance," "new chemical substance," or
"hazardous chemical substance or mixture" pursuant
7
<PAGE> 9
to Sections 3, 6 and 7 of the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., (g) "hazardous substances" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. Section 9601 et seq., and (h) "hazardous waste" pursuant to Section
1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq.
Individual Shareholders Improvements and Fixtures has
the meaning set forth in the definition of Excluded Real Property.
Intellectual Property means (a) all inventions
(whether patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names and corporate names, together
with all translations, adaptations, derivations and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrightable
works, all copyrights and all applications, registrations and renewals in
connection therewith, (d) all mask works and all applications, registrations
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights and (h) all copies and tangible and intangible
embodiments thereof (in whatever form or medium).
Interim Period Receivables has the meaning given it in
Section 3.1(n).
Inventory means tangible personal property owned,
leased or otherwise held by the Company for rental, lease, sale or use in the
ordinary course of business.
Latest Balance Sheet has the meaning given it in
Section 3.1(f).
Leases means all leases pursuant to which the Company
is the lessee of any property.
Legal Requirement means any constitution, statute,
ordinance, code, law, rule, regulation, order or other requirement, standard or
procedure enacted, adopted or applied by any Governmental Authority, including
judicial decisions applying common law or interpreting any other Legal
Requirement.
Liability means any liability or obligation (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued,
8
<PAGE> 10
whether liquidated or unliquidated, and whether due or to become due),
including any liability for Taxes.
Multiemployer Plan has the meaning set forth in ERISA
Section 3(37).
New Rental Equipment has the meaning set forth in
Section 4.2.
New Rental Equipment Increases has the meaning set
forth in Section 4.2.
1996 Unpaid Personal Property Taxes means the amount
of those personal property taxes set forth on Exhibit 1.1(e) assessed against
the Company in 1995 by any Governmental Authority of the State of Washington in
respect of 1996 but which are not due and payable in whole or in part until
October, 1996 (it being understood that the Company has timely paid the amount
of such personal property taxes which were due and payable in April, 1996).
1997 Personal Property Taxes means those personal
property taxes assessed against the Company in 1996 by any Governmental
Authority of the State of Washington in respect of 1997 but which are not due
and payable in whole or in part until 1997.
Noncompetition Agreement means the Noncompetition
Agreement among the Buyer, on the one hand, and Milton L. Neumann, Alice E.
Neumann and the Trust Shareholders, on the other hand, in the form of Exhibit
1.1(f) to be entered into at the Closing.
Orders means all applicable judgments, injunctions,
orders, decrees, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
OSHA means the Occupational Safety and Health Act of
1970, as amended, and any regulations, rules or orders promulgated thereunder.
Other Buyer Agreements means the Employment
Agreements, the Noncompetition Agreement, the Premises Leases (except for the
Premises Lease under which Harlan Douglas is lessor) and the other documents
and instruments to be executed and delivered by the Buyer pursuant to this
Agreement.
Other Seller Agreements means the Employment
Agreements, the Noncompetition Agreement, the Premises Leases (except for the
Premises Lease under which Harlan Douglas is lessor), the stock powers and the
other documents and instruments to be executed and delivered by any Individual
Shareholder, any relative thereof, or any Trust Shareholder pursuant to this
Agreement.
9
<PAGE> 11
Permits means all permits, licenses, consents,
franchises, authorizations, approvals, privileges, waivers, exemptions,
exclusionary or inclusionary orders and other concessions, whether governmental
or private, including, without limitation, all environmental, public health or
safety permits required in connection with the Company's business.
Person means an individual, partnership, corporation,
association, joint stock company, trust, joint venture, limited liability
company, unincorporated organization or Governmental Authority.
Premises means the real property, buildings and
improvements thereon constituting the business premises of the Company, located
as described on Exhibit 1.1(g).
Premises Leases means (a) the Shareholder Leases and
(b) the lease agreement between the Company and Harlan Douglas as lessor, and
any consent required thereunder to the transactions described herein or by the
Buyer in connection with such lease (which shall be obtained by the
Shareholders) (the "Douglas Lease"), under which the Buyer will lease the
Premises following the Closing.
Post-Closing Douglas Lease Obligations means those
obligations of the Buyer under the Douglas Lease with respect to the period
after the Closing Date; provided, however, that Post-Closing Douglas Lease
Obligations shall not include any Liability of the Company under or in
connection with the Douglas Lease with respect to the period prior to the
Closing Date (regardless of whether discovered, asserted or arising before or
after the Closing Date).
Right means any right, property interest, concession,
patent, trademark, trade name, copyright or other proprietary right of another.
S Corporation Termination Date means the effective
date as of which the Company's "S" corporation election was terminated as a
result of the Trust Shareholders becoming shareholders of the Company.
Securities Act means the Securities Act of 1933, as
amended, and any regulations, rules and orders promulgated thereunder.
Shareholder Leases means the lease agreements among
the Buyer as lessee and Milton L. Neumann and Alice E. Neumann, husband and
wife, as lessors in the forms of Exhibits 1.1(h), (i) and (j) to be entered
into at the Closing.
Shareholders means the Individual Shareholders and the
Trust Shareholders.
Shareholders' Agent means Milton L. Neumann (or the
substituted agent described in Section 9.14) acting pursuant to Section 9.14.
10
<PAGE> 12
Shares means all of the issued and outstanding
capital stock of the Company.
Specified Agreements has the meaning set forth in
Section 3.1(e)(ii).
Subsidiary means any corporation with respect to
which a specified Person (or a Subsidiary thereof) owns a majority of the
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
Survival Period means the applicable periods after
the Closing Date during which representations and warranties survive pursuant
to Section 3.3.
Tax means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, documentary, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated or other tax of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not.
Tax Return means any return, declaration, report,
claim for refund or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
Trust Agreement means, as to each Trust Shareholder,
the agreement creating such Trust Shareholder.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to purchase from the
Shareholders, and the Shareholders agree to sell to the Buyer, all the Shares
free and clear of any Encumbrance, for the consideration specified in Section
2.2. The Buyer shall have no obligation under this Agreement to purchase, nor
shall the Shareholders have any obligation under this Agreement to sell, less
than all of the Shares.
2.2. Purchase Price; Payment. The purchase price for the
Shares shall consist of $5.7 million, (i) plus the amount set forth on Exhibit
2.2 in respect of certain prepaid and other expenses paid by the Company prior
to the Closing which relate to the period after the Closing Date, (ii) plus New
Rental Equipment Increases for New Rental Equipment which is both purchased by
the Company prior to the Closing and paid for in full by the Company prior to
the Closing, as set forth on Exhibit 4.2 as of the date hereof and as of the
Closing, (iii) minus Current Rental Equipment Decreases for Current Rental
Equipment which is sold by the Company prior to the Closing , as set forth on
Exhibit 4.2 as of the date hereof and as of the
11
<PAGE> 13
Closing; provided, however, the purchase price shall not be reduced in respect
of the amount of any Current Rental Equipment Decrease which will, immediately
following the Closing Date, be represented by a Current Rental Equipment
Receivable. The purchase price shall be delivered by the Buyer to the
Shareholders by wire transfer or other delivery of immediately available funds
in the following percentages:
<TABLE>
<CAPTION>
% of
No. of Shares Purchase
Shareholder Sold at Closing Price
- ----------- --------------- -----
<S> <C> <C>
Milton L. and Alice E. Neumann 17,199 28.1951
Milt and Alice Neumann
Charitable Remainder Unitrust 17,520 28.7213
Milt and Alice Neumann
Charitable Remainder Annuity Trust 4,030 6.6066
Cheryl Kettrick Charitable Trust 8,235 13.5000
Steve Neumann Charitable Trust 8,235 13.5000
Cheryl Kettrick Charitable
Remainder Unitrust 1,971 3.2311
Steve Neumann Charitable
Remainder Unitrust 1,971 3.2311
Jody Depew Charitable
Remainder Unitrust 1,839 3.0148
</TABLE>
2.3. Sales Taxes, Etc. The Shareholders shall be
responsible for and shall pay any and all sales, transfer recording, stamp and
other Taxes, fees or charges payable in respect of the sale of the Shares to
the Buyer pursuant to this Agreement.
2.4. Closing; Effective Date. The closing of the
transactions contemplated by this Agreement (the "Closing") is anticipated to
take place by mail and facsimile delivery on May 29, 1996 commencing at 8:00
a.m. Spokane, Washington time, at the offices of Sherman & Howard L.L.C, and
all transactions contemplated by this Agreement shall (except as provided in
Section 4.9(b)) be effective at 11:59 p.m. local time in Spokane, Washington on
the day immediately preceding the Closing (such effective time being the
"Closing Date").
2.5. Deliveries at the Closing. At the Closing, (a) the
Shareholders will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver, or cause to be delivered, to the Shareholders the
certificates, instruments and documents referred to in Section 6.2, (c) the
12
<PAGE> 14
Shareholders will deliver to the Buyer stock certificates representing all the
Shares, endorsed in blank or accompanied by duly executed assignment documents,
free and clear of any Encumbrance, and (d) the Buyer will pay the purchase
price in accordance with Section 2.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Shareholders.
The Shareholders jointly and severally represent and warrant to the Buyer that
the statements contained in this Section 3.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were then substituted for
the date of this Agreement throughout this Section 3.1).
(a) Ownership and Certain Shareholder Matters.
The Individual Shareholders own, beneficially and of record, free and clear of
any Encumbrance or Tax, the number of shares of the Company's common stock,
$1.00 par value, set forth opposite the Individual Shareholders' names in
Section 2.2(a). Each Trust Shareholder holds legal and record title, in trust
for the benefit of the beneficiaries of such Trust Shareholder, free and clear
of any Encumbrance or Tax, the number of shares of the Company's common stock,
$1.00 par value, set forth opposite such Trust Shareholder's name in Section
2.2(a). The Shares referred to in the preceding two sentences of this Section
3.1(a) collectively constitute all of the Shares. Neither the Shares nor any
Shareholder is subject to any voting trust, voting agreement, proxy, or other
agreement, other than the Trust Agreements, or understanding with respect to
the voting of the Shares. Except as set forth on Exhibit 3.1(a), all of which
shall be terminated by the Shareholders at the Closing, there are no existing
rights of first refusal, buy-sell arrangements, options, warrants, rights,
calls, or other commitments or restrictions of any character relating to any of
the Shares, except those restrictions on transfer imposed by the Securities Act
and applicable state securities and trust laws. No Shareholder is under any
impairment and no trustee (other than the trustees of the Trust Shareholders)
or guardian of the property or of the person or other legal or personal
representative has been appointed with respect to the financial or business
affairs of any Shareholder. Each Shareholder, Steven L. Neumann and Cheryl L.
Kettrick has full and absolute right, power, authority and legal capacity to
execute, deliver and perform this Agreement and all Other Seller Agreements to
which such Shareholder or Person is a party, and this Agreement constitutes,
and such Other Seller Agreements will when executed and delivered constitute,
the legal, valid and binding obligations of, and be enforceable in accordance
with their respective terms against, such Shareholder, Steven L. Neumann or
Cheryl L. Kettrick, as the case may be. The execution, delivery and
performance of this Agreement and the Other Seller Agreements to which any
Shareholder, Steven L. Neumann or Cheryl L. Kettrick is a party, and the
consummation of the transactions contemplated hereby and thereby, will not (i)
violate any Legal Requirement or Order to which any Shareholder, Steven L.
Neumann or Cheryl L. Kettrick is subject, or (ii) violate, with or without the
giving of notice or the lapse of time or both, or conflict with or result in
the breach or termination of any provision of, or constitute a default under,
or give any Person the right to accelerate any obligation under, or result in
the creation of any Encumbrance upon any properties or assets of any
Shareholder, Steven L. Neumann or Cheryl L. Kettrick pursuant to, any
indenture, mortgage, deed of trust, lien, lease, agreement, instrument or other
arrangement to which the Shareholder is a party or by which the Shareholder,
Steven L. Neumann or Cheryl L. Kettrick or any of the Shareholder's, Steven L.
13
<PAGE> 15
Neumann's or Cheryl L. Kettrick's assets are bound or subject. Except for
those notices that will be given and consents that will be obtained by the
Shareholders prior to the Closing (which are set forth on Exhibit 3.1(a)),
neither any Shareholder nor Steven L. Neumann or Cheryl L. Kettrick need give
any notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order to consummate
the transactions contemplated hereby.
(b) Organization, Good Standing, Power, Etc. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Washington, which is the only jurisdiction in
which the nature of the business conducted by it or the properties owned,
leased or operated by it make such qualification necessary. The Company has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The copies of
the articles of incorporation (certified by the Secretary of State of
Washington) and the bylaws of the Company, both as amended to date, which have
been delivered to the Buyer by the Shareholders and are attached as Exhibit
3.1(b), are complete and correct, and the Company is not in default under or in
violation of any provision of its articles of incorporation or bylaws. The
minute books (containing all records of meetings of or actions by the
shareholders, the board of directors, and any committees of the board of
directors) and the stock certificate books and the stock record books of the
Company, copies of which have been delivered to the Buyer by the Shareholders,
are correct and complete.
(c) Capitalization, Etc. The authorized capital
stock of the Company consists of 100,000 shares of common stock, $1.00 par
value, of which 61,000 shares are issued and outstanding. All of the issued
and outstanding shares of the Company's capital stock have been duly authorized
and validly issued, and are fully paid and nonassessable, with, to the best
knowledge of the Company and the Shareholders, no personal Liability attaching
to the ownership thereof. There are no authorized or outstanding stock or
securities convertible into or exchangeable for, or any authorized or
outstanding option, warrant or other right to subscribe for or to purchase, or
convert any obligation into, any unissued shares of its capital stock, and the
Company has not agreed to issue securities so convertible or exchangeable or
any such option, warrant or other right. There are no authorized or
outstanding stock appreciation, phantom stock, profit participation (except as
set forth on Exhibit 3.1(c)) or similar rights with respect to the Company.
There are no voting trusts, voting agreements, proxies or other agreements or
understandings with respect to any capital stock of the Company, other than the
Trust Agreements.
(d) No Subsidiaries. The Company has no
Subsidiaries and no interest in any other corporation, partnership, limited
partnership, limited liability company, association or joint venture.
(e) No Violation of Agreements, Etc. (i) The
execution, delivery and performance of this Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby will not (A) violate any Legal Requirement or Order to which the
Company is subject or any provision of the articles of incorporation or bylaws
of the Company or (B) violate, with or without the giving of notice or the
lapse of time or both, or conflict with or result in the breach or termination
of any provision of, or constitute
14
<PAGE> 16
a default under, or give any Person the right to accelerate any obligation
under, or result in the creation of any Encumbrance upon any properties, assets
or business of the Company pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Company is a party or by which the Company or any of its assets and properties
is bound or subject. Except for notices and consents which are set forth in
Part I of Exhibit 3.1(e), the Company does not need to give any notice to, make
any filing with or obtain any authorization, consent or approval of any
Governmental Authority or other Person in order for the parties to consummate
the transactions contemplated by this Agreement. Notwithstanding anything to
the contrary contained in this Agreement, the Shareholders shall not be
required to give any such notice or obtain any such consent other than those
set forth in Part II of Exhibit 3.1(e).
(ii) The merger immediately following the
Closing of the Company into the Buyer will not violate, with or without the
giving of notice or the lapse of time or both, or conflict with or result in
the breach or termination of any provision of, or constitute a default under,
or give any Person the right to accelerate any obligation under, or result in
the creation of any Encumbrance upon any properties, assets or business of the
Buyer or the Company pursuant to, any indenture, mortgage, deed of trust, lien,
lease, license, agreement, instrument or other arrangement to which the Company
is a party immediately prior to the transfer of the Shares to the Buyer
pursuant to this Agreement or by which the Company or any of its assets and
properties is bound or subject immediately prior to the transfer of the Shares
to the Buyer pursuant to this Agreement (collectively, the "Specified
Agreements"). Except for those notices and consents which are set forth in
Part III of Exhibit 3.1(e), the Company, in connection with such merger, does
not need to give any notice to or obtain any consent from any Person in
connection with any Specified Agreement. Notwithstanding anything to the
contrary contained in this Agreement, the Shareholders shall not be required to
give any such notice or obtain any such consent other than those set forth in
Part IV of Exhibit 3.1(e).
(f) Financial Statements. The statement of
assets, liability and equity of the Company as of December 31, 1993, December
31, 1994 and December 31, 1995 (the latter being referred to as the "Latest
Balance Sheet") and the related statement of revenues and expenses for the
fiscal years then ended, have been prepared in accordance with GAAP, except as
set forth on Exhibit 3.1(f), on a basis consistent with those of prior years,
are accurate and fairly present the financial position and results of
operations of the Company as of said dates and for each of the periods
indicated. Copies of the financial statements described in this Section 3.1(f)
are attached as Exhibit 3.1(f). To the best knowledge of the Company and the
Shareholders, said balance sheets make full and adequate provision for all
Liabilities of the Company.
(g) Absence of Liabilities. As of the Closing
Date and the Closing, to the best knowledge of the Company and the
Shareholders, the Company will have no Liability (and there is no basis for the
assertion of any Liability) arising out of any transactions entered into prior
to Closing, any action or inaction prior to Closing or any state of facts
existing prior to Closing, or otherwise, except for those Environmental
Liabilities identified on Exhibit 3.1(g) (which Environmental Liabilities
shall, after the Closing Date, be the obligation and responsibility of the
Shareholders rather than the Company) and the Closing Date Trade
15
<PAGE> 17
Payables, the 1996 Unpaid Personal Property Taxes, the 1997 Personal Property
Taxes and Post-Closing Douglas Lease Obligations (which Closing Date Trade
Payables, 1996 Unpaid Personal Property Taxes, 1997 Personal Property Taxes and
Post-Closing Douglas Lease Obligations shall, after the Closing, be the
obligation and responsibility of the Company). All Closing Date Liabilities
shall have been paid by the Company on or prior to the Closing Date.
(h) Absence of Certain Changes or Events. Since
October 1, 1995, the Company has not (i) incurred any debt, indebtedness or, to
the best knowledge of the Company and the Shareholders, other Liability, except
current Liabilities incurred in the ordinary course of business and those
Environmental Liabilities identified on Exhibit 3.1(g) (which Environmental
Liabilities shall, after the Closing Date, be the obligation and responsibility
of the Shareholders rather than the Company); (ii) delayed or postponed the
payment of (A) accounts payable or (B), to the best knowledge of the Company
and the Shareholders, any other Liability; (iii) accelerated the collection of
any receivable (except as set forth on Exhibit 3.1(h)); (iv) subjected any of
its assets or properties to any Encumbrance; (v) settled, compromised or
written off any receivable (except as set forth on Exhibit 3.1(h)); (vi)
leased, except in the ordinary course of business, or sold or otherwise
transferred (except as otherwise expressly permitted by this Section 3.1(h) or
as set forth on Exhibit 3.1(h) with respect to distributions of certain
securities, real estate and cash of the Company to its shareholders) any of its
assets or properties; (vii) canceled, compromised, settled, released or waived
any right, debt or claim (except as set forth on Exhibit 3.1(h)); (viii)
changed in any manner the way in which it conducts business (except as set
forth on Exhibit 3.1(h)); (ix) transferred or granted any rights under any
leases (except to customers in the ordinary course of business), licenses or
agreements or with respect to any Intellectual Property; (x) made or granted
any individual wage or salary increase in excess of 10% or any general wage or
salary increase (except as set forth on Exhibit 3.1(h) with respect to certain
officers of the Company), entered into any employment, consulting or agency
contract with any shareholder, officer, director, employee or consultant or any
relative or Affiliate thereof, changed or increased the rates of compensation
payable through bonus, pension, contract or other commitment to any
shareholder, officer, director, employee or consultant or any relative or
Affiliate thereof for any period before or after the date set forth above
(except as set forth on Exhibit 3.1(h) with respect to certain officers of the
Company) or made any other change in employment terms for any shareholder,
officer, director, employee or consultant or any Affiliate thereof; (xi)
adopted, amended, modified or terminated any bonus, profit-sharing, incentive,
severance or other plan, contract or commitment for the benefit of any of its
shareholders, officers, directors, employees or any relative or Affiliate
thereof (or taken any such action with respect to any other Employee Benefit
Plan or Benefit Arrangement); (xii) except as otherwise expressly permitted by
this Section 3.1(h), entered into, or agreed to enter into, any contracts or
agreements, or made any commitments, involving more than $15,000 in the
aggregate; (xiii) suffered any material adverse fact or change, including,
without limitation, to or in its business, financial condition, prospects,
customer relationships or properties (except as set forth on Exhibit 3.1(h)
with respect to distributions of certain securities, real estate and cash of
the Company to its shareholders); (xiv) entered into any contract or commitment
to make capital expenditures in excess of $15,000 in the aggregate; (xv)
declared, set aside or paid any dividend or made any distribution to its
shareholders (whether in cash or in kind) (except as set forth on Exhibit
3.1(h) with respect to distributions of certain securities, real estate and
cash of the Company to its shareholders) or purchased, redeemed or otherwise
acquired any shares of its capital stock
16
<PAGE> 18
or any other securities, other than the payment of the Closing Date
Distribution; (xvi) made any loan to any Person, including, without limitation,
any shareholder, officer or director or to any relative or Affiliate thereof or
entered into any transaction (including, without limitation, any agreement or
other arrangement providing for employment of, furnishing of services by,
rental of real or personal property from, or otherwise requirement payment to)
with any shareholder, officer or director or any relative or Affiliate thereof;
(xvii) permitted any Person, including, without limitation, any shareholder,
officer, director or employee or any relative or affiliate thereof, to withdraw
assets from the Company (except as set forth on Exhibit 3.1(h) with respect to
distributions of certain securities, real estate and cash of the Company to its
shareholders); (xviii) made any payment or transfer to or for the benefit of
any shareholder, officer or director or any relative or Affiliate thereof
(except as set forth on Exhibit 3.1(h) with respect to distributions of certain
securities, real estate and cash of the Company to its shareholders), or agreed
to take any such action, other than the payment to Steven L. Neumann and Cheryl
L. Kettrick of the proportionate monthly amount of their respective normal
annualized salaries of $124,000 and $124,000 due and payable during such period
(the aggregate normal annual salaries of such Persons is $248,000); (xix) made
or pledged to make any charitable or other contribution; (xx) accelerated,
terminated, modified or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases and licenses) involving more
than $15,000 individually or in the aggregate to which the Company is a party
or by which it is bound; (xxi) changed its method of depreciation; (xxii)
rented or leased any equipment or sold or otherwise transferred any Inventory
or services at below-normal rates or margins; (xxiii) suffered any other
material occurrence, event, incident, action, failure to act or transaction
outside the ordinary course of business (except as set forth on Exhibit 3.1(h)
with respect to distributions of certain securities, real estate and cash of
the Company to its shareholders); or (xxiv) agreed to incur, take, make or
permit any of the matters described in clauses (i) through (xxiii).
(i) No Royalty Payments. The Company is not the
licensee of any Intellectual Property requiring the payment of any royalty or
licensing fee.
(j) Tax Matters.
(i) There has been duly and timely filed in
proper form by or on behalf of the Company, or a filing extension from
the appropriate Governmental Authorities has been obtained with
respect to, all Tax Returns required to be filed by applicable Legal
Requirement on or prior to the date of this Agreement. All
assessments, Taxes, fees or other charges imposed on the Company, any
of its properties or any of its prior or present shareholders
(pursuant to the Company's "S" corporation election) in respect of the
periods covered by such Tax Returns have been paid, or adequate
reserves have been provided for (however, no representation is made
with respect to reserves by shareholders) with respect to the payment
of all Taxes (whether or not disputed) payable in respect of periods
through the date of this Agreement and all prior periods, and, to the
best knowledge of the Company and the Shareholders, all Tax
Liabilities arising out of transactions entered into or states of fact
existing prior to the date of this Agreement. There is no unpaid
interest, penalty or addition to any Tax due or claimed to be due from
the Company (or any of its prior or present shareholders pursuant to
the Company's "S" corporation election), or any Tax
17
<PAGE> 19
deficiency, determination or assessment outstanding against the
Company (or any of its prior or present shareholders pursuant to the
Company's "S" corporation election). No audit of any Tax Returns of
the Company is pending or, to the best knowledge of the Company and
the Shareholders, has been threatened, and the Company has not given
any waiver of any statute of limitations relating to the assessment or
payment of Taxes, which waiver has not yet expired. All Tax Returns,
or extensions thereof required to be filed, and all Taxes required to
be paid, prior to the Closing by or on behalf of the Company, of any
nature whatsoever, shall have been so filed or paid prior to the
Closing. Following the Closing, the Shareholders (but not the
Company) will pay all Taxes attributable to the Company or its
business and activities through the Closing Date, including all Taxes
attributable to the transactions contemplated by this Agreement (other
than those Taxes, if any, of the Company or the Buyer attributable to
the merger immediately following the Closing of the Company into the
Buyer), such payment to be made on or before the due date of such Tax
Returns.
(ii) The Company has filed all Tax
Returns that it was required to file. All such Tax Returns were
correct and complete in all respects. All Taxes owed by the Company
(whether or not shown on any Tax Return) have been paid. The Company
is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where the Company does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no
Encumbrances on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(iii) The Company has withheld and paid
all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.
(iv) To the best knowledge of the Company
and the Shareholders, there is no basis for any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
the Company either (A) claimed or raised by any authority in writing
or (B) as to which any of the Company or the Shareholders have
knowledge based upon personal contact with any agent of such
authority. Exhibit 3.1(j) lists all federal, state, local and foreign
income Tax Returns filed with respect to the Company for taxable
periods ended on or after January 1,1988, indicates those Tax Returns
that have been audited and indicates those Tax Returns that currently
are the subject of audit. The Shareholders have delivered to Buyer
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies filed or assessed
against or agreed to by the Company since January 1, 1988.
(v) The Company has not waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(vi) The Company has not filed a consent
under Code Section 341(f) concerning collapsible corporations. The
Company has not made any
18
<PAGE> 20
payments, is not obligated to make any payments and is not a party to
any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Section 280G.
The Company has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662. The
Company is not a party to any Tax allocation or sharing agreement.
The Company (A) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Company) and (B), to the best knowledge of the
Company and the Shareholders, has no Liability for the Taxes of any
Person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract or otherwise. To the best
knowledge of the Company and the Shareholders, the total adjusted
basis of the Company's Assets exceeds the sum of the Company's
Liabilities plus the amount of Liabilities to which the Company's
Assets are subject.
(vii) Exhibit 3.1(j) sets forth the
following information with respect to the Company as of the most
recent practicable date (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
contemplated hereby): (A) the basis of the Company in its assets; and
(B) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax credit or excess
charitable contribution allocable to the Company.
(k) Assets and Properties.
(i) The Assets are owned by the Company,
free and clear of all Encumbrances other than statutory liens imposed
by Washington law in respect of the 1996 Unpaid Personal Property
Taxes and the 1997 Personal Property Taxes. The Assets consist of the
assets of the Company in existence as of October 1, 1995 (except as
set forth on Exhibit 3.1(k) with respect to certain securities, real
estate and cash of the Company which were distributed to its
shareholders and except for such changes in Inventory and in accounts
receivable in the ordinary course of business as are not in violation
of Section 3.1(h) or 4.2), increased by New Rental Equipment purchased
from October 1, 1995 to the day immediately preceding the date of this
Agreement (as set forth on Exhibit 4.2 as of the date hereof),
increased by New Rental Equipment purchased on or after the date of
this Agreement but on or before the Closing Date in compliance with
Section 4.2 (as shall be set forth on Exhibit 4.2 pursuant to the last
sentence of Section 4.2), decreased by Current Rental Equipment sold
in compliance with this Agreement from October 1, 1995 to the day
immediately preceding the date of this Agreement (as set forth on
Exhibit 4.2 as of the date hereof), and decreased by Current Rental
Equipment sold in compliance with this Agreement on or after the date
of this Agreement but on or before the Closing Date in compliance with
Section 4.2 (as shall be set forth on Exhibit 4.2 pursuant to the last
sentence of Section 4.2). From October 1, 1995 to the day immediately
preceding the date of this Agreement, the
19
<PAGE> 21
Company has purchased the New Rental Equipment and has sold, for cash
or a Current Rental Equipment Receivable only, the Current Rental
Equipment described on Exhibit 4.2 as of the date of this Agreement,
but has not otherwise sold, traded, transferred or otherwise disposed
of any Current Rental Equipment. The Company has not, between the
date of this Agreement and the Closing, purchased any New Rental
Equipment or sold, traded, transferred or otherwise disposed of any
Current Rental Equipment except in accordance with Section 4.2. The
Assets are all of the assets (other than the Premises, the Individual
Shareholders Improvements and Fixtures and cash) used by the Company
in its business. Except for items rented to customers, all of the
Company's tangible personal property is located on the Premises. The
Company has good and marketable title to, or valid leasehold interests
in, all of the Assets. The Company does not own any real property
interest other than the Company Improvements, Fixtures and Fittings
and its leasehold interests in the Premises.
(ii) The Company leases all buildings as
part of the Premises, and either owns or leases all machinery,
equipment and other assets, necessary for the conduct of its business
as presently conducted. Except as set forth in Exhibit 3.1(k)(ii), to
the best knowledge of the Company and the Shareholders, each such
building and the Premises comply in all respects with the Americans
with Disabilities Act, are free from defects, have been maintained in
accordance with normal industry practice, are in good operating
condition and repair and are suitable for the purposes for which they
presently are used. Except as set forth on Exhibit 3.1(k)(ii), the
Company has not received notice of violation of any Legal Requirement,
Order or Permit relating to its operations or its owned or leased
properties.
(iii) All Leases are valid and in full
force and effect in accordance with their respective terms and there
is not, under any of such Leases, any existing default or event of
default or event which, with notice or lapse of time or both, would
constitute a default. No party to any Lease has repudiated any
provision thereof, and, except as set forth on Exhibit 3.1(k)(iii),
there are no disputes, oral agreements or forbearance programs in
effect as to such Lease. To the best knowledge of the Company and the
Shareholders, the Premises have received all approvals of Governmental
Authorities (including Permits) required in connection with the
occupation and operation thereof, and, except for those Environmental
Liabilities identified on Exhibit 3.1(g) (which Environmental
Liabilities shall, after the Closing Date, be the obligation and
responsibility of the Shareholders rather than the Company), have been
occupied, operated and maintained in accordance with applicable Legal
Requirements. The Premises are supplied with utilities and other
services necessary for the operation thereof. To the best knowledge
of the Company and the Shareholders, the owners of the Premises have
good and marketable title to the underlying real property, free and
clear of any Encumbrance, easement, covenant or other restriction,
except for the leasehold interest of the Company, installments of
special assessments not yet delinquent and recorded easements,
covenants and other restrictions which do not impair the current use,
occupancy or value, or the marketability of title, of the property
subject thereto. The Company does not sublease any real or personal
property.
20
<PAGE> 22
(l) Lists of Properties, Contracts and Other
Data. The Shareholders have delivered to the Buyer a correct and complete
list, attached hereto as Exhibit 3.1(l), certified by Milton L. Neumann, as
representative of the Shareholders, to be correct and complete, setting forth
the following:
(i) all items of equipment and machinery
owned, leased or used by the Company, including all items of
equipment, machinery and other tangible personal property which as of
the date of this Agreement has no book value, and the original cost,
depreciation and current book value of all items of equipment,
machinery and other tangible personal property owned by the Company
which are included in the Latest Balance Sheet;
(ii) all rights, licenses and Leases to
which the Company is a party;
(iii) all assignments, licenses,
indemnifications or other agreements with respect to any form of
intangible property owned, leased or used by the Company, including,
without limitation, any Intellectual Property;
(iv) all guaranty, warranty and indemnity
agreements to which the Company is a party or by which it or its
assets is bound, including, without limitation, those with respect to
products or services sold, rented, leased, provided or delivered by
the Company;
(v) (A) the forms of rental and lease
agreements used by the Company in its business, and (B) all contracts
or agreements for the purchase, sale, rental or lease of materials,
supplies, products or other personal property or for the furnishing or
receipt of services which (1) are with any shareholder, officer or
director of the Company or any relative or Affiliate of any of such
Persons or of the Company, (2) have been prepaid prior to the Closing
Date for a period of more than two months after the Closing Date, or
(3) involve any rental/purchase option or lease/purchase option or
similar arrangement;
(vi) all claims, deposits, causes of
action, choses in action, rights of recovery, rights of setoff and
rights of recoupment of the Company;
(vii) all franchises, approvals, Permits,
licenses, orders, registrations, certificates, variances and similar
rights of the Company;
(viii) all contracts or agreements
concerning confidentiality or prohibiting the Company from freely
engaging in its business as now conducted or proposed to be conducted
or from competing anywhere in the world;
(ix) all other contracts, agreements,
instruments, guarantees and commitments (including mortgages, deeds of
trust, indentures, loan agreements and credit agreements and including
a description of any oral contracts) to which the Company is a party
or by which it or its assets is bound;
21
<PAGE> 23
(x) the names and annual rates of
compensation as of October 1, 1995 (which rates have, except as set
forth on Exhibit 3.1(l) with respect to certain officers of the
Company, remained the same through the date hereof and the Closing),
of all present officers and directors of the Company, all other
management employees, and each other employee whose annual rate of
compensation is at least $30,000;
(xi) the names of all retired employees,
if any, of the Company who are receiving or are entitled to receive
any payments which are not fully covered by any Employee Pension
Benefit Plan of the Company which is qualified under Code Section
401(a), their ages and the annual funded and unfunded benefits;
(xii) the name of each bank or other
financial institution or entity in which the Company has an account or
safe deposit box (with the identifying account number or symbol) and
the names of all persons authorized to draw thereon or to have access
thereto; and
(xiii) all outstanding notes or accounts
receivable relating to accounts with the Company, or advances by the
Company to any shareholder, officer, director, employee or consultant
or relative or Affiliate thereof, as of the date of this Agreement.
True and complete copies of the documents referred to in such list have been
delivered to the Buyer. All such rights, licenses, leases, registrations,
applications, contracts, agreements and commitments and other items referred to
in such list are valid, in full force and effect, enforceable in accordance
with their respective terms for the period stated therein, no party has
repudiated any provision thereof and no breach or default will result from the
execution, delivery and performance of this Agreement, the Other Seller
Agreements, or the transactions contemplated hereby or thereby. Neither the
Company nor, to the best knowledge of the Company and the Shareholders, any
other party thereto is in breach or default in performance of any of their
respective obligations thereunder except as set forth on Exhibit 3.1(l), and no
event exists which, with the giving of notice or lapse of time or both, would
constitute a breach, default or event of default on the part of a party to any
of the foregoing that is continuing unremedied.
(m) Litigation, Etc. There is no outstanding
Order against, nor to the best knowledge of the Company and the Shareholders,
except as set forth on Exhibits 3.1(m), 3.1(x), 3.1(y), 3.1(z) and 3.1(aa), is
there any litigation, proceeding, arbitration or investigation by any
Governmental Authority or other Person pending or threatened against, the
Company, its properties or business or relating to the transactions
contemplated by this Agreement, nor to the best knowledge of the Company and
the Shareholders, except as set forth on Exhibits 3.1(m), 3.1(x), 3.1(y),
3.1(z) and 3.1(aa), is there any basis for any such action.
(n) Notes and Accounts Receivable. The notes
receivable, if any, and accounts receivable of the Company reflected on the
Latest Balance Sheet, and all notes and accounts receivable arising on or prior
to the Closing Date (including, without limitation, any Current Rental
Equipment Receivables), arose and will arise from bona fide transactions by the
Company in the ordinary course of business, are valid receivables with trade
customers or
22
<PAGE> 24
others subject to no setoffs or counterclaims. The Current Rental Equipment
Receivables in existence as of the Closing Date, regardless of whether they
arose before or after the S Corporation Termination Date, will be fully
collected at their face amounts in accordance with their terms but in any event
within 90 days of the Closing Date. The notes receivable, if any, and the
accounts receivable of the Company which arose or arise from sales, leases or
other transactions (but in each case no such sale, lease or other transaction
shall be in violation of Section 3.1(h) or 4.2) made after the S Corporation
Termination Date but on or prior to the Closing Date, other than of Current
Rental Equipment (collectively, the "Interim Period Receivables"), will be
collected at their full face amounts in accordance with their terms but in any
event within 90 days of the Closing Date. The notes receivable, if any, and
the accounts receivable of the Company, other than the Current Rental Equipment
Receivables and the Interim Period Receivables, existing on the Closing Date
(collectively, the "Other Closing Receivables") will be collected as follows:
(i) 80% of the aggregate amount of the Other Closing Receivables which are, as
of the Closing Date, within 30 days of their date of invoice, will be collected
within 240 days of the Closing Date; (ii) 60% of the Other Closing Receivables
which are, as of the Closing Date, within 31 to 60 days of their date of
invoice, will be collected within 240 days of the Closing Date; and (iii) 40%
of the Other Closing Receivables which are, as of the Closing Date, within 61
to 90 days from their date of invoice, will be collected within 240 days of the
Closing Date. No representation or warranty is made with respect to Other
Closing Receivables which are, as of the Closing Date, more than 90 days past
their date of invoice.
(o) Product Quality, Warranty Claims. 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 to
applicable contractual commitments, express and implied warranties, product and
service specifications and quality standards, and, to the best knowledge of the
Company and the Shareholders, the Company has no Liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith. No product or service sold, leased, rented, provided or
delivered by the 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.
(p) Product Liability. To the best knowledge of
the Company and the Shareholders, except as set forth on Exhibit 3.1(p), the
Company has no Liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against the Company which might give rise to any Liability) arising out
of any injury to a Person or property as a result of the ownership, possession,
provision or use of any product or service sold, rented, leased, provided or
delivered by the Company on or prior to the Closing Date. All product
liability claims that have been asserted against the Company since January 1,
1991, whether covered by insurance or not and whether litigation has resulted
or not, are listed and summarized on Exhibit 3.1(p).
23
<PAGE> 25
(q) Inventory.
(i) The Inventory of the Company which
is held for rental or lease consists of goods which are merchantable,
is fit for the purpose for which it was procured and is held by the
Company and is usable in the ordinary course of business. To the best
knowledge of the Company and the Shareholders, none of such Inventory
is obsolete (and for purposes hereof, an item of such Inventory is not
considered obsolete if it is rented or leased by customers on a basis
consistent with prior periods), damaged or defective (and for purposes
hereof, an item of such Inventory is not considered damaged or
defective if it is an item which has suffered damage in the course of
its use by the customer and has been repaired, or is reparable and is
in the process of being repaired, by the Company for use in the
Company's rental and leasing business). The value of such Inventory
reflected on the Latest Balance Sheet fairly represents the value of
such Inventory calculated on a basis consistent with past practice and
GAAP. From October 1, 1995 through the Closing Date, the Company has
repaired and will repair damaged items of Inventory which are held for
rental or lease on a basis consistent with pre-October 1, 1995
practice.
(ii) The Inventory of the Company which
is held for resale consists of goods which are merchantable and good
and salable in the ordinary course of the Company's business. Exhibit
3.1(q)(ii) sets forth all items of the type to be held for resale
which, as of the day immediately preceding the date of this Agreement,
have been ordered but not yet delivered to the Company. From October
1, 1995 through the Closing Date, the Company has restocked and will
restock the Inventory held for resale in the ordinary course of
business on a basis consistent with pre-October 1, 1995 practice.
(r) Insurance. The Company has policies of
insurance (i) covering risk of loss on the Assets and (ii) covering commercial
and products liability and liability for fire, property damage, personal injury
and workers' compensation coverage, all, to the best knowledge of the Company
and the Shareholders, with responsible and financially sound insurance
carriers in adequate amounts and in compliance with any governmental
requirements and in accordance with good industry practice. All such insurance
policies are valid, in full force and effect and enforceable in accordance with
their respective terms and no party has repudiated any provision thereof. All
such policies will remain in full force and effect until the Closing Date.
Neither the Company nor any other party to any such policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices) in the performance of any of their respective obligations thereunder,
and no event exists which, with the giving of notice or the lapse of time or
both, would constitute such a breach, default or event of default, or permit
termination, modification or acceleration under any such policy. There are no
claims (except as set forth on Exhibit 3.1(r)), actions, proceedings or suits
arising out of or based upon any of such policies nor, to the best knowledge of
the Company and the Shareholders, does any basis for any such claim, action,
suit or proceeding exist. Descriptions, including current premium amounts and
date and amount of the last premium increases, of the policies of insurance are
set forth on Exhibit 3.1(r). All premiums have been paid on such policies as
of the date of this Agreement and will be paid on such policies through the
Closing Date, and the Company has not received notice of any increase in any
such premium except
24
<PAGE> 26
as set forth on Exhibit 3.1(r). The Company has been covered during the five
years prior to the date of this Agreement by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. All claims made during such five-year period with
respect to any insurance coverage of the Company, other than those described in
Exhibit 3.1(p), are set forth in Exhibit 3.1(r). The Company does not engage
in any self-insurance activities, other than to the extent of any deductibles.
(s) Compliance with Applicable Laws and Rights.
Except as set forth on Exhibits 3.1(s), 3.1(x), 3.1(y), 3.1(z) and 3.1(aa), to
the best knowledge of the Company and the Shareholders, the Company is not in
violation of any applicable Legal Requirements, Orders or Rights. Except as
set forth on Exhibits 3.1(s), 3.1(x), 3.1(y), 3.1(z) and 3.1(aa), the Company
has not received notice from any Governmental Authority or other Person of any
violation or alleged violation of any Legal Requirement, Order or Right, the
subject matter of which has not been resolved to the satisfaction of the Person
giving the notice, and, to the best knowledge of the Company and the
Shareholders, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced or is pending or
threatened against the Company alleging any such violation. Except as set
forth on Exhibits 3.1(s), 3.1(x), 3.1(y), 3.1(z) and 3.1(aa), to the best
knowledge of the Company and the Shareholders, the Company's property,
including the Premises and its machinery and equipment, conforms with
applicable Legal Requirements and Orders, including, without limitation,
environmental and zoning laws and building codes, and is in compliance with
OSHA and the Americans with Disabilities Act. Neither the Company nor any
Shareholder has any knowledge of any pending or proposed OSHA regulations or
amendments to OSHA regulations (including toxic chemical regulations) which
would require any change in any of the Premises or the Company's equipment,
operations or procedures or affect the Company's business or its costs of
conducting its business as now conducted. The Company has never made any
payments for political contributions, or any bribes, kickback payments or other
illegal contributions.
(t) Pension and Employee Benefit Matters.
(i) Neither the Company nor any ERISA
Controlled Group which includes the Company (if any) maintains,
administers or contributes to, or has any obligation to contribute to,
any Employee Benefit Plan. Exhibit 3.1(t) lists each Employee Benefit
Plan that was previously maintained, administered, contributed to or
required to be contributed to by the Company or any ERISA Controlled
Group (if any) which includes or has included the Company, and the
date of termination of each such Employee Benefit Plan. To the best
knowledge of the Company and the Shareholders, the Company has no
Liability (nor is there any basis for the assertion of any Liability)
as a result of the Company's or any such ERISA Controlled Group's
maintenance, administration or termination of, or contribution to, any
Employee Benefit Plan. Neither the Company nor any member of any
ERISA Controlled Group (if any) which includes or has included the
Company has ever been required to contribute to any Multiemployer
Plan.
(ii) Exhibit 3.1(t) lists each Benefit
Arrangement. Copies and descriptions (including descriptions of the
number and employment classifications of
25
<PAGE> 27
employees covered by each such Benefit Arrangement) have been
delivered by the Shareholders to the Buyer and attached hereto as part
of Exhibit 3.1(t). Each Benefit Arrangement has been maintained and
administered in substantial compliance with its terms and with the
requirements prescribed by any and all Legal Requirements that are
applicable to each such Benefit Arrangement.
(iii) Except as set forth in any Benefit
Arrangement identified in Exhibit 3.1(t) and except as provided by
Legal Requirement or any collective bargaining agreement or any
employment contract identified on Exhibit 3.1(t), the employment of
all persons presently employed or retained by the Company is
terminable at will.
(iv) To the best knowledge of the Company
and the Shareholders, the Company has not incurred any Liability under
Title IV of ERISA arising in connection with the termination of any
plan covered or previously covered by Title IV of ERISA or the
withdrawal from any multiemployer or multiple employer plan.
(v) To the best knowledge of the Company
and the Shareholders, there have been no prohibited transactions with
respect to any Employee Benefit Plan. To the best knowledge of the
Company and the Shareholders, no "fiduciary" (as defined in Section
3(21) of ERISA) has any Liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration
or investment of the assets of any Employee Benefit Plan.
(vi) The Company does not maintain and
has never maintained nor contributes, or ever has contributed, or ever
has been required to contribute, to any Employee Benefit Plan
providing post-retirement health, disability or life insurance
benefits for current or former employees, their spouses or their
dependents. Except as provided by applicable federal and state
statutory requirements, no condition exists that would prevent the
Company from amending or terminating any Benefit Arrangement providing
health or medical benefits in respect of any active or retired
employees of the Company, or relatives thereof.
(vii) Each Benefit Arrangement has been
maintained and administered in compliance with its terms and with the
requirements prescribed by any and all Legal Requirements, including
but not limited to ERISA and the Code, that are applicable to such
Plans. To the best knowledge of the Company and the Shareholders,
nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any Benefit Arrangement has or
could make the Company or any officer or director of the Company
subject to any Liability under Title I of ERISA, any penalty under
Section 502 of ERISA or any Liability for any Tax under Section 4972
or Section 4975 through 4980B, inclusive, of the Code.
(viii) There is no contract, agreement,
plan or arrangement covering any employee or former employee of the
Company that, individually or
26
<PAGE> 28
collectively, could give rise to the payment of any amount that would
not be deductible pursuant to the terms of Section 280G or 162(a)(l)
of the Code.
(ix) The Company has made, before the
date of this Agreement, all required contributions and premium
payments under each Benefit Arrangement for all completed fiscal years
including contributions that may not by law have otherwise been
required to be made until the due date for filing the Tax Return for
any completed fiscal year.
(x) There has not been with respect to
the Company's active or retired employees, nor will be, as of the
Closing Date, any amendment to, written interpretation or announcement
(whether or not written) by the Company relating to, or change in
employee participation or coverage under, any Benefit Arrangement that
would increase the expense of maintaining or funding benefits under
such Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended on December 31, 1995.
(u) Employees and Labor. The Company has not
received any notice, nor, to the best knowledge of the Company and the
Shareholders, is there any reason to believe that any executive or key employee
of the Company other than Milton L. Neumann and Alice E. Neumann, or any group
of employees of the Company has any plans to terminate his, her or its
employment with the Company. To the best knowledge of the Company and the
Shareholders, no executive or key employee is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Company prior to the Closing Date and, if such person becomes an
employee of the Buyer, to the affairs of the Buyer after the Closing Date. The
Company has complied with all Legal Requirements relating to the employment of
labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
Taxes. The Company will not be required to give any notice under any plant
closing or similar law as a result of this Agreement, the Other Seller
Agreements or the transactions contemplated hereby or thereby. The Company
does not have any labor relations problems or disputes, nor has it experienced
any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Company's facilities, and no union organization effort has been threatened,
initiated or is in progress with respect to any employees of the Company. The
Company is not indebted to any shareholder, officer, director, employee or
consultant or any relative or Affiliate thereof, whether by loan, advance or
otherwise, other than for salaries accrued but not yet payable and reimbursable
out-of-pocket expenses incurred in the ordinary course of business and not yet
payable, nor is any shareholder, officer, director, employee or consultant or
any relative or Affiliate thereof so indebted to the Company.
(v) Supplier and Customer Relationships. Exhibit
3.1(v) lists each customer that individually or with its Affiliates was, based
upon the Company's sales, rental or lease revenues during the fiscal years
ending December 31, 1994 and 1995 and the period from June 30, 1995 to March
31, 1996, one of the Company's ten largest customers in each such year or such
nine-month period (collectively, the "Principal Customers"). Exhibit 3.1(v)
27
<PAGE> 29
lists each supplier that individually or with its Affiliates was, based upon
the Company's purchases of supplies during the fiscal year ending December 31,
1995 and the period from June 30, 1995 to March 31, 1996, one of the Company's
ten largest suppliers in such year or such nine-month period (collectively, the
"Principal Suppliers"). The Company has good commercial working relationships
with its customers and suppliers and since June 30, 1995 no Principal Customer
or Principal Supplier has canceled or otherwise terminated its relationship
with the Company, materially decreased or limited its purchases, rentals or
leases from the Company or its materials or products supplied to the Company,
or threatened to take any such action. To the best knowledge of the Company and
the Shareholders, no customer has any plans to reduce its purchases, rentals or
leases from the Company below levels prevailing in recent periods, and the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not adversely affect the relationship of
the Company with any of the Principal Customers or Principal Supplier prior to
the Closing Date or of the Buyer with any Principal Customer or Principal
Supplier after the Closing Date.
(w) Condition, Adequacy and Type of Equipment.
All of the machinery, equipment and tangible personal property included in the
Assets or to be included in the Assets has been well maintained, is in good
repair and good operating condition and is suitable for the purposes for which
it is presently used. The existing machinery, equipment and tangible personal
property is sufficient for the conduct of the Company's business as now
conducted. The Company has not experienced material problems or deficiencies
with respect to such machinery, equipment and tangible personal property, and,
to the best knowledge of the Company and the Shareholders, there is no basis to
anticipate any such problems or deficiencies; provided, however, that the
parties acknowledge that in the normal course of the Company's business certain
items of the Inventory which are held for rental or lease may suffer damage in
the course of its use by the customer and that such items have been repaired,
or are reparable and are in the process of being repaired, by the Company for
use in the Company's rental and leasing business. From October 1, 1995 through
the Closing Date, the Company has repaired and will repair damaged items of
Inventory which are held for rental or lease on a basis consistent with pre-
October 1, 1995 practice.
(x) Environmental Obligations. Except as
disclosed in Exhibit 3.1(x), to the best knowledge of the Company and the
Shareholders, the Company is conducting and at all times has conducted its
business and operations, and has occupied and used the Premises and all other
real property and facilities previously owned, occupied, used or operated by
the Company, in accordance with and in compliance with all Environmental
Obligations and so as not to give rise to Liability under any Environmental
Obligations or to any adverse impact on the Company's business or activities.
Except as disclosed in Exhibit 3.1(x), to the best knowledge of the Company and
the Shareholders, there is no basis to believe or suspect that the Company's
business has been conducted or is being conducted in violation of any
Environmental Obligations, and neither the Company nor the Shareholders have
any knowledge of pending or proposed changes to any Environmental Obligations
which would require any changes in any of the Premises or any of the Company's
equipment, operations or procedures or affect the Company's business or its
cost of conducting its business as now conducted.
(y) Compliance, Disclosure of Environmental
Conditions. Except as disclosed in Exhibit 3.1(y), to the best knowledge of
the Company and the Shareholders, no
28
<PAGE> 30
conditions, circumstances or activities have existed or currently exist with
respect to the Premises, any other real property or facilities previously
owned, occupied, used or operated by the Company or any predecessor, or the
Company's business, facilities or property which could give rise to any
Environmental Liability, including but not limited to the recovery by any
Governmental Authority or other Person of any remedial or removal costs,
response costs, natural resource damages or other costs, expenses or damages
arising from or relating to any release or threat of release of any Hazardous
Material or any alleged injury or threat of injury or harm to public health,
safety or the environment (however, notwithstanding anything to the contrary
contained in this Agreement, the representation and warranty set forth in this
sentence is given with respect to "any other real property or facilities
previously owned" based solely upon the actual knowledge of the Persons
identified in Section 3.4 without any investigation or due diligence). Except
as disclosed in Exhibit 3.1(y), to the best knowledge of the Company and the
Shareholders, no conditions, circumstances or activities have existed or
currently exist with respect to the Premises, any other real property or
facilities previously owned, occupied, used or operated by the Company or any
predecessor, or the Company's business, facilities or property which could
subject the Company or the Buyer to any administrative, civil or criminal
liability, injunctive relief, penalty or obligation, whether under common law,
equitable theory, or pursuant to Environmental Obligations, or which in the
future could result in or may have in the past resulted in actual or threatened
damage, harm, or impairment of, or a threat to, public health, safety, welfare
or the environment (however, notwithstanding anything to the contrary contained
in this Agreement, the representation and warranty set forth in this sentence
is given with respect to "any other real property or facilities previously
owned" based solely upon the actual knowledge of the Persons identified in
Section 3.4 without any investigation or due diligence). Exhibit 3.1(y)
identifies all real property and facilities, including the addresses thereof,
which have been owned, occupied, used or operated by the Company or its
predecessors at any time on or prior to the date of this Agreement.
(z) No Outstanding Orders or Actions. Except as
set forth on Exhibit 3.1(z), there are no outstanding Orders against the
Company, any Shareholder or any relative or Affiliate of any Shareholder, nor,
to the best knowledge of the Company and the Shareholders, are there any
pending or threatened investigations of any kind against the Company, any
Shareholder or any relative or Affiliate of any Shareholder, concerning any
environmental, public health, safety, welfare or land use matters or other
Environmental Obligations, including, but not limited to, the emission,
discharge or release of hazardous or toxic substances or wastes, pollutants, or
contaminants into the environment or work place, or the handling, storage,
treatment, disposal or transportation of hazardous or toxic substances or
wastes, pollutants or contaminants. Except as set forth on Exhibit 3.1(z), to
the best knowledge of the Company and the Shareholders, there are no actions,
suits or administrative, arbitral or other proceedings alleged, claimed,
threatened, pending against or affecting the Company, any Shareholder or any
relative or Affiliate of any Shareholder at law or in equity with respect to
any environmental, public health, safety or land use matters or other
Environmental Obligations, and except as disclosed in Exhibit 3.1(z) neither
the Company nor the Shareholders have any knowledge of any existing grounds on
which any such action, suit or proceedings might be commenced.
(aa) No Waste Disposal. Except as disclosed in
Exhibit 3.1(aa), to the best knowledge of the Company and the Shareholders, (i)
all chemicals and chemical
29
<PAGE> 31
compounds and mixtures which are included among the assets of the Company are
integral to and required for the conduct of the Company's business and (ii) all
Hazardous Materials which are or were generated as part of the business of the
Company are and have been handled, stored, treated, disposed of and transported
in accordance with applicable Legal Requirements and Environmental Obligations.
(ab) Permits. The Company owns or holds all
Permits necessary to allow it to own, lease and operate its properties and to
conduct its business. Each of such Permits is listed on Exhibit 3.1(ab). All
of the Permits are currently in full force and effect, no action or claim is
pending or threatened to revoke, modify or terminate any Permit or render any
Permit invalid, and all of the Permits are transferable to the Buyer.
(ac) Intellectual Property.
(i) Exhibit 3.1(ac) lists each item of
Intellectual Property which is owned by the Company, which is owned by
any Shareholder and is related to the Company or the Business, or
which is used by the Company in the Business and, in each case where
the Company is not the owner, the owner of the Intellectual Property.
The Company owns or has the legal right to use each such item of
Intellectual Property, and, to the best knowledge of the Company and
the Shareholders, none of such Intellectual Property is subject to any
Encumbrance. Each item of Intellectual Property described on Exhibit
3.1(ac) will be owned or available for use by the Buyer on identical
terms and conditions after the Closing. The Company has taken all
necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses.
(ii) To the best knowledge of the Company
and the Shareholders, the Company has not interfered with, infringed
upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of any other Person, and none of the
Company and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company has
ever received any charge, complaint, claim, demand, or notice alleging
any such interference, infringement, misappropriation or violation
(including any claim that the Company must license or refrain from
using any Intellectual Property rights of any other Person). To the
best knowledge of the Company and the Shareholders, the continued
operation of the Business as currently conducted will not interfere
with, infringe upon, misappropriate or conflict with any Intellectual
Property rights of another Person. To the best knowledge of the
Company and the Shareholders, no other Person has interfered with,
infringed upon, misappropriated or otherwise come into conflict with
any Intellectual Property rights of the Company.
(iii) The Company has not granted any
license, sublicense or permission with respect to any Intellectual
Property owned or used in the Business. With respect to each item of
Intellectual Property required to be identified in Exhibit 3.1(ac), to
the best knowledge of the Company and the Shareholders, no action,
suit, proceeding, hearing, investigation, charge, complaint, claim or
demand is pending or is threatened which challenges the legality,
validity, enforceability, use or ownership
30
<PAGE> 32
of the item. The Company has never agreed to indemnify any Person for
or against any interference, infringement, misappropriation or other
conflict with respect to any such item.
(iv) The Company is not obligated to pay
any royalty or license or sublicense fee with respect any Intellectual
Property. To the best knowledge of the Company and the Shareholders,
the Company does not use any item of Intellectual Property which is
owned in whole or in part by any other Person, whether or not such use
is pursuant to any license, sublicense, agreement or permission.
(ad) Guaranties. The Company is not a guarantor
of or, to the best knowledge of the Company and the Shareholders, otherwise
liable for any Liability (including indebtedness) of any other Person.
(ae) Powers of Attorney. There are no outstanding
powers of attorney executed on behalf of the Company.
(af) Brokers' Fees. Neither the Company nor any
Shareholder has any Liability to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this
Agreement.
(ag) Disclosure. Documents and information
provided to the Buyer by the Company, any Shareholder or any agents or
employees thereof in the course of the Buyer's due diligence investigation and
the negotiation of this Agreement, Section 3.1 of this Agreement and the
disclosure Exhibits referred to therein, including the financial statements
referred to above in Section 3.1, considered together, do not contain any
untrue statement of any material fact and do not omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. There is no fact which materially adversely affects the business,
prospects, condition, affairs or operations of the Company or any of its
properties or assets which has not been set forth in this Agreement or such
Exhibits, including such financial statements. Nothing in the disclosure
Exhibits referred to in Section 3.1 shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the applicable
disclosure Exhibit identifies the exception with particularity and describes
the relevant facts in reasonable detail. The Shareholders acknowledge and
agree that the fact that they have made disclosures pursuant to Section 3.1 or
otherwise of matters, or did not have knowledge of matters, which result in
Adverse Consequences to the Buyer shall not relieve the Shareholders of their
obligation to indemnify and hold the Buyer harmless from all such Adverse
Consequences pursuant to Article 7.
3.2. Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Shareholders that the statements contained
in this Section 3.2 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State
31
<PAGE> 33
of Delaware. This Agreement and the Other Buyer Agreements and the
transactions contemplated hereby and thereby have been duly approved by all
requisite corporate action. The Buyer has full corporate power and authority
to execute, deliver and perform this Agreement and the Other Buyer Agreements,
and this Agreement constitutes, and the Other Buyer Agreements will when
executed and delivered constitute, the legal, valid and binding obligations of
the Buyer, and shall be enforceable in accordance with their respective terms
against the Buyer.
(b) No Violation of Agreements, Etc. The
execution, delivery and performance of this Agreement and the Other Buyer
Agreements, and the consummation of the transactions contemplated hereby and
thereby will not (i) violate any Legal Requirement or Order to which the Buyer
is subject or any provision of the certificate of incorporation or bylaws of
the Buyer or (ii) violate, with or without the giving of notice or the lapse of
time or both, or conflict with or result in the breach or termination of any
provision of, or constitute a default under, or give any Person the right to
accelerate any obligation under, or result in the creation of any Encumbrance
upon any properties, assets or business of the Buyer pursuant to, any
indenture, mortgage, deed of trust, lien, lease, license, agreement, instrument
or other arrangement to which the Buyer is a party or which the Buyer or any of
its assets and properties is bound or subject. Except for notices and consents
that will be given or obtained by the Buyer prior to the Closing, the Buyer
does not need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement.
3.3. Survival of Representations. The representations and
warranties contained in Sections 3.1 and 3.2 and the Liabilities of the parties
with respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for two years, except that the Liabilities of the
Shareholders with respect to (a) the representations and warranties set forth
in Section 3.1(j) shall survive until the expiration of all applicable statutes
of limitation and (b) the representations and warranties set forth in Sections
3.1(a), 3.1(b), 3.1(k)(i), 3.1(t), 3.1(x), 3.1(y), 3.1(z), 3.1(aa) and 3.1(ag),
and the Liabilities of the Buyer with respect to the representations and
warranties set forth in Section 3.2(a), shall survive without termination.
3.4. Representations as to Knowledge. The representations
and warranties contained in Article 3 hereof shall in each and every case where
an exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of each such party and be exercised always in a reasonable manner and within
reasonable times. For purposes of Section 3.1, the terms "Company" and
"Shareholders" shall, when used in reference to a statement made to the "best
knowledge," "best of knowledge" or "knowledge" of the Company or of the
Shareholders, include each Shareholder, each director of the Company, each
officer of the Company, Steven L. Neumann, Cheryl L. Kettrick, each manager of
the Company's stores (but in the case of each such manager, only as to such
store and matters related thereto), and each other employee of the Company who
is responsible to the Company (by job description, delegation of duty or
responsibility, if any) for matters which are the subject of such statement.
32
<PAGE> 34
4. Pre-Closing Covenants. The parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Section 6). Without limiting the foregoing, the Shareholders will
cause the Company to give any notices, make any filings and obtain any
consents, authorizations and approvals needed to consummate the transactions
contemplated by this Agreement.
4.2. Operation of Business. The Shareholders will not
cause or permit the Company to engage in any practice, take any action or enter
into any transaction outside its ordinary course of business; provided,
however, that in no event will any action be taken or any transaction be
entered into which would result in a breach of any representations, warranties
or covenants of any Shareholder. Without limiting the foregoing, on or after
the date of this Agreement but on or before the Closing Date, the Company may
purchase new or used rental equipment for use in the Business ("New Rental
Equipment") or may sell (but only for cash or a Current Rental Equipment
Receivable) rental equipment owned by the Company on or after October 1, 1995
("Current Rental Equipment"), but may not otherwise sell, trade, transfer or
dispose of any Current Rental Equipment; provided, however, that between the
date of this Agreement and the Closing no New Rental Equipment shall be
purchased and no Current Rental Equipment shall be sold without the express
prior written approval of an officer of the Buyer and without the Shareholders'
Agent and an officer of the Buyer expressly agreeing on the amount by which the
purchase price payable pursuant to Section 2.2 shall be increased in respect of
New Rental Equipment purchases ("New Rental Equipment Increases") and the
amount by which the purchase price payable pursuant to Section 2.2 shall be
decreased in respect of Current Rental Equipment sales ("Current Rental
Equipment Decreases"). Further, between the date of this Agreement and the
Closing, no New Rental Equipment shall be ordered without the express prior
written approval of an officer of the Buyer. Exhibit 4.2 sets forth (a) New
Rental Equipment Increases, as agreed by the Shareholders' Agent and an officer
of the Buyer, with respect to New Rental Equipment purchased on or after
October 1, 1995 but on or before the day immediately preceding the date of this
Agreement, (b) Current Rental Equipment Decreases, as agreed by the
Shareholders' Agent and an officer of the Buyer, with respect to Current Rental
Equipment sold on or after October 1, 1995 but on or before the day immediately
preceding the date of this Agreement, and (c) all New Rental Equipment which,
as of the day immediately preceding the date of this Agreement, has been
ordered but not yet delivered to the Company. If any New Rental Equipment
purchases or Current Rental Equipment sales occur on or after the date hereof
but on or before the Closing Date, Exhibit 4.2 shall be amended by agreement of
the Shareholders' Agent and the Buyer to reflect any agreed-upon New Rental
Equipment Increases and Current Rental Equipment Decreases relating thereto.
4.3. Preservation of Business. The Shareholders will
cause the Company to keep its business and properties intact, including its
current operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers and employees.
33
<PAGE> 35
4.4. Full Access. The Shareholders will cause the Company
to permit the Buyer and its agents to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company, to all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to the Company.
4.5. Notice of Developments. The Shareholders will give
prompt written notice to the Buyer of any material development which occurs
after the date of this Agreement and affects the assets, Liabilities, business,
financial condition, operations, results of operations or future prospects of
the Company or the representations, warranties, covenants or disclosure
Exhibits of the Shareholders. No such written notice, however, shall be deemed
to amend or supplement any disclosure Exhibit or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
4.6. Exclusivity. No Shareholder will, and no Shareholder
will cause or permit the Company to, (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any portion of the assets
of, the Company (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
the Company's stock in favor of any such transaction. The Shareholders will
notify the Buyer immediately if any Person makes any proposal, offer, inquiry
or contact with respect to any of the foregoing.
4.7. Announcements. Prior to the Closing, no party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
parties.
4.8. Confirmatory Conveyance. Prior to the Closing Date,
the Individual Shareholders shall convey to the Company, free and clear of any
Encumbrance or Tax, all of each Individual Shareholder's right, title and
interest to the Company Improvements, Fixtures and Fittings.
4.9. Closing Date Liabilities and Distribution. (a)
Immediately prior to the Closing Date, the Shareholders shall cause the Company
to pay in full all Liabilities of the Company (including Company Transaction
Expenses as permitted pursuant to Section 9.10), other than (i) the Closing
Date Trade Payables, the 1996 Unpaid Personal Property Taxes, the 1997 Personal
Property Taxes and the Post-Closing Douglas Lease Obligations (which Closing
Date Trade Payables, 1996 Unpaid Personal Property Taxes, 1997 Personal
Property Taxes and Post-Closing Douglas Lease Obligations shall, after the
Closing, be the obligation and responsibility of the Company), (ii) any
Liabilities of the Company for which the Shareholders are responsible pursuant
to Sections 2.3 or 9.10, relating to the period ending on the Closing Date and
(iii) those Environmental Liabilities identified on Exhibit 3.1(g) (which
Environmental Liabilities shall, after the Closing Date, be the obligation and
responsibility of the Shareholders rather than the Company and are, effective
as of the Closing Date, hereby assumed by the Shareholders) (such Liabilities,
excluding (A) the Closing Date Trade Payables,
34
<PAGE> 36
the 1996 Unpaid Personal Property Taxes, the 1997 Personal Property Taxes and
the Post-Closing Douglas Lease Obligations, (B) any Liabilities for which the
Shareholders are responsible pursuant to Sections 2.3 and 9.10 and (C) those
Environmental Liabilities identified on Exhibit 3.1(g), are referred to as the
"Closing Date Liabilities").
(b) Immediately prior to the Closing Date, the
Shareholders shall cause the Company to distribute to the Shareholders the
Excluded Assets (the "Closing Date Distribution"). Any and all Taxes
attributable to such distribution of Excluded Assets and to any prior
distribution or dividend of assets, including, without limitation, any
recognition by the Company of taxable income or gain with respect to the
distribution or dividend of the Excluded Assets or any prior distribution or
dividend of assets, shall be paid in full by the Shareholders, and the Company
shall not have any Liability with respect thereto.
5. Post-Closing Covenants. The parties agree as follows with
respect to the period following the Closing without in any way limiting the
scope of any representation, warranty, covenant or agreement set forth in this
Agreement.
5.1. Further Assurances. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, each of the parties will take such further action (including
the execution and delivery of such further instruments and documents) as any
other party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Milton L. Neumann and Alice E. Neumann
will provide reasonable consulting services (up to 25 hours per month for
Milton L. Neumann and up to 15 hours per month for Alice E. Neumann, as
requested by the Buyer) to the Buyer to assist in transition matters during the
first year following the Closing. No Shareholder will, and the Shareholders
will cause their Affiliates and relatives not to, take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Company from continuing,
or any other Person from establishing, a business relationship with the Buyer
after the Closing.
5.3. Cooperation. In the event and for so long as any
party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(a) any transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving the Company, each of the other parties will cooperate with her, him
or it and her, his or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to indemnification
therefor under Section 7).
5.4. Confidentiality. The Shareholders will treat and
hold as confidential all Confidential Information concerning the Business,
refrain from using any such Confidential
35
<PAGE> 37
Information and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all of such Confidential Information in its or their
possession.
5.5. Post-Closing Announcements. Following the Closing,
no Shareholder shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the Buyer.
5.6. Financial Statements. The Shareholders shall, upon
request of the Buyer, cooperate with the Buyer to produce such historical and
on-going financial statements and audits as the Buyer may request, all at the
sole cost and expense of the Buyer.
5.7. Termination of Obligations. Upon Closing but
effective from and after the Closing Date, neither the Buyer nor the Company
shall have any Liability to any Shareholder or any Affiliate or relative
thereof, except as otherwise provided in this Agreement, the Employment
Agreements and the Shareholder Leases. Upon Closing but effective from and
after the Closing Date, the Shareholders shall not have any Liability to the
Buyer or the Company, except as otherwise provided in this Agreement, the
Employment Agreements, the Noncompetition Agreement and the Shareholder Leases.
5.8. Medical Benefits. From and after the Closing, the
Buyer shall provide medical coverage to each of Milton L. Neumann and Alice E.
Neumann pursuant to the medical coverage plans in effect from time to time for
employees of the Buyer (the "Medical Plans"), to the extent the terms of such
Medical Plans so permit and provided that Milton L. Neumann and Alice E.
Neumann promptly reimburse the Buyer in full for the total cost incurred by the
Buyer in providing such coverage. If the employment by the Buyer of Steven L.
Neumann or Cheryl L. Kettrick is terminated after the Closing, the Buyer shall,
for a period of up to ten years from the date of termination, provide medical
coverage to such terminated employee pursuant to the Medical Plans, to the
extent the terms of such Medical Plans so permit and provided that such
terminated employee promptly reimburses the Buyer in full for the total cost
incurred by the Buyer in providing such coverage. If the Medical Plans do not
permit the Buyer to provide such medical coverage to any of the above-
referenced persons, the Buyer shall not have any obligation to provide medical
coverage to such person. Further, the obligations of the Buyer pursuant to
this Section 5.8 shall not require the Buyer to "self-insure" or have any
particular medical coverage plan. The term "total cost" as used in this
Section shall include all costs and expenses incurred by the Buyer in providing
such coverage, including, without limitation, any increase in insurance
premiums and costs associated with the impact that inclusion of any of the
above-referenced persons may have on the Buyer's "risk pool" or "experience
rating."
5.9. Certain Environmental Matters. The Shareholders shall
obtain from the Washington Department of Ecology within 180 days of the Closing
a written statement providing that the contamination which has been documented
to currently exist on the property located at 8000 North Market Street,
Spokane, Washington and 10903 East Sprague Avenue, Spokane, Washington may
remain in place and that no remedial actions (including but not limited to
excavation, disposal, or treatment) are required. In the event that any
remedial actions (including but not limited to excavation, disposal, or
treatment) are required regarding
36
<PAGE> 38
such contamination, such actions shall be subject to the Shareholders'
indemnification and other obligations set forth in Section 7 of this Agreement.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The
obligation of the Buyer to consummate the transactions contemplated by this
Agreement is subject to satisfaction of the following conditions:
(a) each Shareholder's representations and
warranties shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to the Buyer (the form of which shall
be reasonably satisfactory to the Buyer) pursuant to Section 4.5 and the
subject matter thereof shall be satisfactory to the Buyer;
(b) the Shareholders shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) the Shareholders shall have given, or shall
have caused the Company to give, all notices and procured, or shall have caused
the Company to procure, all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be
pending or threatened before any Governmental Authority or before any other
Person wherein an unfavorable Order would (i) prevent consummation of any of
the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own the Shares
or of the Company to own its assets and conduct its business, and no such Order
shall be in effect;
(e) there shall have been no adverse change in
the Company or the Business since the date of execution of this Agreement;
(f) the Shareholders shall have delivered to the
Buyer a certificate to the effect that each of the conditions specified above
in Sections 6.1(a) through (e) is satisfied in all respects;
(g) the Buyer shall have satisfactorily completed
its due diligence with respect to the Company;
(h) the Other Seller Agreements and the consent
of the landlord to the assignment of the Premises Lease under which Harlan
Douglas is lessor shall have been executed and delivered by the Shareholders
and the other parties thereto (other than the Buyer);
(i) the Buyer shall have received from counsel to
the Shareholders an opinion in form and substance as set forth in Exhibit
6.1(i) addressed to the Buyer and its debt and equity financing sources and
dated as of the Closing;
37
<PAGE> 39
(j) the Shareholders' estimate of Closing Date
Trade Payables, which shall be delivered to the Buyer two days prior to the
Closing Date, shall be acceptable to the Buyer;
(k) the Buyer shall have received the
resignations, effective as of the Closing, of each director and officer of the
Company;
(l) stock certificates representing the Shares,
duly endorsed in blank or accompanied by stock powers duly executed in blank,
shall have been delivered by the Shareholders to the Buyer;
(m) the Shareholders shall have delivered to the
Buyer possession and control of the Company and its assets, including, without
limitation, all stock certificate books, minute books, corporate seals, and all
other corporate and financial records of the Company;
(n) financing necessary for the consummation of
the transactions contemplated hereby and the operation of the Business shall be
available to the Buyer on terms and conditions satisfactory to the Buyer;
(o) a written report of the results of
environmental studies of the Premises shall have been completed by the
Shareholders and supplied to the Buyer, and the contents of such report and the
conditions described therein shall be satisfactory to the Buyer; and
(p) the Shareholders shall have delivered, or
caused the Company to deliver, to the Buyer such other instruments,
certificates and documents as are reasonably requested by the Buyer in order to
consummate the transactions contemplated by this Agreement, all in form and
substance reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Shareholders. The
obligation of the Shareholders to consummate the transactions contemplated by
this Agreement is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties
shall be correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied
with all of its covenants hereunder through the Closing Date;
(c) no action, suit or proceeding shall be
pending or threatened before any Governmental Authority or before any other
Person wherein an unfavorable Order would (i) prevent consummation of any of
the transactions contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, and no such Order shall be in effect;
38
<PAGE> 40
(d) the Buyer shall have delivered to the
Shareholders a certificate to the effect that each of the conditions specified
above in Sections 6.2(a) and (b) is satisfied in all respects;
(e) the Other Buyer Agreements shall have been
executed and delivered by the Buyer;
(f) the Shareholders shall have received from
counsel to the Buyer an opinion in form and substance as set forth in Exhibit
6.2(f), addressed to the Shareholders and dated as of the Closing; and
(g) the Buyer shall have paid and deposited the
purchase price in accordance with Section 2.2.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer
and the Company.
(a) If any Shareholder breaches (or if any third
party, including any Governmental Authority, alleges facts that, if true, would
mean any Shareholder has breached) any of the Shareholder's representations or
warranties contained herein and the Buyer gives notice thereof (which notice
shall describe the breach or alleged breach in reasonable detail given the
facts then known to the Buyer) to the Shareholders' Agent within the Survival
Period, or if a Shareholder or relative or Affiliate thereof (including any
Shareholder who is a lessor under any Shareholder Lease) breaches (or if any
third party, including any Governmental Authority, alleges facts that, if true,
would mean any Shareholder or relative or Affiliate thereof has breached) any
representation of such Shareholder or relative or Affiliate thereof contained
in any Other Seller Agreement or any covenant of such Shareholder or relative
or Affiliate thereof contained herein or in the Other Seller Agreements and the
Buyer gives notice thereof (which notice shall describe the breach or alleged
breach in reasonable detail given the facts then known to the Buyer) to the
Shareholders' Agent, then the Shareholders agree to jointly and severally
indemnify the Buyer and the Company from and against any Adverse Consequences
the Buyer or the Company may suffer resulting from, arising out of, relating to
or caused by any of the foregoing regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In addition,
the Shareholders agree to jointly and severally indemnify the Buyer and the
Company from and against any Adverse Consequences the Buyer or the Company may
suffer which arise out of, result from, relate to or are caused by any of the
following, regardless of whether or not any such matter was known to the
Company or any Shareholder, is a matter with respect to which the Company or a
Shareholder did not have knowledge or was disclosed on any Exhibit hereto (i)
any act or omission of the Company, any predecessor or any Shareholder
(including any Shareholder who is a lessor under any Shareholder Lease) with
respect to, or any event or circumstance related to, the Company's, any
predecessor's or any Shareholder's ownership, occupation, use or operation of
such Person's assets or such Person's conduct of its business, which act,
39
<PAGE> 41
omission, event or circumstance occurred or existed prior to or at the Closing
Date, without regard to whether a claim with respect to such matter is asserted
before or after the Closing Date; (ii) any Liability of the Company with
respect to the period prior to the Closing Date, other than the Closing Date
Trade Payables, the 1996 Unpaid Personal Property Taxes and the 1997 Personal
Property Taxes; (iii) any Liability of any Shareholder or predecessor
(including any Shareholder who is a lessor under any Shareholder Lease) with
respect to the period prior to or after the Closing Date; (iv) any
Environmental Liability with respect to the period prior to or after the
Closing Date (including, without limitation, the Environmental Liabilities
identified on any Exhibit hereto), except for any Environmental Liability
arising out of the use, generation, storage, release or disposal of any
Hazardous Materials after the Closing by the Company, the Buyer, its successors
or any of their respective agents or contractors or arising out of the failure
after the Closing Date by the Company, the Buyer or any of their respective
agents or contractors to comply with applicable Environmental Obligations in
connection with such use, generation, storage, release or disposal after the
Closing by the Company, the Buyer, its successors or any of their respective
agents or contractors; or (v) any failure of the Company or any predecessor to
comply prior to the Closing Date with any Legal Requirement. If any dispute
arises concerning whether any indemnification is owing which cannot be resolved
by negotiation among the parties within a reasonable time, the dispute shall be
resolved by arbitration pursuant to this Agreement.
(b) Notwithstanding the foregoing Section 7.1(a),
the Shareholders shall have no obligation to indemnify the Buyer unless and
until the aggregate amount of Adverse Consequences suffered by the Buyer and
the Company from all matters as to which they are entitled to indemnification
under this Agreement (except those matters described in the next sentence)
totals $50,000, at which point the Shareholders jointly and severally shall be
required to indemnify the Buyer and the Company for all Adverse Consequences
suffered by either of them (including those Adverse Consequences which
initially aggregated to the $50,000 threshold). The Shareholders jointly and
severally shall indemnify the Buyer and the Company in full (without regard to
the $50,000 amount described in the preceding sentence) for all Adverse
Consequences which arise out of, result from, relate to or are caused by (i)
any failure by the Shareholders to pay the full amounts payable by them
pursuant to Sections 2.3, 4.9, 8.2 or 9.10 of this Agreement; (ii) any Current
Rental Equipment Receivable, Interim Period Receivable or Other Closing
Receivables failing to be collected by the Buyer as specified in Section
3.1(n); (iii) any breach of the representations and warranties set forth in
Sections 3.1(a), 3.1(c), 3.1(k)(i), 3.1(q)(ii), 3.1(t), 3.1(x), 3.1(y), 3.1(z)
or 3.1(aa), the last sentence of Section 3.1(j)(i), the last sentence of
Section 3.1(q)(i) or the last sentence of Section 3.1(w); (iv) any breach of
the representations and warranties set forth in Section 3.1(g) which results in
Adverse Consequences of more than $10,000 (however, once such $10,000 amount is
reached, the Shareholders shall indemnify the Buyer and the Company for all
Adverse Consequences suffered as a result of all breaches of Section 3.1(g)
(including those Adverse Consequences which initially aggregated to the $10,000
threshold)); (v) any breach of the representations and warranties set forth in
Section 3.1(h) which results in Adverse Consequences of more than $10,000
(however, once such $10,000 amount is reached, the Shareholders shall indemnify
the Buyer and the Company for all Adverse Consequences suffered as a result of
all breaches of Section 3.1(h) (including those Adverse Consequences which
initially aggregated to the $10,000 threshold)); (vi) any breach of the
representations and warranties set forth in Section 3.1(k)(ii) or (iii) which
results in Adverse Consequences of more
40
<PAGE> 42
than $10,000 (however, once such $10,000 amount is reached, the Shareholders
shall indemnify the Buyer and the Company for all Adverse Consequences suffered
as a result of all breaches of Section 3.1(k)(ii) or (iii) (including those
Adverse Consequences which initially aggregated to the $10,000 threshold));
(vii) any Liability of the Company (other than Environmental Liabilities) with
respect to the period prior to the Closing Date, other than Closing Date Trade
Payables, the 1996 Unpaid Personal Property Taxes and 1997 Personal Property
Taxes; (viii) any Environmental Liability with respect to the period prior to
or after the Closing Date (including, without limitation, the Environmental
Liabilities identified on any Exhibit hereto), except for any Environmental
Liability arising out of the use, generation, storage, release or disposal of
any Hazardous Materials after the Closing by the Company, the Buyer, its
successors or any of their respective agents or contractors or arising out of
the failure after the Closing Date by the Company, the Buyer or any of their
respective agents or contractors to comply with applicable Environmental
Obligations in connection with such use, generation, storage, release or
disposal after the Closing by the Company, the Buyer, its successors or any of
their respective agents or contractors; (ix) any matter disclosed on any
Exhibit relating to Section 3.1; (x) any failure of the Shares to be conveyed
by the Shareholders to the Buyer other than free and clear of any Encumbrance
or Tax; (xi) any failure of Section 9.14 not being enforceable against the
Shareholders or as a result of any breach of Section 9.14 by any Shareholder;
(xii) any breach by any Shareholder of any covenant contained in this
Agreement; (xiii) any Liability of any Shareholder; or (xiv) any breach by any
Shareholder (including any Shareholder who is a lessor under any Shareholder
Lease) or Affiliate or relative thereof of any representation, warranty or
covenant set forth in any Other Seller Agreement. In determining whether there
has been a breach of any representation or warranty contained in Section 3.1
and in determining the amount of Adverse Consequences suffered by the Buyer or
the Company for purposes of Sections 7.1(a) and 7.1(b), such representations
and warranties shall not be qualified (other than references to "material" in
Section 3.1(ag)) by "material," "materiality," "in all material respects,"
"best knowledge," "best of knowledge" or "knowledge" or words of similar
import, or by any phrase using any such terms or words.
(c) Notwithstanding anything to the contrary in
this Agreement, the maximum aggregate amount payable by the Shareholders to the
Buyer in respect of breaches of the Shareholders' representations or warranties
contained in this Agreement shall not exceed the aggregate purchase price for
the Shares paid to the Shareholders by the Buyer pursuant to Section 2.2.
7.2. Indemnification Provisions for Benefit of the
Shareholders.
(a) If the Buyer breaches (or if any third party,
including any Governmental Authority, alleges facts that, if true, would mean
the Buyer has breached) any of its representations or warranties contained
herein and the Shareholders' Agent gives notice thereof to the Buyer within the
Survival Period, or if the Buyer breaches (or if any third party, including any
Governmental Authority, alleges facts that, if true, would mean the Buyer has
breached) any of its representations or covenants contained herein or in the
Other Buyer Agreements and the Shareholders' Agent gives notice thereof (which
notice shall describe the breach or alleged breach in reasonable detail given
the facts then known to the Shareholders) to the Buyer, then the Buyer agrees
to indemnify the applicable Shareholders from and against any Adverse
Consequences such Shareholders may suffer resulting from, arising out of,
relating
41
<PAGE> 43
to, or caused by the breach or alleged breach, regardless of whether the
Adverse Consequences are suffered during or after the Survival Period. If any
dispute arises concerning whether any indemnification is owing which cannot be
resolved by negotiation among the parties within a reasonable time, the dispute
shall be resolved by arbitration pursuant to this Agreement.
(b) Notwithstanding the foregoing Section 7.2(a),
the Buyer shall have no obligation to indemnify the Shareholders unless and
until the aggregate amount of Adverse Consequences suffered by the Shareholders
from all matters as to which they are entitled to indemnification under this
Agreement (except those matters described in the next sentence) totals $50,000,
at which point the Buyer shall be required to indemnify the Shareholders for
all Adverse Consequences suffered by them (including those Adverse Consequences
which initially aggregated to the $50,000 threshold). The Buyer shall
indemnify the Shareholders in full (without regard to the $50,000 amount
described in the preceding sentence) for all Adverse Consequences which arise
out of, result from, relate to or are caused by (i) any failure by the Buyer to
pay the full amount payable by it pursuant to Sections 8.2 or 9.10 of this
Agreement; (ii) any breach by the Buyer of any of its representations,
warranties or covenants set forth in any Other Buyer Agreement (excluding the
Premises Lease under which Harlan Douglas is the lessor). In determining
whether there has been a breach of any representation or warranty contained in
Section 3.2 and in determining the amount of the Adverse Consequences suffered
by the Shareholders for purposes of Sections 7.2(a) and 7.2(b), such
representations and warranties shall not be qualified by "material,"
"materiality," "in all material respects," "best knowledge," "best of
knowledge" or "knowledge" or words of similar import, or by any phrase using
any such term or terms.
7.3. Matters Involving Third Parties.
(a) If any third party (including, without
limitation, any Governmental Authority) notifies any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party") under Section 7.1 or 7.2 above, then the Indemnified Party shall notify
(which notification shall consist of such notification as the third party
provides to the Indemnified Party) each Indemnifying Party thereof in writing
within 15 days after receiving such notice. No delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right,
at its sole cost and expense, to defend the Indemnified Party against the Third
Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within 10 days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to or caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other
42
<PAGE> 44
equitable relief, (iv) settlement of, or an adverse judgment with respect to,
the Third Party claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice materially adverse
to the continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not elect to assume control of or
otherwise participate in the defense or settlement of any Third Party Claim, it
shall be bound by the results obtained by the Indemnified Party with respect to
the Third Party Claim.
(c) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with Section 7.3(b) above,
(i) the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section
7.3(b) above is or becomes unsatisfied, however, (i) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it reasonably
may deem appropriate (and the Indemnified Party need not consult with, or obtain
any consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to or caused by the Third Party Claim
to the fullest extent provided in this Section 7.
7.4 Right of Offset. The Buyer shall have the right to
offset any Adverse Consequences it may suffer against any amounts payable
pursuant to this Agreement or any Other Seller Agreements (other than pursuant
to the Employment Agreements) to any Shareholder or Affiliate or relative
thereof at or after the Closing. The Buyer will give notice to the
Shareholders' Agent of its intent to make such an offset, and if there is a
dispute concerning the Buyer's rights to indemnification for any such Adverse
Consequences, the Buyer will not deduct that amount from payments to be made by
the Buyer until the dispute is resolved by agreement of the parties or
arbitration.
7.5 Other Remedies. Subject to Section 9.11, the foregoing
indemnification provisions are in addition to, and not in derogation of any
statutory, equitable or common law remedy any party may have.
8. Termination.
8.1 Termination of Agreement. The Buyer or the
Shareholders may terminate this Agreement by notice to the other at any time
prior to the Closing.
43
<PAGE> 45
8.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 8.1, no party shall have any obligation or
Liability to any other party with respect to or as a result of such
termination, except that if this Agreement is terminated by any party and
within nine months of such termination the Company or the Shareholders close
the sale, lease, exchange, transfer or other disposition (including any
transaction structured as a merger, consolidation or share exchange) of all or
substantially all of the assets of the Company (or any successor) or all or
substantially all of the ownership interests in the Company (or any successor)
to a third party, then upon the closing of such transaction the Shareholders
will, jointly and severally, pay to the Buyer cash in an amount equal to all
out-of-pocket costs and expenses (including, without limitation, reasonable
legal fees and expenses) incurred by the Buyer prior to the termination of this
Agreement in connection with this Agreement and the transactions contemplated
hereby; provided, however, that no such amount shall be payable to the Buyer if
this Agreement is terminated by the Buyer for any reason other than (a) a
breach by the Shareholders of any of their representations, warranties or
covenants contained in this Agreement, (b) as a result of any Shareholder or
relative or Affiliate thereof failing to execute and deliver any Other Seller
Agreement to which such Shareholder or relative or Affiliate is a party or (c)
as a result of any adverse change in the Company or the Business attributable
to any Shareholder or relative or Affiliate thereof (however, any adverse
change attributable to the general economy, the economy of the Spokane,
Washington area or the rental industry generally shall not be attributable to
any Shareholder or relative or Affiliate thereof).
8.3. Confidentiality. If this Agreement is terminated,
each party will treat and hold as confidential all Confidential Information
concerning the other parties which it acquired from such other parties in
connection with this Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the parties and
their respective successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements or representations
by or among the parties, written or oral, to the extent they relate in any way
to the subject matter hereof.
9.3. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. No Shareholder may assign this Agreement or
any of such Shareholder's rights, interests or obligations hereunder without
the prior written approval of the Buyer. The Buyer may assign its rights or
obligations hereunder as permitted by law, including without limitation, to any
debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
44
<PAGE> 46
9.5. Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
<TABLE>
<CAPTION>
If to the Shareholders: Copy to:
<S> <C>
Addressed to the Share- Paine, Hamblen, Coffin, Brooke & Miller LLP
holders' Agent at: 717 West Sprague
1200 Washington Trust Financial Center
S. 903 Blake Road Spokane, Washington 99204
Spokane, Washington 99216 Attn: Scott L. Simpson, Esq.
Telecopy: (509) 838-0007
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Richard M. Tyler Attn: B. Scott Pullara, Esq.
Telecopy: (303) 620-9016 Telecopy: (303) 298-0940
</TABLE>
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Colorado
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Colorado or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Colorado.
9.8. Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Shareholders. No waiver by any party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no
45
<PAGE> 47
waiver shall be effective unless set forth in writing and signed by the party
against whom such waiver is asserted.
9.9. Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section
8.2, (a) the Buyer shall bear its own costs and expenses (including, without
limitation, all legal fees and expenses and all fees, commissions, expenses
and other amounts payable to any broker, finder or agent) incurred by the Buyer
either before or after the date of this Agreement in connection with this
Agreement or the transactions contemplated hereby and (b) the Shareholders, and
not the Company, shall bear all costs and expenses (including, without
limitation, all legal, accounting and tax-related fees and expenses, all fees,
commissions, expenses and other amounts payable to any broker, finder or agent
and the costs of the environmental study to be delivered pursuant to Section
6.1) incurred by the Shareholders or Affiliates or relatives thereof either
before or after the date of this Agreement or by the Company prior to the
Closing in connection with this Agreement or the transactions contemplated
hereby (collectively, "Company Transaction Expenses"); provided, however, that
prior to the Closing Date the Company may use any cash that would otherwise be
an Excluded Asset to pay Company Transaction Expenses.
9.11. Arbitration. Any disputes arising under this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, shall be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. The arbitration shall be
conducted only in Denver, Colorado, before a single arbitrator selected by the
parties or, if they are unable to agree on an arbitrator, before a panel of
three arbitrators, one selected by the Buyer, one selected by the Shareholders
and the third selected by the other two arbitrators. The award of the
arbitrators shall be final and binding and judgment on the award may be entered
by any court of competent jurisdiction. This submission and agreement shall be
specifically enforceable. The prevailing party or parties in any such
arbitration or in any action to enforce this agreement to arbitrate shall be
entitled to all reasonable costs and expenses, including fees and expenses of
the arbitrators and attorneys, incurred in connection therewith.
Notwithstanding the foregoing provisions of this Section 9.11, in any legal
proceeding commenced by a Governmental Authority or other Person against a
party to this Agreement, that party shall have the right to bring a third party
claim for indemnification against any other party which has an obligation to
indemnify it pursuant to this Agreement.
9.12. Construction. The parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement. The word "including" shall mean
including without limitation. The parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty
46
<PAGE> 48
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in
breach of the first representation, warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified
in this Agreement are incorporated herein by reference and made a part hereof.
9.14. Shareholders' Agent. Each of the Shareholders hereby
authorizes and appoints Milton L. Neumann to act as its, his or her exclusive
agent and attorney-in-fact to act on behalf of each of them following the
Closing with respect to all matters which are the subject of Sections 6, 7, 8,
9.6, 9.8 or 9.11, including, without limitation, (a) receiving or giving all
notices, instructions, other communications, consents or agreements that may be
necessary, required or given under any of such Sections and (b) asserting,
settling, compromising, or defending, or determining not to assert, settle,
compromise or defend, (i) any claims which any Shareholder may assert, or have
the right to assert, against the Buyer, or (ii) any claims which the Buyer may
assert, or have the right to assert, against any Shareholder. Milton L.
Neumann hereby accepts such authorization and appointment. Upon the receipt of
written evidence satisfactory to the Buyer to the effect that Milton L. Neumann
has been substituted as agent and attorney-in-fact of the Shareholders by
reason of his death, disability or resignation, the Buyer shall be entitled to
rely on such substituted agent to the same extent as it was theretofore
entitled to rely upon Milton L. Neumann with respect to the matters covered by
this Section 9.14. No Shareholder shall act with respect to any of the matters
which are the subject of Sections 6, 7, 8, 9.6, 9.8 or 9.11 except through the
Shareholder's Agent. The Shareholders acknowledge and agree that the Buyer may
deal exclusively with the Shareholders' Agent in respect of the above-
referenced matters, that the enforceability of this Section 9.14 is material to
the Buyer, and that the Buyer has relied upon the enforceability of this
Section 9.14 in entering into this Agreement.
[Remainder of page intentionally left blank.]
47
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
----------------------------------
Name: Richard M. Tyler
--------------------------------
Title: President
-------------------------------
SHAREHOLDERS:
/s/ MILTON L. NEUMANN
-------------------------------------
Milton L. Neumann, Individually and
as the Shareholders' Agent
/s/ ALICE E. NEUMANN
-------------------------------------
Alice E. Neumann
Milt and Alice Neumann Charitable
Remainder Unitrust
By: /s/ BRUCE B. BUTLER
---------------------------------
Name: Bruce B. Butler
Title: Trustee
Milt and Alice Neumann Charitable
Remainder Annuity Trust
By: /s/ BRUCE B. BUTLER
---------------------------------
Name: Bruce B. Butler
Title: Trustee
Cheryl Kettrick Charitable Trust
By: /s/ BRUCE B. BUTLER
---------------------------------
Name: Bruce B. Butler
Title: Co-Trustee
By: /s/ CHERYL L. KETTRICK
---------------------------------
Name: Cheryl L. Kettrick
Title: Co-Trustee
48
<PAGE> 50
Steve Neumann Charitable Trust
By: /s/ BRUCE B. BUTLER
---------------------------------
Name: Bruce B. Butler
Title: Co-Trustee
By: /s/ STEVE L. NEUMANN
---------------------------------
Name: Steve L. Neumann
Title: Co-Trustee
Cheryl Kettrick Charitable Remainder
Unitrust
By: /s/ BRUCE B. BUTLER
---------------------------------
Name: Bruce B. Butler
Title: Co-Trustee
By: /s/ CHERYL L. KETTRICK
---------------------------------
Name: Cheryl L. Kettrick
Title: Co-Trustee
Steve Neumann Charitable Remainder
Unitrust
By: /s/ BRUCE B. BUTLER
---------------------------------
Name: Bruce B. Butler
Title: Co-Trustee
By: /s/ STEVE L. NEUMANN
---------------------------------
Name: Steve L. Neumann
Title: Co-Trustee
Jody Depew Charitable Remainder
Unitrust
By: /s/ BRUCE B. BUTLER
---------------------------------
Name: Bruce B. Butler
Title: Co-Trustee
By: /s/ JODY DEPEW
---------------------------------
Name: Jody Depew
Title: Co-Trustee
49
<PAGE> 51
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that MILTON L.
NEUMANN is the person who appeared before me, and said person acknowledged that
he signed this instrument and acknowledged it to be his free and voluntary act
for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that ALICE E.
NEUMANN is the person who appeared before me, and said person acknowledged that
she signed this instrument and acknowledged it to be her free and voluntary act
for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
50
<PAGE> 52
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that BRUCE B.
BUTLER, in his capacity as Trustee of the MILT AND ALICE NEUMANN CHARITABLE
REMAINDER UNITRUST, is the person who appeared before me, and said person
acknowledged that he signed this instrument and acknowledged it to be his free
and voluntary act for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that BRUCE B.
BUTLER, in his capacity as Trustee of the MILT AND ALICE NEUMANN CHARITABLE
REMAINDER ANNUITY TRUST, is the person who appeared before me, and said person
acknowledged that he signed this instrument and acknowledged it to be his free
and voluntary act for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
51
<PAGE> 53
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that BRUCE B.
BUTLER, in his capacity as Co-Trustee of the STEVE NEUMANN CHARITABLE TRUST, is
the person who appeared before me, and said person acknowledged that he signed
this instrument and acknowledged it to be his free and voluntary act for the
uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that STEVEN L.
NEUMANN, in his capacity as Co-Trustee of the STEVE NEUMANN CHARITABLE TRUST,
is the person who appeared before me, and said person acknowledged that he
signed this instrument and acknowledged it to be his free and voluntary act for
the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
52
<PAGE> 54
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that BRUCE B.
BUTLER, in his capacity as Co-Trustee of the STEVE NEUMANN CHARITABLE REMAINDER
UNITRUST, is the person who appeared before me, and said person acknowledged
that he signed this instrument and acknowledged it to be his free and voluntary
act for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that STEVEN L.
NEUMANN, in his capacity as Co-Trustee of the STEVE NEUMANN CHARITABLE
REMAINDER UNITRUST, is the person who appeared before me, and said person
acknowledged that he signed this instrument and acknowledged it to be his free
and voluntary act for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
53
<PAGE> 55
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that BRUCE B.
BUTLER, in his capacity as Co-Trustee of the CHERYL KETTRICK CHARITABLE TRUST,
is the person who appeared before me, and said person acknowledged that he
signed this instrument and acknowledged it to be his free and voluntary act for
the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that CHERYL L.
KETTRICK, in her capacity as Co-Trustee of the CHERYL KETTRICK CHARITABLE
TRUST, is the person who appeared before me, and said person acknowledged that
she signed this instrument and acknowledged it to be her free and voluntary act
for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
54
<PAGE> 56
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that BRUCE B.
BUTLER, in his capacity as Co-Trustee of the CHERYL KETTRICK CHARITABLE
REMAINDER UNITRUST, is the person who appeared before me, and said person
acknowledged that he signed this instrument and acknowledged it to be his free
and voluntary act for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that CHERYL L.
KETTRICK, in her capacity as Co-Trustee of the CHERYL KETTRICK CHARITABLE
REMAINDER UNITRUST, is the person who appeared before me, and said person
acknowledged that she signed this instrument and acknowledged it to be her free
and voluntary act for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
55
<PAGE> 57
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that BRUCE B.
BUTLER, in his capacity as Co-Trustee of the JODY DEPEW CHARITABLE REMAINDER
UNITRUST, is the person who appeared before me, and said person acknowledged
that he signed this instrument and acknowledged it to be his free and voluntary
act for the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
STATE OF WASHINGTON )
) ss
County of Spokane )
I certify that I know or have satisfactory evidence that JODY DEPEW,
in her capacity as Co-Trustee of the JODY DEPEW CHARITABLE REMAINDER UNITRUST,
is the person who appeared before me, and said person acknowledged that she
signed this instrument and acknowledged it to be her free and voluntary act for
the uses and purposes mentioned in the instrument.
Dated May 28, 1996
---------------------------------
/s/ JEAN ANDERSON
-------------------------------------
Print Name: Jean Anderson
-------------------------
Notary Public in and for the State of
Washington, residing at Spokane
My Commission Expires: 4-15-97
--------------
56
<PAGE> 1
EXHIBIT 10.8
================================================================================
ASSET PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
RIFLE RENTALS, INC.,
RENTAL COUNTRY U.S.A., INC.,
G.R.M. COMPANY, INC.,
ROCKY MOUNTAIN RENTALS, INC.,
GLEN R. MILLER
AND
ELIZABETH MILLER
AS OF AUGUST 2, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . 10
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . . 10
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . 10
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . 12
2.5. Closing; Effective Date . . . . . . . . . . . . . . . . . . . 12
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . . . . 13
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . 13
3.1. Representations and Warranties of the Sellers and the
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2. Representations and Warranties of the Buyer . . . . . . . . . 29
3.3. Survival of Representations . . . . . . . . . . . . . . . . . 30
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . 30
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2. Operation of Business . . . . . . . . . . . . . . . . . . . . 30
4.3. Preservation of Business . . . . . . . . . . . . . . . . . . . 31
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . 31
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.7. Confirmatory Conveyance . . . . . . . . . . . . . . . . . . . 32
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . . . . 32
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 32
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 32
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 33
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . 33
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . 33
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . 33
5.8. Collection of Receivables . . . . . . . . . . . . . . . . . . 34
5.9. Use of Certain Assets . . . . . . . . . . . . . . . . . . . . 34
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . 36
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . 36
6.2. Conditions to Obligations of the Sellers and the Shareholders 38
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . 39
7.1. Indemnification Provisions for Benefit of the Buyer . . . . . 39
7.2. Indemnification Provisions for Benefit of the Sellers and
the Shareholders . . . . . . . . . . . . . . . . . . . . . . . 40
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . 41
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . 42
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 42
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . 42
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . 43
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 43
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 43
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 43
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . 43
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 44
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 44
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . 45
9.14. Sellers' and Shareholders' Agent. . . . . . . . . . . . . . . 45
</TABLE>
(ii)
<PAGE> 4
Exhibits:
Exhibit 1.1(a)
Exhibit 1.1(b)
Exhibit 1.1(c)
Exhibit 1.1(d)
Exhibit 1.1(e)
Exhibit 1.1(f)
Exhibit 1.1(g)
Exhibit 1.1(h)
Exhibit 1.1(i)
Exhibit 1.1(j)
Exhibit 3.1(e)
Exhibit 3.1(f)(i)
Exhibit 3.1(f)(ii)
Exhibit 3.1(h)
Exhibit 3.1(i)
Exhibit 3.1(j)
Exhibit 3.1(k)
Exhibit 3.1(l)
Exhibit 3.1(p)
Exhibit 3.1(r)
Exhibit 3.1(s)
Exhibit 3.1(t)
Exhibit 3.1(v)
Exhibit 3.1(x)
Exhibit 3.1(y)
Exhibit 3.1(ab)
Exhibit 4.2(a)
Exhibit 4.2(b)
Exhibit 6.1(i)
Exhibit 6.2(e)
(iii)
<PAGE> 5
This Asset Purchase Agreement is entered into as of August 2,
1996 among RentX Industries, Inc., a Delaware corporation (the "Buyer"), Rifle
Rentals, Inc., a Colorado corporation ("Rifle"), Rental Country U.S.A., Inc., a
Colorado corporation ("Country"), G.R.M. Company, Inc., a Colorado corporation
("GRM"), Rocky Mountain Rentals, Inc., a Colorado corporation ("Rocky") (Rifle,
Country, GRM and Rocky may be referred to individually as "Seller" and
collectively, as "Sellers") and Glen R. Miller and Elizabeth Miller
(individually, a "Shareholder" and collectively, the "Shareholders").
Recitals
The Shareholders own all of the issued and outstanding capital
stock of the Sellers. The Sellers desire to sell, and the Buyer desires to
purchase, substantially all of each Seller's assets as provided in this
Agreement. The parties intend that the Buyer's acquisition of Rifle's assets
will occur after the Buyer acquires the other Sellers' assets and only upon the
Buyer's exercise of its option to acquire Rifle's assets.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions.
1.1. Defined Terms. The following terms used in this Agreement
shall have the meanings designated below:
Acquired Assets means all right, title and interest of
each Seller in and to all of the tangible and intangible assets of such Seller
except the Excluded Assets, but including, without limitation, all of each
Seller's (a) tangible personal property (such as machinery, equipment,
inventories, supplies, manufactured and purchased parts, furniture,
automobiles, trucks, tractors, trailers and tools), (b) all real property
leaseholds, all Seller Improvements, Fixtures and Fittings and, as to Rifle,
the Glenwood Improvements, Fixtures and Fittings, except the Excluded Real
Property, (c) the tradename E-Z Way Rentals (and all derivations thereof),
other Intellectual Property and goodwill, licenses and sublicenses granted and
obtained with respect thereto and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein, (d)
agreements, contracts, instruments, security interests, guaranties and other
similar arrangements, and rights thereunder, except those representing Employee
Benefit Plans or Benefit Arrangements or other Liabilities that are not Assumed
Liabilities, (e) accounts receivable, notes receivable and other receivables,
(f) cash in an amount equal to $400 per store of such Seller, which shall be
left in the cash register of each of such Seller's stores on the Premises as of
the Closing (a total of $2,000 with respect to the five stores of all Sellers),
(g) claims, deposits, payments, refunds, causes of action, choses in action,
rights of recovery, rights of set-off and rights of recoupment (including any
such item relating to the payment of Taxes), (h) franchises, approvals,
Permits, licenses, Orders in favor of such Seller, registrations, certificates,
variances, and similar rights and items obtained from Governmental Authorities,
and rights thereunder, (i) specific ownership tax and fee payments made by the
Seller prior to the Closing in respect the vehicles and mobile equipment
included in the Acquired Assets, and (j) books, records, ledgers, files,
documents, correspondence, lists, drawings, specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials and computer records and data, except the Excluded Accounting
Records; provided, however, that the Sellers shall deliver copies of the
Excluded Accounting Records to the Buyer at the Closing.
Adverse Consequences means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, damages, costs, expenses and fees (including court costs and fees and
expenses of counsel and other experts), plus interest at a rate equal to the
prime rate quoted by Norwest Bank Colorado, N.A. from time to time plus two
percentage points accrued from
<PAGE> 6
the date any Adverse Consequence becomes a liability of the party suffering the
Adverse Consequence as determined in accordance with GAAP.
Affiliated Group means any affiliated group within the
meaning of Code Section 1504 or any similar group defined under a similar
provision of state, local or foreign law.
Assignment and Assumption Agreement means the Assignment
and Assumption Agreement between the First Sellers and the Buyer or Rifle and
the Buyer in the form of Exhibit 1.1(a) to be entered into at the First Closing
or the Second Closing, as applicable, pursuant to which each Seller will assign
to the Buyer, and the Buyer will assume, the obligations of such Seller arising
after the applicable Closing Date under certain contracts specified by the
Buyer, which at the Closing will be identified on Schedule 1 thereto.
Assumed Liabilities means the obligations of each Seller
arising after the Closing Date under those contracts which are identified on
Schedule 1 to the appropriate Assignment and Assumption Agreements. Assumed
Liabilities will not include any other Liability.
Benefit Arrangement means any employment, severance or
other similar contract, arrangement or policy and each plan or agreement
(whether written or oral) providing through insurance coverage or through any
self-insured arrangements, workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation, reduced interest
or interest free loans, mortgages, relocation assistance or post-retirement
insurance, compensation or other benefits (including, without limitation, any
contracts, arrangements or understandings relating to this Agreement) that (a)
is not an Employee Benefit Plan, (b) is entered into, maintained or contributed
to by any Seller and (c) benefits any employee or former employee of any Seller
or any relative thereof.
Business means the business of each Seller represented by
the Acquired Assets of such Seller and any business conducted by such Seller at
any time within 36 months prior to the Closing.
Closing has the meaning given it in Section 2.5.
Closing Accounts Receivable means all accounts and notes
receivable of any Seller which arose from the ordinary course of its business
(including, without limitation, Current Rental Equipment Receivables) and are
in existence as of the applicable Closing Date and included in the Acquired
Assets, as set forth on such Seller's Closing Balance Sheet.
Closing Balance Sheet means the balance sheet of each
Seller as of the applicable Closing Date prepared in accordance with GAAP and
audited, at the Buyer's expense, by the Buyer's certified public accounting
firm.
Closing Date has the meaning given it in Section 2.5.
Closing Inventory means each Seller's current inventory of
goods and equipment held for rent, lease or sale in the ordinary course of
their business which are in existence as of the applicable Closing Date and
included in the Acquired Assets, as set forth on such Seller's Closing Balance
Sheet.
Code means the Internal Revenue Code of 1986, as amended.
-2-
<PAGE> 7
Confidential Information means any information concerning
the subject Person or the subject Person's business, products, financial
condition, prospects and affairs that is not already generally available to the
public.
Consigned Equipment means the equipment consigned to any
Seller by Wagner Equipment Co., which equipment is set forth on Exhibit 1.1(b).
Current Rental Equipment has the meaning set forth in
Section 4.2.
Current Rental Equipment Decreases has the meaning set
forth in Section 4.2.
Current Rental Equipment Receivable means any note or
account receivable of any Seller which arose or arises as consideration for the
sale by a Seller of any Current Rental Equipment pursuant to Section 4.2.
Employee Benefit Plan means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan) or (d) Employee Welfare Benefit Plan.
Employee Pension Benefit Plan has the meaning set forth in
ERISA Section 3(2).
Employee Welfare Benefit Plan has the meaning set forth in
ERISA Section 3(1).
Encumbrance means any mortgage, pledge, conditional sale
agreement, charge, claim, interest of another Person, lien, security interest,
title defect or other encumbrance.
Environmental Obligations means all federal, state and
local laws, regulations, rules, orders, permits, licenses, approvals,
ordinances, judgments, injunctions, directives, and common law relating to land
use, public health, safety, welfare or the environment or to the impact of
business and activities upon land use, public health, safety, welfare or the
environment, including, but not limited to, all requirements of the following
federal statutes and regulations promulgated pursuant thereto, as amended from
time to time: the Clean Air Act; the Clean Water Act; the Resource
Conservation and Recovery Act; the Safe Drinking Water Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the National Environmental Policy
Act; the Comprehensive Environmental Response, Compensation, and Liability Act;
OSHA; the Emergency Planning and Community Right-to-Know Act; the Toxic
Substances Control Act; and any state or local law counterpart or supplement to
such Acts.
Environmental Study has the meaning set forth in Section
3.1(x).
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and any regulations, rules or orders promulgated thereunder.
ERISA Controlled Group means any Persons which together
are treated as a single employer under Section 4001(b)(i) of ERISA or Sections
4014(b), (c), (m) or (o) of the Code.
Escrow Account means the escrow account to be established
and maintained by the Escrow Agent pursuant to the Escrow Agreement.
-3-
<PAGE> 8
Escrow Agent means Norwest Bank Colorado, N.A.
Escrow Agreement means the Escrow Agreement among the
Buyer, the Sellers, the Shareholders, the Shareholders' Agent and the Escrow
Agent in the form of Exhibit 1.1(c) to be entered into at the First Closing, as
amended at the Second Closing upon execution of an amendment to the Escrow
Agreement among the Buyer, the Sellers, the Shareholders, the Shareholders'
Agent and the Escrow Agent reflecting the matters contemplated by the second
sentence of Section 2.3(a) and by Section 2.7(b) if the Second Closing occurs.
Escrow Period means with respect to the First Indemnity
Deposit and the Non-Indemnity Deposit, the period commencing on the First
Closing and ending on the first anniversary of the First Closing with respect
to the Second Indemnity Deposit, the period commencing on the Second Closing
and ending on the first anniversary of the Second Closing and, with respect to
the Lease Extension Deposit, the period commencing on the First Closing and
ending on July 1, 1998.
Excluded Accounting Records means those accounting records
of the Sellers, including the general ledger, pertaining solely to tax returns
of any Seller or Shareholder.
Excluded Assets means (a) all cash of any Seller on hand
as of the Closing Date, other than the $400 per store of such Seller as
described in clause (f) of the definition of Assets, (b) the Excluded Real
Property, (c) the corporate charter, taxpayer and other identification numbers,
seals, minute books, stock transfer books and other documents relating solely
to the organization, maintenance and existence of any Seller as a corporation,
(d) any rights of any Seller under this Agreement or the Other Seller
Agreements, (e) agreements, contracts, plans or similar arrangements
representing Employee Benefit Plans or Benefit Arrangements, (f) the 1997 Ford
F-250 pickup owned by Country and used by Glen R. Miller, (g) the Excluded
Accounting Records, (h) the amount of any Tax refunds received after the
Closing Date which are refunded in respect of the period prior to the Closing
Date and (i) the $12,000 bond posted by Country with the Colorado State Board
of Land Commissioners with respect to the Vail, Colorado Premises.
Excluded Business has the meaning set forth in Section
5.8(c).
Excluded Real Property means (a) the land and buildings
owned by any Seller or Shareholder (and the easements, rights of way and
appurtenances thereto), and the improvements, fixtures and fittings located
thereon or attached thereto relating solely to the Excluded Business and (b)
the lease agreements existing between any Seller and any Shareholder pursuant
to which any Seller leases from any Shareholder any Premises owned by such
Shareholder.
First Closing has the meaning set forth in Section 2.5.
First Indemnity Deposit has the meaning set forth in
Section 2.3(a).
First Sellers means Country, GRM and Rocky.
First Sellers Acquired Assets means the Acquired Assets of
each of the First Sellers.
GAAP means generally accepted accounting principles as in
effect from time to time in the United States.
Glenwood Improvements, Fixtures and Fittings means all
improvements, fixtures and fittings owned by any Seller which are located on or
attached to the Premises occupied by Rifle in Glenwood Springs, Colorado, which
improvements, fixtures and fittings are set forth on Exhibit 1.1(d).
-4-
<PAGE> 9
Governmental Authority means (a) the United States of
America, (b) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like) or (c) any agency, authority or instrumentality of
any of the foregoing, including, without limitation, any court, tribunal,
department, bureau, commission or board.
Hazardous Materials means any material, chemical,
compound, mixture, substance or waste which is regulated by any Governmental
Authority having jurisdiction over any property, including but not limited to
(a) any oil or petroleum compounds, flammable substances, explosives,
radioactive materials, or any other materials or pollutants which pose a hazard
to any property or to persons in or about any property or cause any property to
be in violation of any Legal Requirement, (b) asbestos, asbestos-containing
material or presumed asbestos-containing material of any kind or character, (c)
polychlorinated biphenyls, (d) any materials or substances designated as
"hazardous substances" pursuant to Section 311 of the Clean Water Act, 33
U.S.C. Section 1251 et seq., (e) "economic poison," as defined in the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 135 et seq., (f)
"chemical substance," "new chemical substance," or "hazardous chemical
substance or mixture" pursuant to Sections 3, 6 and 7 of the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., (g) "hazardous substances"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., and (h)
"hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq.
Intellectual Property means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names and corporate names, together
with all translations, adaptations, derivations and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrightable
works, all copyrights and all applications, registrations and renewals in
connection therewith, (d) all mask works and all applications, registrations
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights and (h) all copies and tangible and intangible
embodiments thereof (in whatever form or medium).
-5-
<PAGE> 10
Latest Balance Sheet has the meaning given it in Section
3.1(f).
Lease Extension Deposit has the meaning given it in
Section 2.3(a).
Legal Requirement means any constitution, statute,
ordinance, code, law, rule, regulation, order or other requirement, standard or
procedure enacted, adopted or applied by any Governmental Authority, including
judicial decisions applying common law or interpreting any other Legal
Requirement.
Liabilities Reserve means funds on deposit at any time in
the demand deposit account established on the Closing Date in the name of the
Buyer and the Shareholders' Agent in an amount equal to the Reserve Amount
deposited therein at or after the Closing less the aggregate amount of such
funds used after the Closing to satisfy Reserved Seller Liabilities.
Liability means any liability or obligation (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
Multiemployer Plan has the meaning set forth in ERISA
Section 3(37).
New Rental Equipment has the meaning set forth in Section
4.2.
New Rental Equipment Increases has the meaning set forth
in Section 4.2.
Noncompetition Agreement means the Noncompetition
Agreement among the Buyer, each Seller and each Shareholder, in the form of
Exhibit 1.1(e) to be entered into at the Closing.
Non-Indemnity Deposit has the meaning set forth in Section
2.3(a).
Option means the Buyer's option to purchase the Rifle
Acquired Assets as set forth in Section 9.15.
Orders means all applicable judgments, injunctions,
orders, decrees, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
OSHA means the Occupational Safety and Health Act of 1970,
as amended, and any regulations, rules or orders promulgated thereunder.
Other Buyer Agreements means the Assignment and Assumption
Agreement, the Escrow Agreement, the Noncompetition Agreement, the Shareholder
Leases and the other documents and instruments to be executed and delivered by
the Buyer pursuant to this Agreement.
Other Seller Agreements means the Assignment and
Assumption Agreement, the Escrow Agreement, the Noncompetition Agreement, the
Premises Leases, the bills of sale and other documents and instruments to be
executed and delivered by any Seller or Shareholder or relative or affiliate
thereof pursuant to this Agreement.
Permits means all permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, exclusionary or
inclusionary orders and other concessions, whether governmental
-6-
<PAGE> 11
or private, including, without limitation, all environmental, public health or
safety permits required in connection with any Seller's Business.
Person means an individual, partnership, corporation,
association, joint stock company, trust, joint venture, limited liability
company, unincorporated organization or Governmental Authority.
Premises means the real property, buildings and
improvements thereon constituting the business premises of Rifle located at
51537 Hiways 6 & 24, Glenwood Springs, Colorado 81601; the business premises of
Country located at 41462 Highways 6 & 24, Vail, Colorado 81657 and 751
Chambers, Eagle, Colorado 81631; the business premises of GRM located at 191
Adams, Silverthorne, Colorado 80435; and the business premises of Rocky located
at 1320 W. Victory Way, Craig, Colorado 81625.
Premises Leases means (a) the Shareholder Leases and (b)
the Shareholder Subleases, under which the Buyer will lease the Premises
following the Closing.
Price Allocation Schedule has the meaning given it in
Section 2.3(c).
Reserve Amount means an amount equal to Reserved Seller
Liabilities as of the applicable Closing Date, as estimated in good faith by
the Shareholders' Agent and the Buyer on the day before the applicable Closing
occurs.
Reserved Seller Liabilities means all Liabilities of any
and all Sellers (including Liabilities which at the time of calculation are
accrued but not yet payable) as of the applicable Closing Date relating to the
Business (other than the Excluded Business), except the Assumed Liabilities;
provided, however, that Reserved Seller Liabilities shall not include any
Liabilities of Rifle unless and until the Second Closing occurs.
Rifle Acquired Assets means the Acquired Assets of Rifle
including without limitation those listed on Exhibit 3.1(l) as Rifle Acquired
Assets.
Right means any right, property interest, concession,
patent, trademark, trade name, copyright, know-how or other proprietary right
of another Person.
Second Closing has the meaning given it in Section 2.5.
Seller Improvements, Fixtures and Fittings means all
improvements, fixtures or fittings which are (a) located on or attached to any
of the Premises and (b) owned by any Seller or any Shareholder; provided,
however, that any such improvements, fixtures or fittings which are owned by
any Shareholder prior to the Closing Date shall be conveyed to the applicable
Seller pursuant to Section 4.7. The Buyer shall not remove any item of Seller
Improvements, Fixtures and Fittings from any Premises leased by the Buyer from
any Shareholder unless such item can be removed from such Premises without
materially damaging or materially altering the building or Premises from which
it is removed or unless such damage or alternation is reasonably repaired or
replaced by the Buyer.
Shareholder Leases means the lease agreements between the
Buyer and the Shareholders relating to the Eagle, Colorado Premises, the
Silverthorne, Colorado Premises and the Craig, Colorado Premises in the forms
of Exhibits 1.1(f), (g) and (h), respectively, to be entered into at the
Closing.
-7-
<PAGE> 12
Shareholder Subleases means the sublease agreements
between the Buyer and the Shareholders relating to the Vail, Colorado Premises
and the Glenwood Springs, Colorado Premises in the forms of Exhibits 1.1(i) and
1.1(j), respectively, to be entered into at the Closing.
Shareholders has the meaning given it in the preamble to
this Agreement.
Shareholders' Agent means Glen R. Miller (or the
substituted agent described in Section 9.14) acting as agent for the Sellers
and the Shareholders pursuant to Section 9.14.
Subsidiary means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
Survival Period means the applicable periods after the
Closing Date during which representations and warranties survive pursuant to
Section 3.3.
Tax means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, documentary, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated or other tax of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not.
Tax Return means any return, declaration, report, claim
for refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
Vail Land Lease has the meaning given it in Section
2.7(a).
Vail Sublease has the meaning given it in Section 5.12.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions
set forth in this Agreement, the Buyer agrees to purchase from each Seller, and
each Seller agrees to sell to the Buyer, all the Acquired Assets free and clear
of any Encumbrance, for the consideration specified in Section 2.3. The Buyer
will have no obligation under this Agreement to purchase less than all of the
Acquired Assets of all Sellers.
2.2. Assumption of Certain Liabilities. Subject to the terms
and conditions set forth in this Agreement, the Buyer agrees to assume and
become responsible for all of the Assumed Liabilities at the Closing. The
Buyer will not assume or have any responsibility with respect to any other
Liability not included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) At the First Closing, the Buyer will (i), by wire
transfer or other delivery of immediately available funds, (A) deposit $260,000
(the "Non-Indemnity Deposit") and $200,000 (the "Lease Extension Deposit") into
the Escrow Account, (B) pay $1,815,800 to Country and deposit $325,000 into the
Escrow Account, (C) pay $271,650 to GRM and deposit $38,750 into the Escrow
Account, and (D) pay $66,025 to Rocky and deposit $9,375 into the Escrow
Account, and (ii) assume the Assumed Liabilities of the First Sellers
-8-
<PAGE> 13
(and the amounts paid and deposited to and in respect of each First Seller and
the Assumed Liabilities assumed from each First Seller will constitute the full
purchase price for the Acquired Assets purchased from each First Seller). At
the Second Closing, the Buyer will (i), by wire transfer or other delivery of
immediately available funds, pay $188,525 to Rifle and deposit $26,875 (the
"Second Indemnity Deposit") into the Escrow Account and (ii) assume the Assumed
Liabilities of Rifle (and the amounts paid and deposited to and in respect of
Rifle and the Assumed Liabilities assumed from Rifle will constitute the full
purchase price for the Rifle Acquired Assets). The amount deposited pursuant
to clauses (i) (B), (C) and (D) above is referred to as the "First Indemnity
Deposit." The First Indemnity Deposit and the Second Indemnity Deposit (if
made) will belong to each Seller with respect to which such deposit (or portion
thereof) is made, will be subject to the Seller's indemnification obligations
set forth in this Agreement, and will be held, invested, administered and
disbursed according to Section 7.1(b) hereof and the Escrow Agreement. The
Non-Indemnity Deposit and the Lease Extension Deposit will be held, invested,
administered and disbursed according to Section 2.7 hereof and the Escrow
Agreement. Notwithstanding the foregoing, the cash purchase price to be paid
to each Seller at the Closing will be (i) reduced by Current Rental Equipment
Decreases as set forth on Exhibits 4.2(a) and (b) for Current Rental Equipment
which is sold by a Seller between the date hereof and the Closing pursuant to
Section 4.2 or was sold or otherwise transferred by a Seller between March 1,
1996 and the day preceding the date of this Agreement; provided, however, the
purchase price will not be reduced in respect of the amount of any Current
Rental Equipment Decrease which will be represented, immediately following the
Closing Date, by a Current Rental Equipment Receivable, (ii) increased by New
Rental Equipment Increases for New Rental Equipment which is both purchased by
the Seller prior to the Closing pursuant to Section 4.2 and paid for in full by
such Seller prior to the Closing as set forth on Exhibits 4.2(a) and (b) and
(iii) reduced by such Seller's portion of the Reserve Amount.
(b) At the First Closing, the Buyer will deposit into a
demand deposit account in the name of the Buyer and the Shareholders' Agent an
amount equal to the Reserve Amount pertaining to the First Sellers' Business,
and such funds shall initially constitute the Liabilities Reserve for the First
Sellers. At the Second Closing, the Buyer will deposit into a demand deposit
account in the name of the Buyer and the Shareholders' Agent an amount equal to
the Reserve Amount pertaining to Rifle's Business, and such funds shall
initially constitute the Liabilities Reserve for Rifle. The funds on deposit
in the Liabilities Reserve will belong to the Sellers, subject to the
provisions of this Section 2.3(b). Following the Closing, the Liabilities
Reserve will be applied to the payment of Reserved Seller Liabilities, by
disbursements from that account by the Buyer or the Shareholders' Agent, as the
Reserved Seller Liabilities become due and payable. To the extent that the
Buyer receives a bill or invoice representing, or is otherwise aware of, any
Reserved Seller Liabilities, the Buyer may cause funds to be disbursed from the
Reserve Amount to satisfy such Reserved Seller Liabilities. Reserved Seller
Liabilities representing accrued vacation and other accrued employee benefits
will be satisfied by payment of the amount thereof to the Buyer as the Buyer
provides such benefits or makes cash payments in lieu thereof to employees.
The Shareholders' Agent will take all actions necessary to cause the
Liabilities Reserve to be applied to satisfy Reserved Seller Liabilities and,
if the Liabilities Reserve has been exhausted, the Sellers and the Shareholders
will provide additional funds as required to satisfy Reserved Seller
Liabilities. Nothing in this Agreement will be deemed to limit the joint and
several obligations of the Sellers and the Shareholders to pay the Reserved
Seller Liabilities in full. After all Reserved Seller Liabilities have been
satisfied, any excess Liabilities Reserve on deposit in the account created
pursuant to this Section 2.3(b) will be paid to the Sellers. Any disputes
concerning the Liabilities Reserve will be settled by arbitration as provided
in this Agreement.
(c) As soon as practicable after the Closing, but
effective as of the Closing, the parties will prepare and initial a "Price
Allocation Schedule" allocating the total consideration for the Acquired Assets
acquired from a Seller among the various categories of Acquired Assets as
described below. In preparing the Price Allocation Schedule, the parties will
allocate the total consideration for the Acquired Assets acquired from a Seller
among the Acquired Assets in the following manner:
-9-
<PAGE> 14
(i) to Closing Accounts Receivable of such
Seller, the amount thereof shown on the Closing Balance Sheet of such
Seller;
(ii) to Closing Inventory of such Seller, the
amount thereof shown on the Closing Balance Sheet of such Seller;
(iii) to equipment and leasehold improvements of
such Seller, the current book value thereof as reflected on the Closing
Balance Sheet of such Seller;
(iv) to prepaid expenses of such Seller, the
unamortized balance thereof shown on the Closing Balance Sheet of such
Seller;
(v) to any other assets of such Seller, other
than goodwill, the amount thereof shown on the Closing Balance Sheet of
such Seller; and
(vi) the entire remaining balance of the
consideration shall be allocated to the goodwill of the Business of such
Seller or, at the Buyer's sole discretion, to the other intangible
assets of such Seller which are included in the Acquired Assets of such
Seller.
The parties acknowledge that such allocations were determined pursuant to arm's
length bargaining regarding the fair market values of the Acquired Assets in
accordance with the provisions of Code Section 1060. The parties agree to be
bound by the allocations set forth in the Price Allocation Schedule for all
federal, state and local Tax purposes, including for purposes of determining
any income, gain, loss, depreciation or other deductions in respect of such
assets. The parties further agree to prepare and file all Tax Returns
(including Form 8594 under the Code) in a manner consistent with such
allocations and not to take any position contrary to such allocations in any
administrative or judicial proceeding.
2.4. Sales Taxes, Etc. Each Seller will pay all sales, use,
transfer and other Taxes, fees and charges payable in respect of the sale and
transfer of its Acquired Assets to the Buyer pursuant to this Agreement (except
for licensing fees payable upon transfer to the Buyer of title to the vehicles
and mobile equipment included in the Acquired Assets, which licensing fees
shall be paid by the Buyer).
2.5. Closing; Effective Date. The closing of the Buyer's
acquisition of the First Sellers Acquired Assets and the related transactions
contemplated by this Agreement (the "First Closing") shall take place promptly
following satisfaction of the conditions relating to the First Sellers or the
First Sellers Acquired Assets set forth in Section 6, on a date to be agreed
upon by the parties. The closing of the Buyer's acquisition of the Rifle
Acquired Assets and the related transactions contemplated by this Agreement
(the "Second Closing") shall take place promptly following the Buyer's exercise
of the Option and satisfaction of the conditions relating to Rifle or the Rifle
Acquired Assets set forth in Section 6, on a date to be agreed upon by the
parties. The term "Closing" as used in this Agreement shall refer to the First
Closing or the Second Closing or both, as appropriate, based on the Seller or
Sellers who will participate in the Closing at issue. Any Closing will
commence at 8:00 a.m. local time in Denver, Colorado, at the offices of Sherman
& Howard L.L.C., and all transactions contemplated by this Agreement with
respect to a given Closing will be effective at 11:59 p.m. Colorado time on the
day immediately preceding such Closing (such effective time being the "Closing
Date").
2.6. Deliveries at the Closing. At the Closing, (a) each
Seller and Shareholder will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Sellers and the Shareholders the certificates,
instruments and documents referred to in Section 6.2, (c) each Seller will
deliver to the Buyer instruments transferring to the Buyer title to the
-10-
<PAGE> 15
Acquired Assets of such Seller free and clear of any Encumbrances and (d) the
Buyer will pay, deposit and withhold the purchase price in accordance with
Section 2.3.
2.7. Administration of the Non-Indemnity Deposit and the Lease
Extension Deposit.
(a) Upon extension or renewal of Country's lease with
the State of Colorado for the land on which Country's Vail, Colorado store is
located (the "Vail Land Lease") by Country for a term of no less than 10 years
and on other terms reasonably satisfactory to the Buyer, the Lease Extension
Deposit, plus any accrued interest thereon, will be paid to Country. If no
such extension or renewal has been effected at the end of the Escrow Period
relating to the Lease Extension Deposit, the Lease Extension Deposit, plus any
accrued interest thereon, will be paid to Buyer.
(b) On the Second Closing Date, the Non-Indemnity
Deposit (less $133.58 multiplied by the number of days from and including the
First Closing Date through the Second Closing Date), plus any accrued interest
on such amount, will be paid to Country and the difference between the Non-
Indemnity Deposit and the amount paid to Country will be paid to the Buyer. If
the Buyer does not exercise the Option, upon the earlier of the Buyer's notice
to the Shareholders' Agent of the Buyer's decision not to exercise the Option
or April 1, 1997 the Non-Indemnity Deposit, plus any accrued interest thereon,
will be paid to the Buyer.
(c) The Buyer and the Shareholders' Agent will jointly
give instructions to the Escrow Agent to carry out the intent of this Section
2.7. Any disputes concerning the Non-Indemnity Deposit or the Lease Extension
Deposit will be settled by arbitration as provided in this Agreement.
3. Representations and Warranties.
3.1. Representations and Warranties of the Sellers and the
Shareholders. The Sellers and the Shareholders jointly and severally represent
and warrant to the Buyer that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the applicable Closing Date (as though made then and as though
the applicable Closing Date were then substituted for the date of this
Agreement throughout this Section 3.1; provided, however, that as of the Second
Closing the representations and warranties of the First Sellers will be limited
to (a) their joint and several representations and warranties of all matters
with respect to Rifle set forth in Section 3.1, including without limitation,
those relating to the Rifle Acquired Assets and Rifle's Business, operations
and Liabilities set forth in Section 3.1 (including without limitation, those
set forth in Sections 3.1(a), (b), (c) and (e)) and (b) their joint and several
representations and warranties for all matters with respect to the First
Sellers and the Shareholders set forth in Sections 3.1(a), (b), (c) and (e).
(a) Certain Shareholder Matters. Each Shareholder has
full and absolute right, power, authority and legal capacity to execute,
deliver and perform this Agreement and all Other Seller Agreements to which
such Shareholder is a party, and this Agreement constitutes, and such Other
Seller Agreements will when executed and delivered constitute, the legal, valid
and binding obligations of, and be enforceable in accordance with their
respective terms against, such Shareholder. The execution, delivery and
performance of this Agreement and the Other Seller Agreements to which a
Shareholder is a party, and the consummation of the transactions contemplated
hereby and thereby, will not (i) violate any Legal Requirement or Order to
which a Shareholder is subject, or (ii) violate, with or without the giving of
notice or the lapse of time or both, or conflict with or result in the breach
or termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties or assets of a Shareholder pursuant to,
any indenture, mortgage, deed of trust, lien, lease, agreement, instrument or
other arrangement to which a Shareholder is a party or by which a Shareholder
or any of the Shareholder's assets is bound or subject. No Shareholder need
give any notice to, make any filing with
-11-
<PAGE> 16
or obtain any authorization, consent or approval of any Governmental Authority
or other Person in order to consummate the transactions contemplated hereby.
(b) Organization, Good Standing, Power, Etc. Each
Seller is a corporation validly existing and in good standing under the laws of
the State of Colorado, which is the only jurisdiction in which the nature of
the Business conducted by such Seller or the properties owned, leased or
operated by such Seller make such qualification necessary. Each Seller has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its Business as now being conducted. This Agreement
and the Other Seller Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and unanimously approved by the
board of directors and shareholders of each Seller, and this Agreement has been
duly executed and delivered by the Sellers. Each Seller has full corporate
power and authority to execute, deliver and perform this Agreement and the
Other Seller Agreements, and this Agreement constitutes, and the Other Seller
Agreements will when executed and delivered constitute, the legal, valid and
binding obligations of each Seller, and shall be enforceable in accordance with
their respective terms against the Sellers.
(c) Capitalization, Etc. The authorized capital stock
of Rifle consists of 50,000 shares of common stock, no par value; the
authorized capital stock of Country consists of 50,000 shares of common stock,
no par value; the authorized capital stock of GRM consists of 50,000 shares of
common stock, no par value; and the authorized capital stock of Rocky consists
of 50,000 shares of common stock, no par value. Glen R. Miller owns,
beneficially and of record, free and clear of any Encumbrance or Tax, 29,000
shares of the common stock of Rifle, no par value, which constitute all
outstanding shares of the capital stock of Rifle. Glen R. Miller owns,
beneficially and of record, free and clear of any Encumbrance or Tax, 5,000
shares of the common stock of Country, no par value, which constitute all
outstanding shares of the capital stock of Country. The Shareholders own,
beneficially and of record, free and clear of any Encumbrance or Tax, 50 and 50
shares, respectively, of the common stock of GRM, no par value, which
constitute all outstanding shares of the capital stock of GRM. Glen R. Miller
owns, beneficially and of record, free and clear of any Encumbrance or Tax,
24,000 shares of the common stock of Rocky, no par value, which constitute all
outstanding shares of the capital stock of Rocky. There are no existing rights
of first refusal, buy-sell arrangements, options, warrants, rights, calls or
other commitments or restrictions of any character relating to any Seller's
stock. No Seller has any authorized or outstanding securities convertible into
or exchangeable for, or any authorized or outstanding options, warrants or
other rights to subscribe for or to purchase, or convert any obligations into,
any unissued shares of its capital stock, and no Seller has agreed to issue
securities so convertible or exchangeable or any such options, warrants or
other rights. There are no authorized or outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect to any
Seller. There are no voting trusts, voting agreements, proxies or other
agreements or understandings with respect to any capital stock of any Seller.
(d) No Subsidiaries or Affiliates. No Seller has any
Subsidiaries or interests in any other corporation, partnership, limited
partnership, limited liability company, association or joint venture.
(e) No Violation of Agreements, Etc. The execution,
delivery and performance of this Agreement and the Other Seller Agreements and
the consummation of the transactions contemplated hereby and thereby will not
(i) violate any Legal Requirement or Order to which any Seller is subject or
any provision of the articles of incorporation or bylaws of any Seller or (ii)
violate, with or without the giving of notice or the lapse of time or both, or
conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any Person the right to accelerate any
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of any Seller pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, agreement, instrument or other
arrangement to which any Seller is a party or by which any Seller or any of its
assets and properties is bound or subject. Except for notices that will be
given and consents that will be obtained by the Sellers prior to the Closing
(which are set forth in Exhibit 3.1(e)), the Sellers need not give any notice
to, make any filing with or obtain any authorization, consent or approval of
any
-12-
<PAGE> 17
Governmental Authority or other Person in order for the parties to consummate
the transactions contemplated by this Agreement and the Other Seller
Agreements.
(f) Financial Statements. The balance sheets of each
Seller as of December 31, 1993, December 31, 1994, December 31, 1995, the
related statements of income, shareholders' equity for the fiscal years then
ended, and the unaudited balance sheet of each Seller as of February 29, 1996,
(the latter being referred to with respect to each Seller as the "Latest
Balance Sheet"), and the related statement of income, shareholders' equity for
the two-month period then ended have been prepared in accordance with good
accounting practices and on a basis consistent with those of prior years, but
do not comply with GAAP, are in accordance with the books and records of each
Seller (which books and records are complete and correct), and are accurate and
fairly present the financial position and results of operations of such Seller
as of such dates and for each of the periods indicated. Exhibit 3.1(f)(i)
describes, to the best knowledge of the Sellers and the Shareholders, how such
financial statements vary from GAAP as GAAP relates to method of accounting,
method of depreciation and policy of accruing vacation. Copies of the
financial statements described in this Section 3.1(f) are attached as Exhibit
3.1(f)(ii). Such balance sheets make full and adequate provision for all
Liabilities of such Seller as of their respective dates.
(g) Absence of Undisclosed Liabilities. All
Liabilities of each Seller have been paid when due or, if not yet due, have
been accrued properly. No Seller has any Liability (and there is no basis for
the assertion of any Liability), arising out of any transactions entered into
at or prior to the date of this Agreement, any action or inaction at or prior
to the date of this Agreement, any state of facts existing at or prior to the
date of this Agreement, or otherwise, except (i) Liabilities reflected on the
Latest Balance Sheet and (ii) current Liabilities which have arisen after the
date of the Latest Balance Sheet in the ordinary course of business. All
Liabilities of the Sellers due on or prior to the Closing Date shall have been
paid by the Sellers prior to the Closing.
(h) Absence of Certain Changes or Events. Except as
set forth on Exhibit 3.1(h), since January 1, 1996, no Seller has (i) incurred
any debt, indebtedness or other Liability, except current Liabilities incurred
in the ordinary course of business; (ii) delayed or postponed the payment of
accounts payable or other Liabilities or accelerated the collection of any
receivable beyond stated, normal terms; (iii) subjected any of its assets or
properties to any Encumbrance; (iv) rented or leased, except in the ordinary
course of business, or sold (except as permitted by Section 4.2) or otherwise
transferred any of its equipment or other assets or properties; (v) cancelled,
compromised, settled, released, waived, written-off or expensed any account or
note receivable, right, debt or claim involving more than $10,000 in the
aggregate; (vi) changed in any manner the way in which it conducts Business;
(vii) transferred or granted any rights under any leases (except to customers
in the ordinary course of business), licenses or agreements or with respect to
any Intellectual Property; (viii) made or granted any individual wage or salary
increase in excess of 10% or $1.00 per hour or any general wage or salary
increase, entered into any employment, consulting or agency contract with any
shareholder, officer, director, employee or consultant or any relative or
affiliate thereof, changed or increased the rates of compensation payable
through bonus, pension, contract or other commitment to any shareholder,
officer, director, employee or consultant or any relative or affiliate thereof
for any period before or after the date set forth above or made any other
change in employment terms for any shareholder, officer, director, employee or
consultant or any relative or affiliate thereof; (ix) adopted, amended,
modified or terminated any bonus, profit-sharing incentive, severance or other
plan, contract or commitment for the benefit of any of its shareholders,
officers, directors, employees or any relative or affiliate thereof (or taken
any such action with respect to any other Employee Benefit Plan or Benefit
Arrangement); (x) except as otherwise expressly permitted by this Section
3.1(h), entered into, or agreed to enter into, any contracts or agreements, or
made any commitments, involving more than $10,000 in the aggregate; (xi)
suffered any adverse fact or change, including, without limitation, to or in
its Business, financial condition, prospects, customer relationships or
properties; (xii) entered into any contract or commitment to make capital
expenditures in excess of $10,000 in the aggregate (except as permitted by
Section 4.2); (xiii) declared, set aside
-13-
<PAGE> 18
or paid any dividend or made any distribution to its shareholders (whether in
cash or in kind) or purchased, redeemed or otherwise acquired any shares of its
capital stock or any other securities; (xiv) made any loan to, or given any
guarantee to or for the benefit of, any Person, including, without limitation,
any shareholder, officer or director or to any relative or affiliate thereof or
entered into any transaction (including, without limitation, any agreement or
other arrangement providing for employment of, furnishing of services by,
renting of real or personal property from, or otherwise requiring payment to)
with any shareholder, officer or director or any relative or affiliate thereof;
(xv) permitted any Person, including, without limitation, any shareholder,
officer, director or employee or any relative or affiliate thereof, to withdraw
assets from a Seller (other than cash, as set forth on Exhibit 3.1(h),
withdrawn upon prior notice to the Buyer); (xvi) made any payment or transfer
to or for the benefit of any shareholder, officer or director or any relative
or affiliate thereof, or agreed to take any such action, other than (A) the
payment to Glen R. Miller and Elizabeth Miller of the proportionate monthly
amount of their respective normal annualized salaries of $160,000 and $30,000
due and payable during such period and (B) the payment to officers and
directors of normal reimbursable out-of-pocket expenses incurred in the
ordinary course of business consistent with past practice; (xvii) made or
pledged to make any charitable or other contribution involving more than $2,500
in the aggregate; (xviii) accelerated, terminated, modified or cancelled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases and licenses) involving more than $10,000 individually or in
the aggregate to which a Seller is a party or by which it is bound; (xix)
changed its method of depreciation (except for bonus depreciation as set forth
on Exhibit 3.1(h)); (xx) rented or leased any equipment or sold or otherwise
transferred any inventory, equipment or services at below-normal rental or
lease rates or margins; (xxi) suffered any other material occurrence, event,
incident, action, failure to act or transaction outside the ordinary course of
business; or (xxii) agreed to incur, take, make or permit any of the matters
described in clauses (i) through (xxi).
(i) Permits. Each Seller owns or holds all Permits
necessary to permit it to own, lease and operate its properties and to conduct
its Business. Each of such Permits is listed on Exhibit 3.1(i). All of such
Permits are currently in full force and effect, no action or claim is pending
or threatened to revoke, modify or terminate any Permit or render any Permit
invalid, and all of the Permits are transferable to the Buyer at the Closing
without any action by any Person.
(j) Tax Matters. Exhibit 3.1(j) specifies each Seller
that is an "S" corporation and each Seller that is a "C" corporation. Neither
any Seller nor any of its shareholders has ever filed (i) an election pursuant
to Section 1362 of the Code, that such Seller be taxed as an "S" corporation,
except as set forth on Exhibit 3.1(j), or (ii) a consent pursuant to Section
341(f) of the Code relating to collapsible corporations. There has been duly
and timely filed in proper form by or on behalf of each Seller, or a filing
extension from the appropriate Governmental Authorities has been obtained with
respect to, all Tax Returns required to be filed by applicable Legal
Requirement on or prior to the date of this Agreement. All assessments, Taxes,
fees or other charges imposed on any Seller, any of its properties or any of
its shareholders (pursuant to any Seller's "S" corporation election) in respect
of the periods covered by such Tax Returns have been paid or adequate reserves
have been provided for with respect to the payment of all Taxes (whether or not
disputed) payable in respect of periods through the date of this Agreement and
all prior periods and all Tax Liabilities arising out of transactions entered
into or states of fact existing prior to the date of this Agreement. To the
best knowledge of the Sellers and the Shareholders, all such Tax Returns were
correct and complete in all respects. There is no unpaid interest, penalty or
addition to any Tax due or claimed to be due from any Seller or any of its
shareholders (pursuant to any Seller's "S" corporation election), or any Tax
deficiency, determination or assessment outstanding against any Seller or any
of its shareholders (pursuant to any Seller's "S" corporation election). No
Seller or Shareholder has knowledge or has received notice of an audit of any
Tax Return of any Seller or, to the best knowledge of the Sellers and the
Shareholders, no audit has been threatened, and no Seller has waived any
statute of limitations relating to the assessment or payment of Taxes, which
waiver has not yet expired. All Tax Returns, or extensions thereof required to
be filed, and all Taxes required to be paid, prior to the Closing by or on
behalf of any Seller and by the Shareholders with respect to any Seller, of any
nature whatsoever, shall have been so filed or paid
-14-
<PAGE> 19
prior to the Closing. No Seller is currently the beneficiary of any extension
of time within which to file any Tax Return. The Sellers and Shareholders will
pay all Taxes attributable to each respective Seller's business and activities
through the Closing Date, including all Taxes attributable to the transactions
contemplated by this Agreement, on or before the due date of such Tax Returns.
There are no Encumbrances on any of the assets of any Seller that arose in
connection with any failure (or alleged failure) to pay any Tax. There is no
dispute or claim concerning any Tax Liability of any Seller either (i) claimed
or raised by any authority in writing or (ii) as to which any of any Seller or
any Shareholder has knowledge based upon personal contact with any agent of
such authority. Exhibit 3.1(j) lists all federal, state, local and foreign
income Tax Returns filed with respect to each Seller for taxable periods ended
on or after January 1, 1989, indicates those Tax Returns that have been audited
and indicates those Tax Returns that currently are the subject of audit. The
Sellers have delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any Seller since January 1, 1989.
(k) Assets and Properties.
(i) As of the Closing, the Acquired Assets of
each Seller will be owned by such Seller, free and clear of all
Encumbrances. The Acquired Assets of each Seller consist of the
tangible and intangible assets of such Seller (exclusive of the Excluded
Assets) in existence as of January 1, 1996 (except as set forth on
Exhibit 3.1(h) with respect to cash of such Seller which was distributed
to its shareholders and except for such changes in inventory and in
accounts receivable in the ordinary course of business as are not in
violation of Section 3.1(h) or 4.2), increased by New Rental Equipment
acquired from and after the date of this Agreement in compliance with
Section 4.2, decreased by Current Rental Equipment disposed of from and
after the date of this Agreement in compliance with Section 4.2, and
decreased by Current Rental Equipment sold or otherwise transferred on
or after March 1, 1996 but before the date of this Agreement. Between
March 1, 1996 and the day before the date of this Agreement, each Seller
has purchased the New Rental Equipment and has sold, for cash or a
Current Rental Equipment Receivable only, the Current Rental Equipment
described in Exhibit 4.2(b), but has not otherwise sold, traded,
transferred or otherwise disposed of any Current Rental Equipment. The
Acquired Assets of each Seller are all of the tangible and intangible
assets (other than the Excluded Assets and the Consigned Equipment) used
by the Seller in its business. Except for items rented or leased to
customers, all of the tangible Acquired Assets of each Seller are
located on the Premises occupied by such Seller or by another Seller.
Each Seller has good and marketable title to, or valid leasehold
interests in, all of its Acquired Assets.
(ii) Each Seller leases all buildings as part of
the Premises, and either owns or leases all machinery, equipment and
other assets (except for the Consigned Equipment) necessary for the
conduct of its business as presently conducted. Except as set forth on
Exhibit 3.1(k), the Premises are free from defects, have been maintained
in accordance with normal industry practice, are in good operating
condition and repair, are suitable for the purposes for which they
presently are used and, to the best knowledge of the Sellers and the
Shareholders, comply in all respects with the Americans with
Disabilities Act. No Seller has received notice of violation of any
Legal Requirement, Order or Permit relating to its operations or its
owned or leased properties.
(iii) All leases are valid and in full force and
effect in accordance with their respective terms and, except as set
forth on Exhibit 3.1(k), there are not, under any of such leases, any
existing defaults or events of default or events which, with notice or
lapse of time or both, would constitute a default. No party to any
lease has repudiated any provision thereof, and there are no disputes,
oral agreements or forbearance programs in effect as to such leases. To
the best knowledge of the Sellers and the Shareholders, the Premises
have received all approvals of Governmental Authorities (including
Permits) required in connection with the occupation and operation
thereof and have been
-15-
<PAGE> 20
occupied, operated and maintained in accordance with applicable Legal
Requirements. The Premises are supplied with utilities and other
services necessary for the operation of said facilities. To the best
knowledge of the Sellers and the Shareholders, the owner of the Premises
occupied by Rifle in Glenwood Springs, Colorado, has good and marketable
title to the underlying real property, free and clear of any
Encumbrance, easement, covenant or other restriction, except for
installments of special assessments not yet delinquent and recorded
easements, covenants and other restrictions which do not impair the
current use, occupancy or value, or the marketability of title, of the
property subject thereto. No Seller subleases any personal property
except for temporary subleases of rental equipment (for rental by such
Seller) in an aggregate amount which is not material to such Seller, its
business or its financial results.
(l) Lists of Properties, Contracts and Other Data.
Each Seller has delivered to the Buyer a correct and complete list, attached
hereto as Exhibit 3.1(l), setting forth the following:
(i) all items of equipment, machinery and other
tangible personal property included in the Acquired Assets of such
Seller (including that which, as of the date of this Agreement, has no
book value), and the original cost, depreciation and current book value
of all such items of equipment, machinery and other tangible personal
property which are included in the Latest Balance Sheet of such Seller;
(ii) all rights, licenses, leases, assignments,
indemnifications and other agreements to which each Seller is a party
which relate to the Acquired Assets or the Assumed Liabilities of such
Seller, including, without limitation, any intangible assets or
Intellectual Property;
(iii) all guaranty, warranty and indemnity
agreements which relate to the Acquired Assets or the Assumed
Liabilities of such Seller with respect to products or services sold,
rented, leased, provided or delivered by such Seller;
(iv) all contracts or agreements for the
purchase, sale, rental or lease of materials, supplies, products or
other personal property or for the furnishing or receipt of services
which relate to the Acquired Assets or the Assumed Liabilities of such
Seller;
(v) all contracts or agreements concerning any
partnership or joint venture which relate to the Acquired Assets or the
Assumed Liabilities of such Seller;
(vi) all claims, deposits, causes of action,
choses in action, rights of recovery, rights of setoff and rights of
recoupment which relate to the Acquired Assets or the Assumed
Liabilities of such Seller;
(vii) all franchises, approvals, Permits (other
than those set forth on Exhibit 3.1(i)), licenses, orders,
registrations, certificates, variances and similar rights which relate
to the Acquired Assets or the Assumed Liabilities of such Seller;
(viii) all contracts or agreements concerning
confidentiality or prohibiting such Seller from freely engaging in its
business as now conducted or proposed to be conducted or from competing
anywhere in the world;
(ix) all other contracts, agreements,
instruments, guarantees and commitments (including mortgages, deeds of
trust, indentures, loan agreements and credit agreements) which relate
to the Acquired Assets or the Assumed Liabilities of such Seller to
which it is a party or by which it or its assets are bound;
-16-
<PAGE> 21
(x) the names and annual rates of compensation
as of January 1, 1996 (which rates have remained the same through the
date hereof and the Closing) of all officers and directors of each
Seller, all other management employees, and each other employee whose
annual rate of compensation is at least $20,000;
(xi) the names of all retired employees, if any,
of such Seller who are receiving or are entitled to receive any payments
which are not fully covered by any Employee Pension Benefit Plan
qualified under Code Section 401(a) of any Seller, their ages and their
current annual funded and unfunded benefits;
(xii) the name of each bank or other financial
institution or entity in which such Seller has an account or safe
deposit box (with the identifying account number or symbol) and the
names of all persons authorized to draw thereon or to have access
thereto; and
(xiii) all outstanding notes or accounts
receivable relating to accounts with such Seller, or advances by such
Seller, to such shareholder, officer, director, employee or consultant
or relative or affiliate thereof, as of the date of this Agreement.
True and complete copies of the documents referred to in such list have been
delivered to the Buyer. All such rights, licenses, leases, registrations,
applications, contracts, agreements and commitments and other items referred to
in such list are valid, in full force and effect, enforceable in accordance
with their respective terms for the period stated therein, no party has
repudiated any provision thereof and no breach or default will result from the
execution, delivery and performance of this Agreement or the Other Seller
Agreements, or the transactions contemplated hereby or thereby. No Seller nor
any other party thereto is in breach or default in performance of any of its
respective obligations thereunder, and no event exists which, with the giving
of notice or lapse of time or both, would constitute a breach, default or event
of default on the part of a party to any of the foregoing that is continuing
unremedied.
(m) Litigation, Etc. There is no outstanding Order
against, nor is there any litigation, proceeding, arbitration or investigation
by any Governmental Authority or other Person pending or threatened against,
any Seller, its properties or Business or relating to the transactions
contemplated by this Agreement, nor to the best knowledge of the Sellers and
the Shareholders is there any basis for any such action.
(n) Notes and Accounts Receivable. The notes
receivable, if any, and accounts receivable of each Seller reflected on its
Latest Balance Sheet, and all notes and accounts receivable arising prior to
the Closing Date (including, without limitation, any Current Equipment
Receivables in existence as of the Closing Date), arose and will arise from
bona fide transactions by each Seller in the ordinary course of business, are
valid receivables with trade customers subject to no setoffs or counterclaims,
are current (except that some or all of the $25,000 amount referred to in the
first sentence of Section 5.8 may not be current) and collectible.
(o) Product Quality, Warranty Claims. To the best
knowledge of the Sellers and the Shareholders, all products and services sold,
rented, leased, provided or delivered by each Seller to customers on or prior
to the Closing Date conform to applicable contractual commitments, express and
implied warranties, product and service specifications and quality standards,
and no Seller has any Liability (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against a Seller giving rise to any Liability) for replacement
or repair thereof or other damages in connection therewith. No product or
service sold, rented, leased, provided or delivered by any Seller 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.
-17-
<PAGE> 22
(p) Product Liability. To the best knowledge of the
Sellers and the Shareholders, no Seller has any Liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any Seller which
might give rise to any Liability) arising out of any injury to a Person or
property as a result of the ownership, possession, provision or use of any
product or service manufactured, sold, rented, leased, provided or delivered by
any Seller on or prior to the Closing Date. All product or service liability
claims that have been asserted against any Seller since January 1, 1991,
whether covered by insurance or not and whether litigation has resulted or not,
are listed and summarized on Exhibit 3.1(p).
(q) Inventory. The inventory of each Seller consists
of goods which, in the aggregate, are merchantable, is fit for the purposes
for which it was procured and is held by such Seller, is usable in the ordinary
course of business and is good and not overvalued. The inventory value
reflected on the Latest Balance Sheet of each Seller fairly represents (i) with
respect to inventory held for resale, the resale value of such inventory, and
(ii) with respect to inventory held for rental, the original cost thereof less
such depreciation as is set forth on the Latest Balance Sheet.
(r) Insurance. Each Seller has policies of insurance
(i) covering risk of loss on its Acquired Assets, (ii) covering products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption, all with
responsible and financially sound insurance carriers in adequate amounts and in
compliance with governmental requirements and in accordance with good industry
practice. All such insurance policies are valid, in full force and effect and
enforceable in accordance with their respective terms and no party has
repudiated any provision thereof. All such policies will remain in full force
and effect until midnight on the Closing Date. No Seller nor any other party
to any such policy is in breach or default (including with respect to the
payment of premiums or the giving of notices) in the performance of any of
their respective obligations thereunder, and no event exists which, with the
giving of notice or the lapse of time or both, would constitute a breach,
default or event of default, or permit termination, modification or
acceleration under any such policy. There are no claims, actions, proceedings
or suits arising out of or based upon any of such policies nor, to the best
knowledge of the Sellers and the Shareholders, does any basis for any such
claim, action, suit or proceeding exist. Descriptions, including current
premium amounts and the date and amount of the most recent premium increase for
each, of the policies of insurance are set forth on Exhibit 3.1(r). All
premiums have been paid on such policies as of the date of this Agreement and
will be paid on such policies through the Closing Date, and no Seller has
received notice of any increase in any such premium except as set forth on
Exhibit 3.1(r). Each Seller has been covered during the five years prior to
the date of this Agreement by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. All claims made during such five-year period with respect to any
insurance coverage of any Seller, other than those described on Exhibit 3.1(p),
are set forth on Exhibit 3.1(r). No Seller engages in any self-insurance
activities.
(s) Compliance with Applicable Laws and Rights. To the
best knowledge of the Sellers and the Shareholders, except as set forth on
Exhibit 3.1(s), no Seller is in violation of any applicable Legal Requirement,
Order or Right. No Seller has received notice from any Governmental Authority
or other Person of any violation or alleged violation of any Legal Requirement,
Order or Right, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced or is
pending or threatened against any Seller alleging any such violation. To the
best knowledge of the Sellers and the Shareholders, except as set forth on
Exhibit 3.1(s), each Seller's properties, including its facilities, machinery
and equipment, conform with applicable Legal Requirements and Orders,
including, without limitation, environmental laws, zoning laws and building
codes, and are in compliance with OSHA and the Americans with Disabilities Act.
Neither any Seller nor any Shareholder has any knowledge of any pending or
proposed OSHA regulations or amendments to OSHA regulations (including toxic
chemical regulations) which would require any change in any Seller's
facilities, equipment, operations or procedures or affect any Seller's Business
or the costs of conducting
-18-
<PAGE> 23
its Business as now conducted. No Seller has made any payments for political
contributions, or any bribes, kickback payments or other illegal contributions.
(t) Pension and Employee Benefit Matters.
(i) The Buyer will not suffer any Liability or
Adverse Consequence from any Seller's administration or termination of
any of its Employee Benefit Plans or Benefit Arrangements or from any
failure of any post-Closing distribution of benefits to employees of the
Seller to be made by the Seller in compliance with all applicable Legal
Requirements. In accordance with applicable Legal Requirements, such
employees who become employees of the Buyer will be permitted to roll
over any qualified Employment Pension Plan distributions from the
Seller's plans to any qualified Employee Pension Plan the Buyer may
maintain or establish.
(ii) The Buyer will have no obligation to employ
any employee of any Seller or to continue any Employee Benefit Plan or
Benefit Arrangement, and will have no obligation or Liability under any
such plan or arrangement maintained by any Seller. Each Seller will
remain liable for all costs of employee compensation, including (A) all
employee benefits and claims under any Employee Benefit Plan or Benefit
Arrangement, (B) Taxes relating to employment and employees attributable
to periods through the Closing Date, whether reported by the Closing
Date or thereafter, and (C) all group health plan continuation coverage
to which any employee, former employee or dependent is entitled because
of a qualifying event (as defined in Section 4980B(f)(3) of the Code)
occurring through the Closing Date or as a result of termination of
employment with any Seller because of the transactions contemplated by
this Agreement and any benefit or excise tax liability or penalty or
other costs arising from any failure by a Seller to provide group health
plan continuation coverage.
(iii) No Seller has incurred any Liability under
Title IV of ERISA arising in connection with any termination or partial
termination of any Employee Pension Benefit Plan or any withdrawal from
any Multiemployer Plan. None of the assets of any Seller is the subject
of a lien arising under Section 302(f) of ERISA or Section 412(n) of the
Code; no Seller has been required to post any security under Section 307
of ERISA or Section 401(a)(29) of the Code; and no fact or event exists
that could reasonably be expected to give rise to any such lien or
requirement to post any such security.
(iv) Except as set forth on Exhibit 3.1(t),
neither any Seller nor any ERISA Controlled Group which includes any
Seller (if any) maintains, administers or contributes to, has
maintained, administered or contributed to, or has any Liability to
contribute to, any Employee Benefit Plan. Exhibit 3.1(t) lists each
Employee Benefit Plan that is, or at any time during the past six years
was, maintained, administered,
-19-
<PAGE> 24
contributed to or required to be contributed to by any Seller or any
ERISA Controlled Group (if any) which includes or has included any
Seller, and the date of termination of each such Employee Benefit Plan
(if any) which has been terminated. No Seller has any Liability (nor is
there any basis for the assertion of any Liability) as a result of any
Seller's or any such ERISA Controlled Group's maintenance,
administration or termination of, or contribution to, any Employee
Benefit Plan. Neither any Seller nor any member of any ERISA Controlled
Group (if any) which includes or has included any Seller has ever been
required to contribute to any Multiemployer Plan.
(u) Employees and Labor. No Seller has received any
notice, nor, to the best knowledge of the Seller and the Shareholders, is there
any reason to believe that any executive or key employee of any Seller or any
group of employees of any Seller has any plans to terminate his, her or its
employment with any Seller. No executive or key employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Sellers prior to the Closing Date and, if such
person becomes an employee of the Buyer, to the affairs of the Buyer after the
Closing Date. To the best knowledge of the Sellers and the Shareholders, each
Seller has complied with all Legal Requirements relating to the employment of
labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
Taxes. No Seller will be required to give any notice under any plant closing
or similar law as a result of this Agreement, the Other Seller Agreements or
the transactions contemplated hereby or thereby. No Seller has any labor
relations problems or disputes, nor has any Seller experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. No Seller is a party to or bound by any collective bargaining
agreement, there is no union or collective bargaining unit at any Seller's
facilities, and no union organization effort has been threatened, initiated or
is in progress with respect to any employees of any Seller. No Seller is
indebted to any shareholder, officer, director, employee or consultant or any
relative or affiliate thereof, whether by loan, advance or otherwise, other
than for salaries accrued but not yet payable and reimbursable out-of-pocket
expenses incurred in the ordinary course of business and not yet payable, nor
is any shareholder, officer, director, employee or consultant or any relative
or affiliate thereof so indebted to any Seller.
(v) Supplier and Customer Relationships. Exhibit
3.1(v) lists each customer that, to the best knowledge of the Sellers and the
Shareholders, individually or with its affiliates was, based upon each Seller's
sales, rental or lease revenues during the fiscal year ending December 31, 1995
and the three-month period ending March 31, 1996, one of such Seller's ten
largest customers in such year or such three-month period (collectively, as to
a Seller, the "Principal Customers"). Exhibit 3.1(v) lists each supplier that
individually or with its affiliates was, based upon each Seller's purchases of
inventory or supplies during the fiscal years ending December 31, 1993, 1994
and 1995 and the three-month period ending March 31, 1996, one of such Seller's
two largest suppliers in each such year or such three-month period
(collectively, as to a Seller, the "Principal Suppliers"). Each Seller has
good commercial
-20-
<PAGE> 25
working relationships with its Principal Customers and Principal Suppliers and
since June 30, 1995, no Principal Customer or Principal Supplier of a Seller
has cancelled or otherwise terminated its relationship with such Seller,
materially decreased or limited its purchases, rentals or leases or inventory
or supplies supplied to any Seller, or threatened to take any such action. To
the best knowledge of the Sellers and the Shareholders, the Sellers and the
Shareholders have no basis to anticipate any problems with any Seller's
business or customer relationships. To the best knowledge of the Sellers and
the Shareholders, no Principal Customer or Principal Supplier has any plans to
reduce its purchases, rentals or leases below levels prevailing in recent
periods, and the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not adversely affect the
relationship of any Seller with any Principal Customer or Principal Supplier
prior to the Closing Date or of the Buyer with any Principal Customer or
Principal Supplier after the Closing Date.
(w) Condition, Adequacy and Type of Equipment. All of
the machinery, equipment and other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) has been well
maintained, is in good repair and good operating condition (subject to the last
sentence of this Section 3.1(w)), and is suitable for the purposes for which it
is presently used. The existing machinery, equipment and other tangible
personal property of each Seller is sufficient for the conduct of such Seller's
Business as now conducted. None of the machinery, equipment or other tangible
personal property included in the Acquired Assets (including that held for
rental, lease or sale) is damaged or defective (subject to the last sentence of
this Section 3.1(w)), no Seller has experienced material problems or
deficiencies with respect to its machinery, equipment and other tangible
personal property (subject to the last sentence of this Section 3.1(w)), and,
to the best knowledge of the Sellers and the Shareholders, there is no basis to
anticipate any such problems or deficiencies (subject to the last sentence of
this Section 3.1(w)). In the normal course of business certain items which are
held for rental or lease suffer damage in the course of use by a Seller's
customer, and such items have been repaired, or are reparable and are in the
process of being repaired, by the Seller for use in the Seller's rental and
leasing business; provided, that each Seller shall continue through the Closing
Date to repair such items on a basis consistent with past practice and the
aggregate cost to the Buyer after the Closing Date to repair all such items
which are in need of repair or are in the process of being repaired as of the
Closing Date will not exceed that which, consistent with past practice of the
Seller, is normally experienced by the Seller at any given time.
(x) Environmental Obligations. Except as set forth in
the environmental studies attached as Exhibit 3.1(x) (collectively, the
"Environmental Study"), to the best knowledge of the Sellers and the
Shareholders, each Seller is conducting and at all times has conducted its
business and operations, and has occupied, used and operated the Premises and
all other real property and facilities previously owned, used, occupied or
operated by such Seller, in compliance with all Environmental Obligations and
so as not to give rise to Liability under any Environmental Obligations or to
any impact on such Seller's business or activities. Except as set forth in the
Environmental Study, to the best knowledge of the Sellers
-21-
<PAGE> 26
and the Shareholders, there is no basis to believe or suspect that any Seller's
business has been conducted or is being conducted in violation of any
Environmental Obligations, and the Sellers and the Shareholders do not have any
knowledge of pending or proposed changes to any Environmental Obligations which
would require any changes in any Seller's facilities, equipment, operations or
procedures or affect any Seller's business or its cost of conducting its
business as now conducted.
(y) Compliance, Disclosure of Environmental Conditions.
Except as set forth in the Environmental Study, to the best knowledge of the
Sellers and the Shareholders, no conditions, circumstances or activities have
existed or currently exist, and no Seller or Shareholder has engaged in any
acts or omissions, with respect to the Premises, any other real properties or
facilities previously owned, occupied, used or operated by any Seller or any
predecessor, or any Seller's business, properties or facilities which could
result in any Liability, including any recovery by any Governmental Authority
or other Person of any remedial or removal costs, response costs, natural
resource damages or other costs, expenses or damages arising from or relating
to any release or threatened release of any Hazardous Material or alleged
injury or threat of injury or harm to public health, safety or the environment.
Except as set forth in the Environmental Study, to the best knowledge of the
Sellers and the Shareholders, no conditions, circumstances or activities have
existed or currently exist, and no Seller or Shareholder has engaged in any
acts or omissions, with respect to the Premises, any other real properties or
facilities previously owned, occupied, used or operated by any Seller or any
predecessor, or any Seller's business, properties or facilities which could
subject any Seller or the Buyer to any administrative, civil or criminal
liability, injunctive relief, penalty or obligation, whether under common law,
equitable theory, or pursuant to Environmental Obligations, or which in the
future could result in or in the past may have resulted in actual or threatened
damage, harm, or impairment of, or a threat to, public health, safety, welfare
or the environment. Exhibit 3.1(y) identifies all real properties and
facilities, including the addresses thereof, which have been owned, occupied,
used or operated by any Seller or its predecessors at any time on or prior to
the date of this Agreement.
(z) No Outstanding Orders or Actions. To the best
knowledge of the Sellers and the Shareholders, there are no outstanding Orders
against any Seller or any Shareholder, nor are there any pending or threatened
investigations of any kind against any Seller or any Shareholder, concerning
any environmental, public health, safety, welfare or land use matters or other
Environmental Obligations, including, but not limited to, the emission,
discharge or release of hazardous or toxic substances or wastes, pollutants, or
contaminants into the environment or work place, or the handling, storage,
treatment, disposal or transportation of hazardous or toxic substances or
wastes, pollutants or contaminants. To the best knowledge of the Sellers and
the Shareholders, there are no actions, suits or administrative, arbitral or
other proceedings alleged, claimed, threatened, pending against or affecting
any Seller or any Shareholder at law or in equity with respect to any
environmental, public health, safety, welfare or land use matters or other
Environmental Obligations, and the Sellers and the Shareholders
-22-
<PAGE> 27
have no knowledge of any existing grounds on which any such action, suit or
proceedings might be commenced.
(aa) No Waste Disposal. Except as set forth in the
Environmental Study, to the best knowledge of the Sellers and the Shareholders,
any chemicals and chemical compounds and mixtures which are included among the
assets of each Seller are integral to and required for the conduct of the
Seller's business, have not been processed, have not been and are not intended
to be discarded, and are not waste or waste materials. Except as set forth in
the Environmental Study, to the best knowledge of the Sellers and the
Shareholders, no Seller has generated, used, transported or disposed of
Hazardous Materials. Except as set forth in the Environmental Study, to the
best knowledge of the Sellers and the Shareholders, all waste materials which
are generated as part of the business of any Seller are handled, stored,
treated and disposed of in accordance with applicable Legal Requirements and
Environmental Obligations.
(ab) Intellectual Property.
(i) Exhibit 3.1(ab) lists each item of
Intellectual Property owned by any Seller or any Shareholder or which
are used by any Seller in the Business and, in each case where a Seller
is not the owner, the owner of the Intellectual Property. Each Seller
owns or has the legal right to use each such item of Intellectual
Property, and none of such Intellectual Property is subject to any
Encumbrance. Each item of Intellectual Property described on Exhibit
3.1(ab) will be owned or available for use by the Buyer on identical
terms and conditions after the Closing. Each Seller has taken all
necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses.
(ii) No Seller has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of any other Person, and none of the
Sellers or the Shareholders has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that a Seller must
license or refrain from using any Intellectual Property rights of any
other Person). The continued operation of the Business of each Seller
as currently conducted will not interfere with, infringe upon,
misappropriate or conflict with any Intellectual Property rights of
another Person. To the best knowledge of the Sellers and the
Shareholders, no other Person has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property rights of any Seller.
(iii) No Seller has granted any license,
sublicense or permission with respect to any Intellectual Property owned
or used in the Business. With respect to each item of Intellectual
Property required to be identified in Exhibit 3.1(ab), no action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand
is
-23-
<PAGE> 28
pending or is threatened which challenges the legality, validity,
enforceability, use or ownership of the item and no Seller has agreed to
indemnify any Person for or against any interference, infringement,
misappropriation or other conflict with respect to the item.
(iv) No Seller is obligated to pay any royalty or
license or sublicense fee with respect to any Intellectual Property.
With respect to each item of Intellectual Property required to be
identified in Exhibit 3.1(ab) which is not owned by a Seller: (A) the
license, sublicense, agreement or permission under which a Seller has
the right to use the item is legal, valid, binding, enforceable and in
full force and effect and (B) no party to the license, sublicense,
agreement or permission is in breach or default, and no event has
occurred which, with notice or lapse of time or both, would constitute a
breach, default or repudiation or permit termination, modification or
acceleration thereunder.
(ac) Guaranties. No Seller is a guarantor of or, to the
best knowledge of the Sellers and the Shareholders, otherwise liable for any
Liability (including indebtedness) of any other Person with respect to the
Acquired Assets or the Business.
(ad) Powers of Attorney. There are no outstanding
powers of attorney executed on behalf of any Seller.
(ae) Brokers' Fees. No Seller nor any Shareholder has
any Liability to pay any fees or commissions to any broker, finder or agent
with respect to the transactions contemplated by this Agreement.
(af) Disclosure. The documents and information provided
to the Buyer by any Seller, any Shareholder or any agent or employee thereof in
the course of the Buyer's due diligence investigation and the negotiation of
this Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, considered together, do not contain any untrue statement of any
material fact and do not, to the best knowledge of the Sellers and the
Shareholders, omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact which
materially adversely affects the Business, prospects, condition, affairs or
operations of any Seller or any of its properties or assets which have not been
set forth in this Agreement or such Exhibits, including such financial
statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be
deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation
-24-
<PAGE> 29
or warranty has to do with the existence of the document or other item itself).
The Sellers and the Shareholders acknowledge and agree that the fact that they
have made disclosures pursuant to Section 3.1 or otherwise of matters, or did
not have knowledge of matters, which result in Adverse Consequences to the
Buyer shall not relieve the Sellers and the Shareholders of their obligation to
indemnify and hold the Buyer harmless from all Adverse Consequences pursuant to
Article 7.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers and the Shareholders that the statements
contained in this Section 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. This Agreement and the Other Buyer
Agreements and the transactions contemplated hereby and thereby have been duly
approved by all requisite corporate action. The Buyer has full corporate power
and authority to execute, deliver and perform this Agreement and the Other
Buyer Agreements, and this Agreement constitutes, and the Other Buyer
Agreements will when executed and delivered constitute, the legal, valid and
binding obligations of the Buyer, and shall be enforceable in accordance with
their respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution,
delivery and performance of this Agreement and the Other Buyer Agreements, and
the consummation of the transactions contemplated hereby and thereby will not
(i) violate any Legal Requirement or Order to which the Buyer is subject or any
provision of the certificate of incorporation or bylaws of the Buyer or (ii)
violate, with or without the giving of notice or the lapse of time or both, or
conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any Person the right to accelerate any
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of the Buyer pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, agreement, instrument or other
arrangement to which the Buyer is a party or which the Buyer or any of its
assets and properties is bound or subject. Except for notices and consents
that will be given or obtained by the Buyer prior to the Closing, the Buyer
does not need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement.
3.3. Survival of Representations. The representations and
warranties contained in Sections 3.1 and 3.2 and the Liabilities of the parties
with respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that (a) the Liabilities of
the Sellers and the Shareholders with respect to (i) the representations and
-25-
<PAGE> 30
warranties set forth in Sections 3.1(j), 3.1(t), 3.1(x), 3.1(y), 3.1(z),
3.1(aa), and 3.1(af), shall survive until the expiration of all applicable
statutes of limitation and (ii) the representations and warranties set forth in
Sections 3.1(a), 3.1(b), 3.1(e), 3.1(k) and 3.1(ab) shall survive without
termination and (b) the Liabilities of the Buyer with respect to the
representations and warranties set forth in Section 3.2(b) shall survive
without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith and in accordance with the following sentence. For purposes of Section
3.1, the terms "best knowledge," "best of knowledge" or "knowledge" of all or
any Sellers and/or Shareholders, mean (a), when such statement is set forth in
the second sentence of Section 3.1(k)(ii), the third sentence of Section
3.1(k)(iii), the first, third or fourth sentences of Section 3.1(s) (except as
such sentences relate to any Order or Right), the third sentence of Section
3.1(u), the first or second sentences of Section 3.1(x), the first or second
sentences of Section 3.1(y) or the last sentence of Section 3.1(aa), the actual
knowledge of Glen R. Miller and Elizabeth Miller without any duty of inquiry or
investigation, and (b), when such statement relates to other matters
(including, without limitation, those set forth in Sections 3.1(p), (r), (u) or
(v)), the actual knowledge of Glen R. Miller and Elizabeth Miller after
reasonable investigation and reasonable good faith inquiry (in each case
consistent with good management practices) of Rance Ketterling, Donna Carter,
Gary Jensen, William Tabor, Roxine Campbell and Edward Crilley.
4. Pre-Closing Covenants. The parties agree as follows with respect
to the period between the execution of this Agreement and each Closing;
provided, however, that following the First Closing the obligations of the
First Sellers and the Shareholders set forth in this Section 4 shall apply only
to matters relating to Rifle, the Rifle Acquired Assets and the Rifle Business.
4.1. General. Each of the parties will use its best efforts to
take all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will cause the Sellers to give any notices, make
any filings and obtain any consents, authorizations or approvals needed to
consummate the transactions contemplated by this Agreement.
4.2. Operation of Business. The Sellers will not, and
Shareholders will not cause or permit the Sellers to, engage in any practice,
take any action or enter into any transaction outside their ordinary course of
business; provided, however, that in no event will any action be taken or any
transaction be entered into which would result in a breach of any
representation, warranty or covenant of any Seller or Shareholder. Without
limiting the
-26-
<PAGE> 31
foregoing, from the date of this Agreement through the Closing, any Seller may
purchase new or used rental or lease equipment for use in the Business ("New
Rental Equipment") or may sell (but only for cash or a Current Rental Equipment
Receivable) rental or lease equipment owned by a Seller on or after March 1,
1996 ("Current Rental Equipment"), including, without limitation, rental or
lease equipment identified on Exhibit 4.2(a) which the President of the Sellers
has, prior to the date of this Agreement, approved for sale by the Sellers but
which has not been sold as of the date of the Agreement, but may not otherwise
sell, trade, transfer or dispose of any Current Rental Equipment; provided,
however, that between the date of this Agreement and the Closing, no New Rental
Equipment shall be purchased and no Current Rental Equipment shall be sold
without the express prior written approval of an officer of the Buyer and
without the Shareholders' Agent and an officer of the Buyer expressly agreeing
on the amount by which the purchase price payable pursuant to Section 2.3 shall
be increased in respect of New Rental Equipment purchases ("New Rental
Equipment Increases") and the amount by which the purchase price payable
pursuant to Section 2.3 shall be decreased in respect of Current Rental
Equipment sales ("Current Rental Equipment Decreases"). Exhibit 4.2(b) sets
forth (a) New Rental Equipment Increases with respect to New Rental Equipment
purchased between March 1, 1996 and the date of this Agreement and (b) Current
Rental Equipment Decreases with respect to Current Rental Equipment sold or
otherwise transferred between March 1, 1996 and the date of this Agreement, as
agreed by the Shareholders' Agent and an officer of the Buyer. If any New
Rental Equipment purchases or Current Rental Equipment sales occur after the
date hereof and before the Closing, Exhibit 4.2(b) shall be amended to reflect
any agreed upon New Rental Equipment Increases and Current Rental Equipment
Decreases relating thereto.
4.3. Preservation of Business. Each Seller will, and the
Shareholders will cause each Seller to, keep its Business and properties,
including its current operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers and employees,
intact.
4.4. Full Access. Each Seller will permit the Buyer and its
agents to have full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of such Seller, to all
premises, properties, personnel, books, records (including Tax records),
contracts and documents of or pertaining to such Seller.
4.5. Notice of Developments. The Sellers will give prompt
written notice to the Buyer of any material development which occurs after the
date of this Agreement and affects the assets, Liabilities, Business, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of any Seller.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
-27-
<PAGE> 32
4.6. Exclusivity. No Seller nor any Shareholder will, and no
Shareholder will cause or permit any Seller to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any portion
of the assets of, any Seller (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
any Seller's stock in favor of any such transaction. The Sellers and
Shareholders will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
4.7. Confirmatory Conveyance. Prior to the Closing Date, the
Shareholders shall convey to the applicable Seller, free and clear of any
Encumbrance or Tax, all of each Shareholder's right, title and interest to the
Seller Improvements, Fixtures and Fittings.
4.8. Announcements. Prior to the Closing, no party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
parties.
5. Post-Closing Covenants. The parties agree as follows with
respect to the period following each Closing.
5.1. Further Assurances. In case at any time after the Closing
any further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Glen R. Miller and Elizabeth Miller will
assist with the transition of the Business of each Seller to the Buyer during
the first six months following the Closing at no cost to the Buyer as set forth
in the next three sentences. The amount of time so required of Glen R. Miller
shall be an initial period of not greater than six consecutive weeks, at
Buyer's sole discretion, on a full-time basis, after which Glen R. Miller shall
be available on an as-needed basis not to exceed thirty hours per week. The
amount of time required of Elizabeth Miller shall be a period of not greater
than three consecutive weeks, at Buyer's sole discretion, on a full-time basis.
After the initial full-time period for Glen R. Miller, and before the
expiration of the six month period, notwithstanding the foregoing, the
assistance of Glen R. Miller shall be rendered at such times as reasonably
agreed to by him and the Buyer. No Seller or Shareholder will take any action
at any time that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier or other business associate of any Seller
from establishing a business relationship with the Buyer after the Closing.
-28-
<PAGE> 33
5.3. Cooperation. In the event and for so long as any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(a) any transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Business of any Seller, each of the
other parties will cooperate with her, him or it and her, his or its counsel in
the contest or defense, make available their personnel, and provide such
testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Section 7).
5.4. Confidentiality. The Sellers and the Shareholders will
treat and hold as confidential all Confidential Information concerning the
Buyer or the Business or Acquired Assets of any Seller, refrain from using any
such Confidential Information and deliver promptly to the Buyer or destroy, at
the request and option of the Buyer, all of such Confidential Information in
its or their possession.
5.5. Post-Closing Announcements. Following the Closing, no
Seller nor Shareholder will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer.
5.6. Financial Statements. The Sellers and the Shareholders
will, upon request of the Buyer, cooperate with the Buyer to produce such
historical and on-going financial statements and audits as the Buyer may
request, all at the sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities. The Shareholders and the
Sellers will pay and perform, as and when due, all Liabilities relating to the
Sellers, the Business of each Seller and the Acquired Assets of each Seller
other than the Assumed Liabilities. In addition, the Sellers and the
Shareholders will pay to the Buyer, promptly after their receipt of notice from
the Buyer stating the amount payable by them and a copy of the invoices from
Governmental Authorities relating thereto, the portion of the personal property
taxes on the Acquired Assets of each Seller attributable to the period from
January 1, 1996 to and including the date on which the Closing occurs. The
amount of such taxes payable by the Shareholders and the Sellers will be
determined by prorating personal property taxes on the Acquired Assets of each
Seller for 1996 in proportion to the number of days in the year prior to and
including the date on which the Closing occurs compared to the number of days
in the year remaining after the date on which the Closing occurs. The Buyer
will pay and perform, as and when due (except to the extent the validity
thereof or the liability therefor is being contested by the Buyer), the Assumed
Liabilities. Further, the Sellers and the Shareholders, at their expense,
promptly will take or cause to be taken any action necessary to remedy any
failure of the Premises or the Business to comply at the Closing Date with any
Legal Requirement or Order, upon receipt of notice from the Buyer at any time.
However, the Sellers and the Shareholders will be
-29-
<PAGE> 34
required to remedy such a failure involving the non-compliance of the Premises
with the Americans with Disabilities Act only if the Buyer becomes aware
thereof, or such a condition is required to be remedied, in connection with an
event occurring after the Closing (including, by way of example only, a
remodeling of any of the Premises or an investigation or inspection by a
Governmental Authority).
5.8. Collection of Receivables. The Sellers jointly and
severally guarantee that the Closing Accounts Receivable will be fully paid to
the Buyer in accordance with their terms at their recorded amounts not later
than 120 days after the Closing Date, except that up to $25,000 in the
aggregate of such Closing Accounts Receivable will be fully paid to the Buyer
at their recorded amounts not later than 180 days (rather than 120 days) after
the Closing Date. From the Closing until 120 days after the Closing Date (and
until 180 days after the Closing Date with respect to the $25,000 of Closing
Accounts Receivable whose payment is guaranteed within 180 days after the
Closing Date pursuant to the first sentence of this Section), the Buyer will
apply its standard accounts receivable collection procedures to the Closing
Accounts Receivable; provided, however, the Buyer will not be required to
institute suit, utilize third-party collection agencies or take other
extraordinary collection actions with respect to the Closing Accounts
Receivable; and, provided further, that any failure of any collection
activities of the Buyer or any such collection agency or other agent will not
relieve the Sellers and the Shareholders from their guarantee of the Closing
Accounts Receivable as described in the first sentence of this Section. In
order to determine whether a Closing Account Receivable has been collected for
purposes of the first sentence of this Section, the following shall apply: (a)
if the customer, at the time of payment or thereafter, specifies that a
particular payment made by such customer applies to a Closing Account
Receivable or to an account receivable generated by the Buyer after the Closing
Date (a "Customer Specification"), such Customer Specification shall control;
and (b) if no Customer Specification is made, payments received from a customer
after the Closing Date shall be applied first to the oldest account receivable
from such customer. Upon payment in full from the Sellers and the Shareholders
to the Buyer of any Closing Account Receivable guaranteed pursuant to the first
sentence of this Section, such Closing Account Receivable shall, without
further action of any part, become the property of the Sellers.
5.9. Use of Certain Assets.
(a) Until the first anniversary of the Closing, Glen R.
Miller may use the Buyer's rental equipment located at its Eagle, Colorado
store for his personal use at his home in Eagle, Colorado, to the extent the
rental equipment requested by Mr. Miller is not needed by the Buyer for rental
to its customers. Such use by Mr. Miller will be subject to the Buyer's
standard rental terms and conditions, except that Mr. Miller will not be
charged any rental fee or required to make any security deposit.
(b) Until the first anniversary of the Closing, the
Buyer may use Mr. Miller's car wash located on the Eagle, Colorado Premises in
connection with the Buyer's
-30-
<PAGE> 35
rental business, to the extent such car wash is not then being used by
customers of the car wash. Such use by the Buyer will be subject to the
standard terms and conditions applicable to customers of the carwash, except
that the Buyer will not be charged any fee. Any wash stalls so used by the
Buyer will be left reasonably clean by the Buyer.
(c) Until the first anniversary of the Closing, the
Buyer will permit the Shareholders to have access to the computer system and
records included in the Acquired Assets, at reasonable times and upon
reasonable notice to the Buyer, to the extent necessary for the Shareholders to
conduct the car wash business conducted prior to the Closing by the Sellers
(the "Excluded Business") and so long as such access does not interfere with
the Buyer conducting its business. Further, during such time period, the Buyer
will maintain at its Eagle, Colorado store an "out-box" into which the Buyer
will place, for pick-up by Mr. Miller, correspondence received at such store
concerning the Excluded Business. The provisions of Section 5.4 shall apply to
any Confidential Information concerning the Buyer that is obtained by any
Shareholder in connection with the activities of any Shareholder or Seller
relating to this Section 5.8(c).
5.10. Excluded Accounting Records. Following the Closing, the
Sellers and the Shareholders will, upon reasonable notice from the Buyer and at
reasonable times, provide the Buyer with access to the original Excluded
Accounting Records. The Buyer may, at its own expense, make copies of such
documents.
5.11. Replacement Equipment Relationship. The Sellers and the
Shareholders are not being required to make any representation pursuant to
Section 3.1(v) regarding the relationship between the Sellers and Wagner
Equipment Co. ("Wagner") or the continuation by Wagner following the Closing of
that relationship with the Buyer. However, following the Closing, Glen R.
Miller shall use his best efforts to secure for the Buyer relationships with
Wagner or one or more other heavy equipment providers acceptable to the Buyer
pursuant to which the Buyer will be provided with equipment like that provided
by Wagner to the Sellers prior to the Closing on terms no worse to the Buyer
than those enjoyed by the Sellers prior to the Closing Date and permitting the
Buyer to experience similar revenues and profit margins with respect to such
equipment as those experienced by the Sellers prior to the Closing Date as a
result of the Wagner relationship.
5.12. Country Lease. The Sellers will use their best efforts to
cause, before July 1, 1998, an extension or renewal of the Vail Land Lease for
a term of no less than 10 years and on other terms reasonably satisfactory to
the Buyer. If no such extension or renewal has been so effected, at least 60
days prior to expiration of the Vail Land Lease, Country will (i) purchase or
lease another location in or near Vail, Colorado that is suitable, in the
Buyer's reasonable discretion, for operation of the Country Business then
operated by the Buyer on the land that is subject to the Vail Land Lease and
(ii) enter into a lease with the Buyer for the new location, which lease will
be in the form of the Shareholder Sublease for the Vail,
-31-
<PAGE> 36
Colorado Premises (the "Vail Sublease") and will have economic terms no less
favorable to the Buyer than those in the Vail Sublease.
5.13. Certain Environmental Matters. In regard to the
Silverthorne, Colorado Premises, the Sellers shall, within 90 days of the First
Closing, notify the Colorado Department of Public Health and the Environment
("CDPHE") that a release has occurred on such Premises and that the release has
resulted in a small area of groundwater contamination. The Sellers shall take
such further actions at their expense as are required by CDPHE or any other
Governmental Authority regarding such release and associated contamination.
Nothing in this Section 5.13 shall relieve any Seller or Shareholder from any
obligation or Liability under Section 7 of this Agreement, obligate the Buyer
to take any action or impose any Liability on the Buyer.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the purchase of the Acquired Assets of each Seller and
the consummation of the other transactions contemplated by this Agreement is
subject to satisfaction of the following conditions:
(a) each Seller's and each Shareholder's
representations and warranties shall be correct and complete at and as of the
Closing Date and the Closing and any written notices delivered to the Buyer
pursuant to Section 4.5 and the subject matter thereof shall be satisfactory to
the Buyer;
(b) the Sellers and the Shareholders shall have
performed and complied with all of their covenants hereunder through the
Closing;
(c) the Sellers and Shareholders shall have given all
notices and procured all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets or to conduct the
Business of any Seller, and no such Order shall be in effect;
(e) there shall have been no adverse change in the
Acquired Assets or the Business of any Seller between the date of execution of
this Agreement and the Closing;
-32-
<PAGE> 37
(f) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects and as to the adoption
of resolutions by the board of directors and shareholders of each Seller
authorizing the execution, delivery and performance of this Agreement and the
Other Seller Agreements and the consummation of the transactions contemplated
hereby and thereby;
(g) the Buyer shall have completed its due diligence
with respect to the Sellers, the Business of each Seller and the Acquired
Assets of each Seller with results satisfactory to the Buyer.
(h) the Other Seller Agreements and documentation
necessary to accomplish the conveyance of the specific ownership tax and fee
payments made by the Sellers prior to the Closing in respect of vehicles and
mobile equipment included in the Acquired Assets shall have been executed and
delivered by the Sellers and the Shareholders, as applicable, and the
Shareholders and the owners of the real property underlying the Shareholder
Subleases shall have executed and delivered new leases or extensions/amendments
relating thereto, and estoppel, nondisturbance and landlord waiver agreements,
satisfactory to the Buyer;
(i) the Buyer shall have received from counsel to the
Sellers and the Shareholders an opinion in form and substance as set forth in
Exhibit 6.1(i) addressed to the Buyer and its debt and equity financing sources
and dated as of the Closing;
(j) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the Business of each
Seller shall be available to the Buyer on terms and conditions satisfactory to
the Buyer;
(k) the Buyer shall have received from each Seller
financial statements for 1994 and 1995, audited by an accounting firm
acceptable to the Buyer at the expense of the Buyer, and such financial
statements shall be satisfactory to the Buyer;
(l) "Phase I" and "Phase II" environmental studies of
the Premises, and additional environmental testing of the Glenwood Springs,
Colorado Premises as agreed upon by the Buyer and the Shareholders' Agent,
shall have been completed at the Sellers' expense and supplied to the Buyer,
and the contents of such studies and the results of such additional testing
shall be satisfactory to the Buyer;
(m) each Seller shall have delivered to the Buyer
possession and control of the Acquired Assets of such Seller;
(n) the Sellers and the Shareholders shall have
executed and delivered to the Buyer appropriate documentation to transfer
record ownership of the trade name "E-Z Way Rental" to the Buyer;
-33-
<PAGE> 38
(o) the Sellers and the Shareholders shall have
delivered, or caused the Sellers to deliver, to the Buyer such other
instruments, certificates and documents as are reasonably requested by the
Buyer in order to consummate the transactions contemplated by this Agreement,
all in form and substance reasonably satisfactory to the Buyer; and
(p) with respect to the Second Closing, the Buyer shall
have exercised the Option.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligations of the Sellers and the
Shareholders. The obligations of the Sellers and the Shareholders to
consummate the sale of the Acquired Assets is subject to satisfaction of the
following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with
all of its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above in
Sections 6.2(a) and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed
and delivered by the Buyer;
(e) the Sellers and Shareholders shall have received
from counsel to the Buyer an opinion in form and substance as set forth in
Exhibit 6.2(e), addressed to the Sellers and Shareholders and dated as of the
Closing; and
(f) the Buyer shall have paid and deposited the
purchase price for the Acquired Assets pursuant to Section 2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) If any Seller or Shareholder breaches (or if any
Person other than the Buyer alleges facts that, if true, would mean any Seller
or Shareholder has breached) any
-34-
<PAGE> 39
of the representations or warranties of any Seller or Shareholder contained
herein and the Buyer gives notice thereof to the Shareholders' Agent within the
Survival Period, or if any Seller or Shareholder breaches (or if any Person
other than the Buyer alleges facts that, if true, would mean any Seller or
Shareholder has breached) any covenants of any Seller or Shareholder contained
herein or any representations, warranties or covenants of any Seller or
Shareholder contained in any Other Seller Agreement and the Buyer gives notice
thereof to the Shareholders' Agent, then the Sellers and the Shareholders agree
to jointly and severally indemnify the Buyer from and against any Adverse
Consequences the Buyer may suffer resulting from, arising out of, relating to
or caused by any of the foregoing regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In addition,
the Sellers and the Shareholders agree to jointly and severally indemnify the
Buyer from and against any Adverse Consequences the Buyer may suffer which
result from, arise out of, relate to or are caused by the consummation of the
transactions contemplated by this Agreement, whether or not such matter was
known or disclosed to the Buyer, was disclosed on any Exhibit hereto or is a
matter with respect to which any Seller or Shareholder did or did not have
knowledge, including, without limitation, (i) any act or omission of any
Seller, any Shareholder or any predecessor with respect to, or any event or
circumstance related to, any Seller's, any Shareholder's or any predecessor's
ownership, occupation, use or operation of any of the Acquired Assets, the
Excluded Assets or any other assets or properties or the conduct of its or
their business, regardless of whether such act, omission, event or circumstance
occurred or existed prior to, at or after the Closing Date or whether a claim
with respect to such matter was asserted before or is asserted after the
Closing Date, (ii) any Liability of any Seller or any Shareholder not included
in the Assumed Liabilities, (iii) the use, presence, generation, handling,
remediation, removal, transportation, release or disposal of Hazardous
Materials on, to or from any of the Premises or other real property or
facilities owned, used, occupied or operated by any Seller, any Shareholder or
any predecessor prior to the Closing Date, (iv) the failure of any Seller, any
Shareholder or any predecessor to comply with any Environmental Obligation or
other Legal Requirement or Order or the violation by any of them of any Right,
(v) any claim that the transactions contemplated by this Agreement violate the
Worker Adjustment and Retraining Notification Act, as amended, or any similar
state or local Legal Requirement or any fraudulent conveyance laws of any
jurisdiction, and any Liability resulting therefrom, and (vi) any Liability
resulting from any failure of the parties to comply with any bulk sales or
transfer law or other similar Legal Requirement of any applicable jurisdiction
in connection with the transactions contemplated by this Agreement. In
determining whether there has been a breach of any representation or warranty
contained in Section 3.1 and in determining the amount of Adverse Consequences
suffered by the Buyer for purposes of this Section, such representations and
warranties shall not be qualified (other than by (A) the reference to knowledge
set forth in the second sentence of Section 3.1(f) as it relates to Exhibit
3.1(f)(i) and (B) the references to "material" set forth in Section 3.1(af)) by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved
-35-
<PAGE> 40
by negotiation among the parties within a reasonable time, the dispute will be
resolved by arbitration pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against any Seller or Shareholder during the
Escrow Period will be paid to the Buyer first out of the First Indemnity
Deposit and Second Indemnity Deposit funds escrowed pursuant to the Escrow
Agreement, along with interest from the date such funds are deposited at the
rate applicable to the escrowed funds. The Sellers and the Shareholders will
have joint and several Liability for any additional amounts needed to cover
such claims, which amounts will be paid directly to the Buyer. At the end of
the Escrow Period relating to the First Indemnity Deposit, the amount of the
First Indemnity Deposit that may be needed to cover pending indemnification
claims made by the Buyer (such amounts to be determined by the Buyer based upon
the reasonable exercise of its business judgment) will be retained in the
Escrow Account until such claims are resolved, and any excess amount of the
First Indemnity Deposit on deposit therein, including any accrued interest
thereon, will be paid to the Sellers. At the end of the Escrow Period relating
to the Second Indemnity Deposit, the amount of the First Indemnity Deposit
retained in the Escrow Account pursuant to the second sentence of this Section
7.1(b) and the amount of the Second Indemnity Deposit that may be needed to
cover pending indemnification claims made by the Buyer (such amounts to be
determined by the Buyer based upon the reasonable exercise of its business
judgment) will be retained in the Escrow Account until such claims are
resolved, and any excess amount of the First Indemnity Deposit or the Second
Indemnity Deposit on deposit therein, including any accrued interest thereon,
will be paid to the Sellers. Nothing in this Section 7.1(b) will be construed
to limit the Buyer's right to indemnification to amounts on deposit in the
Escrow Account. The Buyer and the Shareholders' Agent shall jointly give
instructions to the Escrow Agent to carry out the intent of this Section
7.1(b). Any disputes concerning the escrowed funds will be settled by
arbitration as provided in this Agreement.
7.2. Indemnification Provisions for Benefit of the Sellers and
the Shareholders. If the Buyer breaches (or if any Person other than a Seller
or Shareholder alleges facts that, if true, would mean the Buyer has breached)
any of its representations or warranties contained herein and the Shareholders'
Agent gives notice of a claim for indemnification against the Buyer within the
Survival Period, or if the Buyer breaches (or if any Person other than a Seller
or Shareholder alleges facts that, if true, would mean the Buyer has breached)
any of its covenants contained herein or any of its representations, warranties
or covenants contained in any Other Buyer Agreement and the Shareholders' Agent
gives notice thereof to the Buyer, then the Buyer agrees to indemnify the
Sellers and the Shareholders from and against any Adverse Consequences the
Sellers and the Shareholders may suffer which result from, arise out of, relate
to, or are caused by the breach or alleged breach, regardless of whether the
Adverse Consequences are suffered during or after the Survival Period. In
determining whether there has been a breach of any representation or warranty
contained in Section 3.2 and in determining the amount of Adverse Consequences
suffered by the Buyer for purposes of this Section, such representations and
warranties shall not be qualified by "material," "materiality,"
-36-
<PAGE> 41
"in all material respects," "best knowledge," "best of knowledge" or
"knowledge" or words of similar import, or by any phrase using any such terms
or words. If any dispute arises concerning whether any indemnification is
owing which cannot be resolved by negotiation among the parties within a
reasonable time, the dispute will be resolved by arbitration pursuant to this
Agreement.
7.3. Matters Involving Third Parties.
(a) If any third party (including, without limitation,
any Governmental Authority) notifies any party (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give rise to a claim
for indemnification against any other party (the "Indemnifying Party"), then
the Indemnified Party will notify each Indemnifying Party thereof in writing
within 15 days after receiving such notice. No delay on the part of the
Indemnified Party in notifying any Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its
sole cost and expense, to defend the Indemnified Party against the Third Party
Claim with counsel of its choice satisfactory to the Indemnified Party so long
as (i) the Indemnifying Party notifies the Indemnified Party in writing within
10 days after the Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not elect to assume control of or
otherwise participate in the defense or settlement of any Third Party Claim, it
will be bound by the results obtained by the Indemnified Party with respect to
the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect
-37-
<PAGE> 42
to the Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section
7.3(b) above is or becomes unsatisfied, however, (i) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it reasonably
may deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection therewith), (ii)
the Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset
any Adverse Consequences it may suffer against any amounts payable pursuant to
this Agreement or any Other Seller Agreement to any Seller, any Shareholder or
any relative or affiliate of any Shareholder at or after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions
are in addition to, and not in derogation of, any statutory, equitable or
common law remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate
this Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving
written notice to the Shareholders' Agent at any time prior to the Closing (i)
in the event any Seller or Shareholder has breached any representation,
warranty or covenant contained in this Agreement in any material way, the Buyer
has notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the First Closing
has not occurred on or before August 31, 1996 because of the failure of any
condition precedent to the Buyer's obligations to consummate the First Closing
(unless the failure results primarily from the Buyer breaching any
representation, warranty or covenant contained in this Agreement in any
material way); or
(c) the Shareholders' Agent may terminate this
Agreement by giving written notice to the Buyer at any time prior to the
Closing (i) if the Buyer has breached any
-38-
<PAGE> 43
representation, warranty or covenant contained in this Agreement in any
material way, the Shareholders' Agent has notified the Buyer of the breach, and
the breach has not been cured within 10 days after the notice of breach or (ii)
if the First Closing has not occurred on or before August 31, 1996 because of
the failure of any condition precedent to the Sellers' and the Shareholders'
obligations to consummate the First Closing (unless the failure results
primarily from any Seller or any Shareholder breaching any representation,
warranty or covenant contained in this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement
by a party pursuant to Section 8.1 will in no way limit any obligation or
liability of any other party based on or arising from a breach or default by
such other party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement, and the terminating party
will be entitled to seek all relief to which it is entitled under applicable
law.
8.3. Confidentiality. If this Agreement is terminated, each
party will treat and hold as confidential all Confidential Information
concerning the other parties which it acquired from such other parties in
connection with this Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not
confer any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. No Seller nor any Shareholder may assign this Agreement
or any of their rights, interests or obligations hereunder without the prior
written approval of the Buyer. The Buyer may assign its rights and obligations
hereunder as permitted by law, including, without limitation, to any debt or
equity financing source.
9.4. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which together shall be deemed to be one and the same instrument. The
execution of a counterpart of the signature page to this Agreement will be
deemed the execution of a counterpart of this Agreement.
-39-
<PAGE> 44
9.5. Headings. The section headings contained in this
Agreement are inserted for convenience only and will not affect in any way the
meaning or interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
If to the Sellers or
the Shareholders: Copy to:
Addressed to the Michael D. Boster, Esq.
Shareholders' Agent at: Sims & Boster
751 Chambers Avenue 1775 Sherman Street, Ste. 2015
Eagle, Colorado 81631-1890 Denver, Colorado 80203
Telecopy: (970) 328-6677 Telecopy: (303) 830-0926
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Richard M. Tyler Attn: B. Scott Pullara
Telecopy: (303) 620-9016 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and
construed in accordance with the domestic laws of the State of Colorado without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Colorado or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same is in writing and signed by the
Buyer and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any
-40-
<PAGE> 45
prior or subsequent default, misrepresentation or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence, and no waiver will be effective unless set
forth in writing and signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2,
(a) the Buyer shall bear its own costs and expenses (including, without
limitation, legal fees and expenses) incurred either before or after the date
of this Agreement in connection with this Agreement or the transactions
contemplated hereby and (b) the Seller and the Shareholders will bear all costs
and expenses (including, without limitation, all legal, accounting and tax
related fees and expenses, all fees, commissions, expenses and other amounts
payable to any broker, finder or agent and the costs of any environmental study
to be delivered pursuant to Section 6.1) incurred by any Seller or Shareholder
either before or after the date of this Agreement in connection with this
Agreement or the transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection
with this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. The arbitration will be
conducted only in Denver, Colorado, before a single arbitrator selected by the
parties or, if they are unable to agree on an arbitrator, before a panel of
three arbitrators, one selected by the Buyer, one selected by the Shareholders'
Agent and the third selected by the other two arbitrators. The award of the
arbitrators will be final and binding and judgment on the award may be entered
by any court of competent jurisdiction. This submission and agreement to
arbitrate will be specifically enforceable. The prevailing party or parties in
any such arbitration or in any action to enforce this agreement to arbitrate
will be entitled to all reasonable costs and expenses, including fees and
expenses of the arbitrators and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation,
-41-
<PAGE> 46
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the party has not breached will not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in
this Agreement are incorporated herein by reference and made a part hereof.
9.14. Sellers' and Shareholders' Agent. Each Seller and each
Shareholder hereby authorizes and appoints the Shareholders' Agent to act as
its, his or her exclusive agent and attorney-in-fact to act on behalf of each
of them with respect to all matters which are the subject of Sections 2.3(b),
6, 7, 8, 9.6, 9.8 or 9.11, including, without limitation, (a) receiving or
giving all notices, instructions, other communications, consents or agreements
that may be necessary, required or given under any of such Sections and (b)
asserting, settling, compromising, or defending, or determining not to assert,
settle, compromise or defend, (i) any claims which the Seller or any
Shareholder may assert, or have the right to assert, against the Buyer, or (ii)
any claims which the Buyer may assert, or have the right to assert, against the
Seller or any Shareholder. The Shareholder's Agent hereby accepts such
authorization and appointment. Upon the receipt of written evidence
satisfactory to the Buyer to the effect that the Shareholder's Agent has been
substituted as agent of the Seller and the Shareholders by reason of his death,
disability or resignation, the Buyer shall be entitled to rely on such
substituted agent to the same extent as they were theretofore entitled to rely
upon the Shareholder's Agent with respect to the matters covered by this
Section 9.14. No Seller nor any Shareholder shall act with respect to any of
the matters which are the subject of Sections 2.3(b), 6, 7, 8, 9.6, 9.8 or 9.11
except through the Shareholder's Agent. The Sellers and the Shareholders
acknowledge and agree that the Buyer may deal exclusively with the
Shareholders' Agent in respect of the above-referenced matters, that the
enforceability of this Section 9.14 is material to the Buyer, and that the
Buyer has relied upon the enforceability of this Section 9.14 in entering into
this Agreement.
9.15. Option. At any time on or before March 31, 1997, the Buyer has
an option (the "Option") to purchase the Rifle Acquired Assets and to trigger
the transactions related to such acquisition as set forth in this Agreement.
The Buyer may exercise the Option by giving notice to Rifle pursuant to Section
9.6, but shall have no obligation to exercise the Option.
-42-
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
----------------------------------
Name: Richard M. Tyler
--------------------------------
Title: President
-------------------------------
-43-
<PAGE> 48
SELLERS:
RIFLE RENTALS, INC.
By: /s/ GLEN R. MILLER
----------------------------------
Name: Glen R. Miller
--------------------------------
Title: President
-------------------------------
RENTAL COUNTRY U.S.A., INC.
By: /s/ GLEN R. MILLER
----------------------------------
Name: Glen R. Miller
--------------------------------
Title: President
-------------------------------
G.R.M. COMPANY, INC.
By: /s/ GLEN R. MILLER
----------------------------------
Name: Glen R. Miller
--------------------------------
Title: President
-------------------------------
ROCKY MOUNTAIN RENTALS, INC.
By: /s/ GLEN R. MILLER
----------------------------------
Name: Glen R. Miller
--------------------------------
Title: President
-------------------------------
SHAREHOLDERS:
/s/ GLEN R. MILLER
-------------------------------------
Glen R. Miller
/s/ ELIZABETH MILLER
-------------------------------------
Elizabeth Miller
-44-
<PAGE> 1
EXHIBIT 10.9
================================================================================
ASSET PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
U-RENT, INC.
AND THE
SHAREHOLDERS
OF
U-RENT, INC.
AS OF OCTOBER 31, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . 1
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . 1
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . 1
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . 2
2.5. Closing; Closing Date . . . . . . . . . . . . . . . . . . . 2
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Seller and the
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . . . 10
3.3. Survival of Representations . . . . . . . . . . . . . . . . 11
3.4. Representations as to Knowledge . . . . . . . . . . . . . . 11
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 11
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2. Operation and Preservation of Business . . . . . . . . . . . 11
4.3. Full Access . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4. Notice of Developments . . . . . . . . . . . . . . . . . . . 12
4.5. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6. Conveyance of Shareholder Property . . . . . . . . . . . . . 12
4.7. Announcements . . . . . . . . . . . . . . . . . . . . . . . 12
4.8. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . 12
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 12
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . 12
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 13
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . 13
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 13
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . 13
5.8. [Reserved.] . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . 14
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . 14
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . 14
6.2. Conditions to Obligation of the Seller and
the Shareholders . . . . . . . . . . . . . . . . . . . . . . 15
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . 16
7.1. Indemnification Provisions for Benefit of the Buyer . . . . 16
7.2. Indemnification Provisions for Benefit of the
Seller and the Shareholders . . . . . . . . . . . . . . . . 17
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . 17
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . 18
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 18
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . 19
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . 19
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 19
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . 19
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 19
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . 19
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 20
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 20
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . 20
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . 21
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 21
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . 21
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . 22
9.14. Seller's and Shareholders' Agent. . . . . . . . . . . . . . 22
</TABLE>
Exhibits:
<TABLE>
<S> <C>
Exhibit 1.1(a) Exhibit 3.1(g)(i)(A)
Exhibit 1.1(b) Exhibit 3.1(g)(i)(B)
Exhibit 1.1(c) Exhibit 3.1(g)(ii)
Exhibit 1.1(d) Exhibit 3.1(h)(i)
Exhibit 1.1(e) Exhibit 3.1(h)(ii)
Exhibit 1.1(f) Exhibit 3.1(k)
Exhibit 1.1(g) Exhibit 3.1(l)
Exhibit 1.1(h) Exhibit 3.1(m)
Exhibit 1.1(i) Exhibit 3.1(n)
Exhibit 3.1(c) Exhibit 3.1(p)(i)
Exhibit 3.1(d)(i) Exhibit 3.1(p)(ii)
Exhibit 3.1(d)(ii) Exhibit 3.1(s)(ii)
Exhibit 3.1(e) Exhibit 3.1(s)(iii)
Exhibit 3.1(f) Exhibit 6.1(j)
Exhibit 6.2(e)
</TABLE>
(ii)
<PAGE> 4
This Asset Purchase Agreement is entered into as of October 31,
1996 among RentX Industries, Inc., a Delaware corporation (the "Buyer"), U-
Rent, Inc., an Oklahoma corporation (the "Seller"), and Lawrence R. Redwine and
John P. Redwine (individually, a "Shareholder" and collectively, the
"Shareholders").
Recitals
The Shareholders own all of the issued and outstanding capital
stock of the Seller. The Seller desires to sell, and the Buyer desires to
purchase, substantially all of the Seller's assets as provided in this
Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth
in this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all the Acquired Assets free and clear of any
Encumbrance or Tax, for the consideration specified in Section 2.3. The Buyer
will have no obligation under this Agreement to purchase less than all of the
Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Buyer will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The cash purchase price for the Acquired Assets is
$2,404,400. At the Closing, the Buyer will, by wire transfer or other delivery
of immediately available funds, (i) (A) pay to the Seller (subject to Section
2.3(b)) $2,154,400, less $7,724 representing the estimated Pre-Closing Personal
Property Tax Amount, and (B) deposit $250,000 into the Escrow Account and (ii)
assume the Assumed Liabilities (and the amounts paid and deposited to and in
respect of the Seller and the Assumed Liabilities will constitute the full
purchase price for the Acquired Assets). The amount deposited in the Escrow
Account will belong to the Seller, subject to the Seller's indemnification
obligations set forth in this Agreement, and will be held, invested,
administered and disbursed according to Section 7.1(b) hereof and the Escrow
Agreement.
(b) At the Closing, the Buyer will deposit into a demand
deposit account in the name of the Buyer and the Shareholders' Agent, from the
amount otherwise payable to the Seller pursuant to Section 2.3(a)(i)(A), an
amount equal to the Reserve Amount, and such funds shall initially constitute
the Liabilities Reserve. The funds on deposit in the Liabilities Reserve will
belong to the Seller, subject to the provisions of this Section 2.3(b).
Following the Closing, the Liabilities Reserve will be applied to the payment
of Reserved Seller Liabilities, by disbursements from that account by
<PAGE> 5
the Buyer or the Shareholders' Agent, as the Reserved Seller Liabilities become
due and payable. To the extent that the Buyer receives a bill or invoice
representing, or is otherwise aware of, any Reserved Seller Liabilities, the
Buyer may cause funds to be disbursed from the Reserve Amount to satisfy such
Reserved Seller Liabilities. Reserved Seller Liabilities representing accrued
vacation and other accrued employee benefits will be satisfied by payment of
the amount thereof to the Buyer as the Buyer provides such benefits or makes
cash payments in lieu thereof to employees. The Shareholders' Agent will take
all actions necessary to cause the Liabilities Reserve to be applied to satisfy
Reserved Seller Liabilities and, if the Liabilities Reserve has been exhausted,
the Seller and the Shareholders will provide additional funds as required to
satisfy Reserved Seller Liabilities. Nothing in this Agreement will be deemed
to limit the joint and several obligations of the Seller and the Shareholders
to pay the Reserved Seller Liabilities in full. After all Reserved Seller
Liabilities have been satisfied, any excess Liabilities Reserve on deposit in
the account created pursuant to this Section 2.3(b) will be paid to the Seller.
Any disputes concerning the Liabilities Reserve will be settled by arbitration
as provided in this Agreement.
(c) As soon as practicable after the Closing, but effective as
of the Closing, the parties will prepare and initial a "Price Allocation
Schedule", allocating for Tax reporting purposes the total consideration for
the Acquired Assets among the various categories of Acquired Assets in the
following order and amounts: (i) to cash and cash equivalents, the $1,600
amount on the Closing Balance Sheet; (ii) to Closing Accounts Receivable, the
amount on the Closing Balance Sheet; (iii) to Closing Inventory, the amount on
the Closing Balance Sheet; (iv) to equipment and leasehold improvements, the
greater of the appraised fair market value (if the Buyer in its sole discretion
obtains an appraisal before or after the Closing) or the current book value
thereof as reflected on the Closing Balance Sheet; (v) to prepaid expenses, the
unamortized balance on the Closing Balance Sheet; (vi) to any other assets,
other than goodwill, the amount on the Closing Balance Sheet; and (vii) the
entire remaining balance of the consideration shall be allocated to the
goodwill of the Seller's business or, at the Buyer's sole discretion, to the
other intangible assets which are included in the Acquired Assets. The parties
acknowledge that such allocations for Tax reporting purposes were determined
pursuant to arm's length bargaining regarding the fair market values of the
Acquired Assets in accordance with the provisions of Code Section 1060. The
parties agree to be bound by the allocations set forth in the Price Allocation
Schedule for all federal, state and local Tax reporting purposes, including for
purposes of determining any income, gain, loss, depreciation or other
deductions in respect of such assets. The parties further agree to prepare and
file all Tax Returns (including Form 8594 under the Code) in a manner
consistent with such allocations.
2.4. Sales Taxes, Etc. The Seller will pay all sales, use, transfer
and other Taxes, fees and charges payable in respect of the sale and transfer
of the Acquired Assets to the Buyer pursuant to this Agreement.
2.5. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
November 1, 1996 (but in any event on or before November 4, 1996), commencing
at 8:00 a.m. local time in Denver, Colorado, at the offices of Sherman & Howard
L.L.C., and all transactions contemplated by this Agreement will be effective
at 11:59 p.m. local time in Chickasha, Oklahoma the day immediately preceding
the Closing (such effective time being the "Closing Date").
- 2 -
<PAGE> 6
2.6. Deliveries at the Closing. At the Closing, (a) the Seller and the
Shareholders will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Seller and the Shareholders the certificates,
instruments and documents referred to in Section 6.2, (c) the Seller will
deliver to the Buyer instruments transferring to the Buyer title to the
Acquired Assets free and clear of any Encumbrances or Taxes and (d) the Buyer
will pay and deposit the purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Seller and the Shareholders.
The Seller and the Shareholders jointly and severally represent and warrant to
the Buyer that the statements contained in this Section 3.1 are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
then substituted for the date of this Agreement throughout this Section 3.1).
(a) Organization, Good Standing, Authority, Etc. The Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Oklahoma, which is the only jurisdiction in which the
nature of the business conducted by it or the properties owned, leased or
operated by it make such qualification necessary. The Seller has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. This Agreement and the Other
Seller Agreements and the consummation of the transactions contemplated hereby
and thereby have been duly and unanimously approved by the board of directors
and shareholders of the Seller, and this Agreement has been duly executed and
delivered by the Seller. The Seller has full corporate power and authority to
execute, deliver and perform this Agreement and the Other Seller Agreements to
which the Seller is a party, each Shareholder and each relative or affiliate of
the Seller or a Shareholder who is party to any Other Seller Agreement has full
and absolute right, power, authority and legal capacity to execute, deliver and
perform this Agreement and all Other Seller Agreements to which such
Shareholder, relative or affiliate is a party, and this Agreement constitutes,
and the Other Seller Agreements will when executed and delivered constitute,
the legal, valid and binding obligations of, and shall be enforceable in
accordance with their respective terms against, the Seller and each such
Shareholder, relative or affiliate who is a party thereto.
(b) Ownership. Lawrence R. Redwine and John P. Redwine own,
beneficially and of record, free and clear of any Encumbrance or Tax, 45,000
and 5,000 shares, respectively, of the common stock, $1.00 par value, of the
Seller, which constitute all outstanding shares of the capital stock of the
Seller. No other Person has any right to acquire any equity interest in the
Seller.
(c) No Violation. The execution, delivery and performance of
this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which the Seller, any Shareholder, or any relative or affiliate
of the Seller or any Shareholder who is a party to any Other Seller Agreement
is subject or any provision of the articles of incorporation or bylaws of the
Seller or any such affiliate, or (ii) violate, with or without the giving of
notice or the lapse of time or both, or conflict with or result in the breach
or termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Seller, any
Shareholder, or any such relative or affiliate pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, Permit, agreement, instrument or
other
- 3 -
<PAGE> 7
arrangement to which the Seller, any Shareholder or any such relative or
affiliate is a party or by which the Seller, any Shareholder, or any such
relative or affiliate or any of their respective assets and properties is bound
or subject. Except for notices that will be given and consents that will be
obtained by the Seller and the Shareholders prior to the Closing (which are set
forth in Exhibit 3.1(c)), neither the Seller, any Shareholder, nor any such
relative or affiliate need give any notice to, make any filing with or obtain
any authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement and the Other Seller Agreements.
(d) Financial Statements. The balance sheets of the Seller as
of June 30, 1995 and June 30, 1996, the related statements of income,
shareholders' equity and cash flows for the fiscal years then ended, the
unaudited balance sheet of the Seller as of August 31, 1996 (the latter being
referred to as the "Latest Balance Sheet"), and the related statement of income
for the two-month period then ended, have been prepared in accordance with good
accounting practices and on a basis consistent with those of prior years, are
in accordance with the books and records of the Seller (which books and records
are complete and correct), are accurate and fairly present the financial
position and results of operations of the Seller as of such dates and for each
of the periods indicated, do not list book values for the assets that are in
excess of their fair market values, and, except as set forth on Exhibit
3.1(d)(i), make adequate provision for all Liabilities to which the Seller is
subject. Exhibit 3.1(d)(i) describes, to the best knowledge of the Seller and
the Shareholders, how such financial statements vary from GAAP as GAAP relates
to method of accounting, method of depreciation and policy of accruing
vacation. Copies of the financial statements described in the first sentence
in this Section are attached as Exhibit 3.1(d)(ii).
(e) Absence of Certain Leases, Changes or Events. The Seller
is not, except as set forth on Exhibit 3.1(e), a party to or otherwise bound by
any contract or agreement that has a term of three or more months pursuant to
which the Seller is obligated to furnish any equipment, products or services,
and no such contract or agreement has been prepaid with respect to any period
after the Closing Date. Since April 1, 1996, the Seller has not (i) incurred
any debt, indebtedness or other Liability, except current Liabilities incurred
in the ordinary course of business; (ii) delayed or postponed the payment of
accounts payable or other Liabilities or accelerated the collection of any
receivable beyond stated, normal terms; (iii) sold or otherwise transferred any
of its equipment or other assets or properties; (iv) cancelled, compromised,
settled, released, waived, written-off or expensed any account or note
receivable, right, debt or claim involving more than $5,000 in the aggregate;
(v) changed in any significant manner the way in which it conducts its
business; (vi) made or granted any individual wage or salary increase in excess
of 10% or $1.00 per hour, any general wage or salary increase, or any
additional benefits of any kind or nature; (vii) except as otherwise expressly
permitted by this Section 3.1(e), (A) entered into any contracts or agreements,
or made any commitments, involving more than $5,000 individually or in the
aggregate or (B) accelerated, terminated, delayed, modified or cancelled any
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) involving more than $5,000 individually or in
the aggregate; (viii) suffered any adverse fact or change, including, without
limitation, to or in its business, assets, financial condition, prospects or
customer or supplier relationships; (ix) made any payment or transfer to or for
the benefit of any shareholder, officer or director or any relative or
affiliate thereof or permitted any Person, including, without limitation, any
shareholder, officer, director or employee or any relative or affiliate
thereof, to withdraw assets from the Seller (other than cash as set forth on
Exhibit 3.1(e)), and other than the payment to the Shareholders of the
proportionate monthly amount
- 4 -
<PAGE> 8
of their respective normal annualized salaries due and payable during such
period; (x) failed to make purchases of new or used equipment necessary to
maintain its rental/lease inventory at the level which is reasonably necessary
to maintain the revenue base experienced by the Seller during the 12 months
preceding such date; (xi) increased or decreased its lease rate with respect to
any equipment by 10% or more from the applicable lease rate in effect on April
1, 1996 or rented or leased any equipment or sold or otherwise transferred any
inventory, equipment or services at below-normal rental or lease rates or
margins; (xii) suffered any other significant occurrence, event, incident,
action, failure to act or transaction outside the ordinary course of business;
or (xiii) agreed to incur, take, enter into, make or permit any of the matters
described in clauses (i) through (xii).
(f) Tax Matters. Neither the Seller nor any of its
Shareholders has ever filed (i) an election pursuant to Section 1362 of the
Code that the Seller be taxed as an "S" corporation, except as set forth on
Exhibit 3.1(f), or (ii) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Seller and the Shareholders will pay
all Taxes attributable to the Seller's business and activities, including all
Taxes attributable to the transactions contemplated by this Agreement, on or
before the due date. There are no Encumbrances on any of the assets of the
Seller that arose in connection with any failure (or alleged failure) to pay
any Tax. Exhibit 3.1(f) lists all federal, state and local income Tax Returns
filed with respect to the Seller for taxable periods ended on or after January
1, 1990, indicates those Tax Returns that have been audited and indicates those
Tax Returns that currently are the subject of audit. The Seller has delivered
to the Buyer correct and complete copies of all federal, state and local income
Tax Returns and examination reports of, and statements of deficiencies assessed
against or agreed to by, the Seller since January 1, 1990.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Seller owns
all of the Acquired Assets (other than certain items of Shareholder Property),
free and clear of all Encumbrances (except for those Encumbrances which the
Seller shall cause to be terminated as of the Closing). As of the Closing, all
of the Acquired Assets (including all of the Shareholder Property) will be
owned by the Seller, free and clear of all Encumbrances, and the Seller will
have good and marketable title to (or, in the case of Acquired Assets that are
leased, valid leasehold interests in) all the Acquired Assets. The Acquired
Assets consist of (A) the tangible and intangible assets of the Seller
(exclusive of the Excluded Assets) in existence as of December 31, 1995 (except
as set forth on Exhibit 3.1(e) with respect to cash of the Seller which was
distributed to its shareholders and except for such changes in inventory and in
accounts receivable in the ordinary course of business as are not in violation
of Section 3.1(e)) and (B) all tangible and intangible assets, including,
without limitation, all improvements, fixtures and fittings, owned by any
Shareholder or relative or affiliate thereof or of the Seller which have been
used in its business at any time on or after December 31, 1995 (the
"Shareholder Property"), including, without limitation, the tangible and
intangible assets set forth on Exhibit 3.1(g)(i)(A) owned by any Shareholder or
relative or affiliate thereof. The Premises constitute all of the real
property, buildings and improvements used by the Seller in its business. The
Acquired Assets are all of the tangible and intangible assets (other than the
Excluded Assets) used by the Seller in, or necessary for the conduct of, its
Business. The Acquired Assets and the equipment leased or consigned by the
Seller from third parties who are not relatives or affiliates of the Seller or
any Shareholder for lease by the Seller to its customers (the "Third-Party
Equipment") encompass all equipment used by the Seller to generate the income
reflected in the financial statements attached as Exhibit 3.1(d)(ii), and the
total cost to the Seller to lease or have consignment of such Third-Party
- 5 -
<PAGE> 9
Equipment during the fiscal year ending June 30, 1996 and the two-month period
ending August 31, 1996 did not exceed $150,000 and $42,000, respectively.
Exhibit 3.1(g)(i)(B) lists all Third-Party Equipment. The Seller does not
lease any equipment from any Shareholder or any relative or affiliate of the
Seller or any Shareholder. Except for items rented or leased to customers, all
of the tangible Acquired Assets are located on the Premises.
(ii) Except as set forth on Exhibit 3.1(g)(ii), the
Premises are free from defects, have been maintained in accordance with normal
industry practice, are in good operating condition and repair and are suitable
for the purposes for which they presently are used. The Seller has not
received notice of violation of any Legal Requirement or Permit relating to its
operations or its owned or leased properties.
(iii) No party to any lease has repudiated any
provision thereof, and there are no disputes, oral agreements or forbearance
programs in effect as to any such lease. To the best knowledge of the Seller
and the Shareholders, the Premises have received all approvals of Governmental
Authorities (including Permits) required in connection with the occupation and
operation thereof and have been occupied, operated and maintained in accordance
with applicable Legal Requirements. The Premises are supplied with utilities
and other services necessary for the operation of said Premises.
(h) Lists of Properties, Contracts and Other Data. Attached
as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the items
identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All such
rights, licenses, leases, registrations, Permits, Intellectual Property,
applications, contracts, agreements and commitments and other items referred to
in Exhibit 3.1(h)(ii) are valid, in full force and effect, enforceable in
accordance with their respective terms for the period stated therein, and no
party has repudiated any provision thereof and no action or claim is pending or
threatened to revoke, modify, terminate or render invalid any of such items.
Neither the Seller nor any other party thereto is in breach or default in
performance of any of its respective obligations under, and no event exists
which, with the giving of notice or lapse of time or both, would constitute a
breach, default or event of default on the part of a party to, any of the
foregoing that is continuing unremedied.
(i) Litigation, Etc. There is no outstanding Order against,
nor is there any litigation, proceeding, arbitration or investigation by any
Governmental Authority or other Person pending or threatened against, the
Seller, its properties or its business or relating to the transactions
contemplated by this Agreement, nor is there any basis for any such action.
(j) Notes and Accounts Receivable. The notes receivable, if
any, and accounts receivable of the Seller reflected on its Latest Balance
Sheet, and all notes and accounts receivable arising prior to the Closing Date
in existence as of the Closing Date), arose and will arise from bona fide
transactions by the Seller in the ordinary course of business, are valid
receivables with trade customers subject to no setoffs or counterclaims, and
are current and collectible.
(k) Product Quality, Warranty and Liability. All products and
services sold, rented, leased, provided or delivered by the Seller to customers
on or prior to the Closing Date conform to applicable contractual commitments,
express and implied warranties, product and service specifications and quality
standards, and the Seller has no Liability and there is no basis for any
Liability for
- 6 -
<PAGE> 10
replacement or repair thereof or other damages in connection therewith. No
product or service sold, rented, leased, provided or delivered by the Seller 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. The Seller has no Liability and there is no basis for any
Liability arising out of any injury to a Person or property as a result of the
ownership, possession, provision or use of any product or service sold, rented,
leased, provided or delivered by the Seller on or prior to the Closing Date.
All product or service liability claims that have been asserted against the
Seller since January 1, 1991, whether covered by insurance or not and whether
litigation has resulted or not, are listed and summarized on Exhibit 3.1(k).
(l) Insurance. The Seller has policies of insurance (i)
covering risk of loss on its Acquired Assets, (ii) covering products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption, all, to the
best knowledge of the Seller and the Shareholders, with responsible and
financially sound insurance carriers in adequate amounts and in compliance with
governmental requirements and in accordance with good industry practice. All
such insurance policies are valid, in full force and effect and enforceable in
accordance with their respective terms and no party has repudiated any
provision thereof. All such policies will remain in full force and effect
until midnight on the Closing Date. Neither the Seller nor any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving
of notice or the lapse of time or both, would constitute a breach, default or
event of default, or permit termination, modification or acceleration under any
such policy. There are no claims, actions, proceedings or suits arising out of
or based upon any of such policies nor, to the best knowledge of the Seller and
the Shareholders, does any basis for any such claim, action, suit or proceeding
exist. All premiums have been paid on such policies as of the date of this
Agreement and will be paid on such policies through the Closing Date. The
Seller has been covered during the five years prior to the date of this
Agreement by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. All
claims made during such five-year period with respect to any insurance coverage
of the Seller, other than those described on Exhibit 3.1(k), are set forth on
Exhibit 3.1(l).
(m) Compliance with Applicable Laws and Rights. To the best
knowledge of the Seller and the Shareholders, except as set forth on Exhibit
3.1(m), neither the Seller nor the Seller's assets (including its Premises,
facilities, machinery and equipment) are in violation of any applicable Legal
Requirement or Right. The Seller has not received notice from any Governmental
Authority or other Person of any violation or alleged violation of any Legal
Requirement or Right, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced or is
pending or threatened against the Seller alleging any such violation.
(n) Pension and Employee Benefit Matters. The Buyer will not
suffer any Liability or Adverse Consequence from any Seller's administration or
termination of any of its Employee Benefit Plans or from any failure of any
post-Closing distribution of benefits to employees of the Seller to be made by
the Seller in compliance with all applicable Legal Requirements. The Buyer
will have no obligation to employ any employee of the Seller or to continue any
Employee Benefit Plan, and will have no Liability under any plan or arrangement
maintained by the Seller for the benefit of any employee. The Seller will
remain liable for all costs of employee compensation, including benefits and
Taxes relating to employment and employees attributable to periods through the
Closing Date, whether
- 7 -
<PAGE> 11
reported by the Closing Date or thereafter, and all group health plan
continuation coverage to which any employee, former employee or dependent is
entitled because of a qualifying event (as defined in Section 4980B(f)(3) of
the Code) occurring through the Closing Date or as a result of termination of
employment with the Seller because of the transactions contemplated by this
Agreement and any benefit or excise tax liability or penalty or other costs
arising from any failure by the Seller to provide group health plan
continuation coverage. Except as set forth on Exhibit 3.1(n), neither the
Seller nor any Affiliated Group which includes the Seller (if any) maintains,
administers or contributes to, has maintained, administered or contributed to,
or has any Liability to contribute to, any Employee Benefit Plan. Exhibit
3.1(n) lists each Employee Benefit Plan that is, or at any time during the past
six years was, maintained, administered, contributed to or required to be
contributed to by the Seller or any Affiliated Group (if any) which includes or
has included the Seller, and the date of termination of each such Employee
Benefit Plan (if any) which has been terminated. The Seller has no Liability
(and there is no basis for the assertion of any Liability) as a result of the
Seller's or any such Affiliated Group's maintenance, administration or
termination of, or contribution to, any Employee Benefit Plan. Neither the
Seller nor any member of any Affiliated Group (if any) which includes or has
included the Seller has ever been required to contribute to any Multiemployer
Plan (as defined in ERISA Section 3(37)) nor has incurred any Liability under
Title IV of ERISA.
(o) Employees and Labor. The Seller has not received any
notice, nor, to the best knowledge of the Seller and the Shareholders, is there
any reason to believe that any executive or key employee of the Seller or any
group of employees of the Seller has any plans to terminate his, her or its
employment with the Seller. No executive or key employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Seller prior to the Closing Date and, if such person
becomes an employee of the Buyer, to the affairs of the Buyer after the Closing
Date. The Seller will not be required to give any notice under the Worker
Adjustment and Retraining Notification Act, as amended, or any similar Legal
Requirement as a result of this Agreement, the Other Seller Agreements or the
transactions contemplated hereby or thereby. The Seller does not have any
labor relations problems or disputes, nor has the Seller experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Seller's facilities, and no union organization effort has been threatened,
initiated or is in progress with respect to any employees of the Seller.
(p) Customer and Supplier Relationships. Exhibit 3.1(p)(i)
lists, for each of the Seller's four stores, each customer that, to the best
knowledge of the Seller and the Shareholders, individually or with its
affiliates was, based upon the Seller's sales, rental or lease revenues during
the fiscal years ending June 30, 1995 and June 30, 1996 and the two-month
period ending August 31, 1996, one of the Seller's five largest customers at
such store during any such fiscal year or such two-month period (the "Principal
Customers"). Exhibit 3.1(p)(ii) lists, for each of the Seller's four stores,
each supplier that, to the best knowledge of the Seller and the Shareholders,
individually or with its affiliates was, based upon the Seller's purchases of
inventory or supplies during the fiscal years ending June 30, 1995 and June 30,
1996 and the two- month period ending August 31, 1996, one of the Seller's five
largest suppliers at such store during any such fiscal year or such two-month
period (the "Principal Suppliers"). The Seller has good commercial working
relationships with its Principal Customers and Principal Suppliers and since
July 1, 1994, no Principal Customer or Principal Supplier has cancelled or
otherwise terminated its relationship with the Seller, materially decreased or
limited
- 8 -
<PAGE> 12
its purchases, rentals or leases from, or inventory or supplies supplied to,
the Seller, or threatened to take any such action. The Seller and the
Shareholders have no basis to anticipate any problems with the Seller's
customer, supplier or business relationships. No Principal Customer or
Principal Supplier has any plans to reduce its purchases, rentals or leases
from, or inventory or supplies supplied to, the Seller below levels prevailing
since July 1, 1994, and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not adversely affect
the relationship of the Seller with any Principal Customer or Principal
Supplier prior to the Closing Date or of the Buyer with any Principal Customer
or Principal Supplier after the Closing Date.
(q) Resale Inventory. The resale inventory of the Seller
consists of goods which, in the aggregate, are merchantable, are fit for the
purposes for which they were procured and are held by the Seller, are usable in
the ordinary course of the Seller's business and are not obsolete.
(r) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Seller consists of machinery, equipment and other
tangible personal property which are merchantable, are fit and suitable for the
purpose for which they were procured and are held by the Seller, useable in the
ordinary course of the Seller's business and are not obsolete. All of the
machinery, equipment and other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) has been well
maintained and is in good repair and good operating condition (subject to the
last sentence of this Section 3.1(r)). None of the machinery, equipment or
other tangible personal property included in the Acquired Assets (including
that held for rental, lease or sale) is damaged or defective (subject to the
last sentence of this Section 3.1(r)), the Seller has not experienced material
problems or deficiencies with respect to its machinery, equipment and other
tangible personal property (subject to the last sentence of this Section
3.1(r)), and, to the best knowledge of the Seller and the Shareholders, there
is no basis to anticipate any such problems or deficiencies (subject to the
last sentence of this Section 3.1(r)). In the normal course of business
certain items which are held for rental or lease suffer damage in the course of
use by the Seller's customers, and such items have been repaired, or are
reparable and are in the process of being repaired, by the Seller for use in
the Seller's rental and leasing business; provided, however, that the Seller
shall continue through the Closing Date to repair such items on a basis
consistent with past practice and the aggregate cost to the Buyer after the
Closing Date to repair all such items which are in need of repair or are in the
process of being repaired as of the Closing Date will not exceed that which,
consistent with past practice of the Seller, is normally experienced by the
Seller at any given time.
(s) Environmental Matters.
(i) The Seller is conducting and at all times has
conducted its business and operations, and has occupied, used and operated the
Premises and all other real property and facilities previously owned, occupied,
used or operated by the Seller, in compliance with all Environmental
Obligations and so as not to give rise to Liability under any Environmental
Obligations or to any impact on the Seller's business or activities. The
Seller and the Shareholders do not have any knowledge of pending or proposed
changes to any Environmental Obligations which would require any changes in any
of the Seller's Premises, facilities, equipment, operations or procedures or
affect the Seller's business or its cost of conducting its business as now
conducted.
(ii) No conditions, circumstances or activities have
existed or currently exist, and neither the Seller nor any Shareholder has
engaged in any acts or omissions, with respect to the
- 9 -
<PAGE> 13
Premises or any other real properties, facilities or business previously owned,
occupied, used or operated by the Seller or any predecessor (including, without
limitation, off-site disposal or treatment of Hazardous Materials) which could
give rise to any Liability pursuant to any Environmental Obligation. Exhibit
3.1(s)(ii) identifies all real properties and facilities, including the
addresses thereof, which have been owned, occupied, used or operated by the
Seller or its predecessors at any time on or prior to the date of this
Agreement. There are no outstanding, pending or threatened Orders against the
Seller or any Shareholder, nor are there any current, pending or threatened
investigations of any kind against the Seller or any Shareholder, concerning
any Environmental Obligations. There are no actions, suits or administrative,
arbitral or other proceedings alleged, claimed, threatened, pending against or
affecting the Seller or any Shareholder at law or in equity with respect to any
Environmental Obligations, and neither the Seller nor any Shareholder has
knowledge of any existing grounds on which any such action, suit or proceedings
might be commenced.
(iii) Any chemicals and chemical compounds and mixtures
which are included among the assets of the Seller are integral to and required
for the conduct of the Seller's business, have not been and are not intended to
be discarded or abandoned, and are not waste or waste materials. Except as set
forth in the environmental studies attached as Exhibit 3.1(s)(iii)
(collectively, the "Environmental Study"), the Seller has not generated,
handled, used, transported or disposed of Hazardous Materials. All waste
materials which are generated as part of the business of the Seller are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental Study,
no underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any facilities previously owned,
occupied, used or operated by the Seller or any predecessor. Neither any of
the Premises nor any other real properties or facilities previously owned,
occupied, used or operated by the Seller or any predecessor has been used at
any time as a gasoline service station or any facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products or Hazardous
Materials. No building or other structure on any of the Premises contains
asbestos-containing materials. There are not nor have there been any
incinerators, septic tanks (except as set forth in the Environmental Study),
leach fields, cesspools or wells (including without limitation dry, drinking,
industrial, agricultural and monitoring wells) on any of the Premises.
(t) Intellectual Property. The Seller owns or has the legal
right to use and to transfer to the Buyer each item of Intellectual Property
required to be identified on Exhibit 3.1(h)(ii). The continued operation of
the business of the Seller as currently conducted will not interfere with,
infringe upon, misappropriate or conflict with any Intellectual Property rights
of another Person. To the best knowledge of the Seller and the Shareholders,
no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of the
Seller or any Intellectual Property included in the Shareholder Property.
Neither the Seller nor any owner of any Intellectual Property included in the
Shareholder Property has granted any license, sublicense or permission with
respect to any Intellectual Property owned or used in the Seller's business.
(u) Disclosure. None of the documents or information provided
to the Buyer by the Seller, any Shareholder or any agent or employee thereof in
the course of the Buyer's due diligence investigation and the negotiation of
this Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section
- 10 -
<PAGE> 14
3.1, contain any untrue statement of any material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact which materially adversely affects
the business, prospects, condition, affairs or operations of the Seller or any
of its properties or assets which has not been set forth in this Agreement or
such Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Seller and the Shareholders acknowledge and agree that
the fact that they have made disclosures pursuant to Section 3.1 or otherwise
of matters, or did not have knowledge of matters, which result in Adverse
Consequences to the Buyer shall not relieve the Seller and the Shareholders of
their obligation pursuant to Article 7 to indemnify and hold the Buyer harmless
from all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller and the Shareholders that the statements contained
in this Section 3.2 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other Buyer Agreements
and the transactions contemplated hereby and thereby have been duly approved by
all requisite corporate action. The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Buyer
Agreements, and this Agreement constitutes, and the Other Buyer Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of the Buyer, and shall be enforceable in accordance with their
respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery
and performance of this Agreement and the Other Buyer Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Buyer is subject or any provision of
the certificate of incorporation or bylaws of the Buyer or (ii) violate, with
or without the giving of notice or the lapse of time or both, or conflict with
or result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Buyer pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Buyer is a party or which the Buyer or any of its assets and properties is
bound or subject. Except for notices and consents that will be given or
obtained by the Buyer prior to the Closing, the Buyer does not need to give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement.
- 11 -
<PAGE> 15
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that (a) the Liabilities of
the Seller and the Shareholders with respect to (i) the representations and
warranties set forth in Sections 3.1(f), 3.1(i), 3.1(k), 3.1(m) and 3.1(n)
shall survive until expiration of all applicable statutes of limitation and
(ii) the representations and warranties set forth in Sections 3.1(a), 3.1(b),
3.1(c), 3.1(g), 3.1(s), 3.1(t) and 3.1(u) shall survive without termination,
and (b) the Liabilities of the Buyer with respect to the representations and
warranties set forth in Sections 3.2(a) and 3.2(b) shall survive without
termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of such party and be exercised always in a reasonable manner and within
reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to take
all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will, and will cause the Seller to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Seller will not, and
Shareholders will not cause or permit the Seller to, engage in any practice,
take any action or enter into any transaction outside its ordinary course of
business; provided, however, that in no event will any action be taken or any
transaction be entered into which would result in a breach of any
representation, warranty or covenant of the Seller or any Shareholder. The
Seller will, and the Shareholders will cause the Seller to, keep its business
and properties, including its current operations, physical facilities, working
conditions, and relationships with customers, suppliers, lessors, licensors and
employees, intact and, in connection therewith, to continue to purchase new or
used equipment necessary to maintain its rental/lease inventory at the level
specified in Section 3.1(e)(x).
4.3. Full Access. The Seller will permit the Buyer and its agents to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Seller, to all premises,
properties, personnel, books, records (including Tax records), contracts and
documents of or pertaining to the Seller.
4.4. Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development which occurs after the date of
this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Seller.
No such written notice, however, will be
- 12 -
<PAGE> 16
deemed to amend or supplement any disclosure Exhibit or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
4.5. Exclusivity. Neither the Seller nor any Shareholder will, and no
Shareholder will cause or permit the Seller to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any portion
of the assets of, the Seller (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
the Seller's stock in favor of any such transaction. The Seller and
Shareholders will notify the Buyer immediately if the Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
4.6. Conveyance of Shareholder Property. Prior to the Closing Date,
the Shareholders shall convey to the Seller, free and clear of any Encumbrance
or Tax, all of each Shareholder's right, title and interest to the Shareholder
Property.
4.7. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
4.8. Bulk Sales Laws. In reliance upon its indemnification rights set
forth in Section 7, the Buyer waives compliance by the Seller with the bulk
transfer law and any other similar law of any applicable jurisdiction in
respect to the transactions contemplated by this Agreement.
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Each of the Shareholders will assist with the
transition of the Seller's business to the Buyer during the first 12 months
following the Closing at no cost to the Buyer. Neither the Seller nor any
Shareholder will take any action at any time that is designed or intended to
have the effect of discouraging any customer, supplier, lessor, licensor or
other business associate of the Seller from establishing or continuing a
business relationship with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Seller's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their
- 13 -
<PAGE> 17
books and records as shall be reasonably necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
5.4. Confidentiality. The Seller and the Shareholders will treat and
hold as confidential all Confidential Information concerning the Buyer, the
Seller's business or the Acquired Assets, refrain from using any such
Confidential Information and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all of such Confidential Information in its or
their possession.
5.5. Post-Closing Announcements. Following the Closing, neither the
Seller nor any Shareholder will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer.
5.6. Financial Statements. The Seller and the Shareholders will, upon
request of the Buyer, cooperate with the Buyer to produce such historical and
on-going financial statements and audits as the Buyer may request, all at the
sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities. The Seller and the Shareholders will
pay and perform, as and when due, all Liabilities relating to the Seller, the
business of the Seller and the Acquired Assets, other than the Assumed
Liabilities. In addition, the Seller and the Shareholders will pay to the
Buyer an amount equal to the portion of the personal property taxes on the
Acquired Assets of the Seller attributable to the period from January 1, 1996
to and including the date on which the Closing occurs (the "Pre-Closing
Personal Property Tax Amount"). The Pre-Closing Personal Property Tax Amount
payable by the Shareholders and the Seller will be determined by prorating
personal property taxes on the Acquired Assets of the Seller for 1996 in
proportion to the number of days in the year prior to and including the date on
which the Closing occurs compared to the number of days in the year remaining
after the date on which the Closing occurs. If the actual Pre-Closing Property
Tax Amount exceeds the estimated Pre-Closing Property Tax Amount used for
purposes of Section 2.3(a), the Shareholders and the Sellers shall pay such
excess amount to the Buyer within five days after their receipt of notice from
the Buyer stating the amount payable by them and a copy of the invoices from
Governmental Authorities relating thereto. If the estimated Pre-Closing
Property Tax Amount used for purposes of Section 2.3(a) exceeds the actual Pre-
Closing Property Tax Amount, the Buyer shall pay such excess amount to the
Seller within five days of receipt of the invoices from Governmental
Authorities relating thereto. The Buyer will pay and perform, as and when due
(except to the extent the validity thereof or the liability therefor is being
contested by the Buyer), the Assumed Liabilities. Further, the Seller and the
Shareholders, at their expense, promptly will take or cause to be taken any
action necessary to remedy any failure of the Premises or the acquired business
to comply at the Closing Date with any Legal Requirement, upon receipt of
notice from the Buyer at any time.
5.8. [Reserved.]
5.9. Repurchase of Unpaid Receivables. The Seller and the Shareholders
jointly and severally guarantee that the Closing Accounts Receivable will be
fully paid to the Buyer in accordance with their terms at 95% of their recorded
amounts not later than 120 days from the Closing Date. Upon demand by the
Buyer at any time after 120 days from the Closing Date, the Seller and the
Shareholder shall jointly and severally pay to the Buyer 95% of the amount of
any unpaid Closing Accounts Receivables which are the subject of such demand.
Upon such payment to the Buyer, the Closing Accounts
- 14 -
<PAGE> 18
Receivable which are so paid for by the Seller and the Shareholder shall,
without further action of any party, become the property of the Seller.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the purchase of the Acquired Assets and the consummation of
the other transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Seller's and each Shareholder's representations and
warranties shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to the Buyer pursuant to Section 4.5
and the subject matter thereof shall be satisfactory to the Buyer;
(b) the Seller and the Shareholders shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) the Seller and Shareholders shall have given all notices
and procured all of the third-party consents, authorizations and approvals
required to consummate the transactions contemplated by this Agreement, all in
form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets or to conduct the
acquired business, and no such Order shall be in effect;
(e) there shall have been no adverse change in the Acquired
Assets or the Seller's business between the date of execution of this Agreement
and the Closing;
(f) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in Sections 6.1(a)
through (e) is satisfied in all respects and as to the adoption of resolutions
by the board of directors and shareholders of the Seller authorizing the
execution, delivery and performance of this Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby;
(g) the Buyer shall have completed its due diligence with
respect to the Seller, the Seller's business and the Acquired Assets with
results satisfactory to the Buyer.
(h) the Other Seller Agreements and documentation necessary to
accomplish the conveyance of the specific ownership tax and fee payments made
by the Seller prior to the Closing in respect of vehicles and mobile equipment
included in the Acquired Assets shall have been executed and delivered by the
Seller and the Shareholders, as applicable;
(i) the Premises Leases shall have been executed and delivered
by the parties thereto and the owners of the real property underlying the
Premises Leases, and each Person having an
- 15 -
<PAGE> 19
Encumbrance on such Property, shall have executed and delivered nondisturbance
and landlord waiver agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the Seller
and the Shareholders an opinion in form and substance as set forth in Exhibit
6.1(j) addressed to the Buyer and its debt and equity financing sources and
dated as of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) a "Phase I" environmental study of the Premises, and such
additional environmental testing as the Buyer shall request, shall have been
completed at the Seller's expense and supplied to the Buyer, and the contents
and results thereof shall be satisfactory to the Buyer;
(m) the Seller shall have delivered to the Buyer possession
and control of the Acquired Assets;
(n) the Seller and the Shareholders shall have executed and
delivered to the Buyer (i) appropriate documentation to transfer to the Buyer
record ownership of the trade names "U-Rent" and "U-RENT Equipment Rental &
Sales" and all other registered Intellectual Property and applications therefor
and (ii) an amendment to the Seller's articles of incorporation for the purpose
of changing its name to a name that does not include the term "U-Rent" or any
derivation thereof; and
(o) the Seller and the Shareholders shall have delivered, or
caused the Seller to deliver, to the Buyer such other instruments, certificates
and documents as are reasonably requested by the Buyer in order to consummate
the transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Seller and the Shareholders. The
obligation of the Seller and the Shareholders to consummate the sale of the
Acquired Assets is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Sections 6.2(a)
and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed and
delivered by the Buyer;
- 16 -
<PAGE> 20
(e) the Seller and Shareholders shall have received from
counsel to the Buyer an opinion in form and substance as set forth in Exhibit
6.2(e), addressed to the Seller and Shareholders and dated as of the Closing;
and
(f) the Buyer shall have paid and deposited the purchase price
for the Acquired Assets pursuant to Section 2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) (i) If the Seller or any Shareholder breaches (or if any
Person other than the Buyer alleges facts that, if true, would mean the Seller
or any Shareholder has breached) any of the representations or warranties of
the Seller or any Shareholder contained herein and the Buyer gives notice
thereof to the Shareholders' Agent within the Survival Period, or if the Seller
or any Shareholder breaches (or if any Person other than the Buyer alleges
facts that, if true, would mean the Seller or any Shareholder has breached) any
covenants of the Seller or any Shareholder contained herein or any
representations, warranties or covenants of the Seller or any Shareholder
contained in any Other Seller Agreement and the Buyer gives notice thereof to
the Shareholders' Agent, then the Seller and the Shareholders agree to jointly
and severally indemnify and hold harmless the Buyer from and against any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to or caused by any of the foregoing regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In determining
whether there has been a breach of any representation or warranty contained in
Section 3.1 and in determining the amount of Adverse Consequences suffered by
the Buyer for purposes of Section 7.1(a)(i) and (ii), such representations and
warranties shall not be qualified (other than by (A) the reference to knowledge
set forth in the second sentence of Section 3.1(d) as it relates to Exhibit
3.1(d)(i) and (B) the references to "material" set forth in Section 3.1(u)) by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words.
(ii) The Seller and the Shareholders also agree to
jointly and severally indemnify and hold harmless the Buyer from and against
any Adverse Consequences the Buyer may suffer which result from, arise out of,
relate to or are caused by the consummation of the transactions contemplated by
this Agreement, whether or not such matter was known or disclosed to the Buyer,
was disclosed on any Exhibit hereto or is a matter with respect to which the
Seller or Shareholder did or did not have knowledge, including, without
limitation, any act or omission of the Seller, any Shareholder or any
predecessor with respect to, or any event or circumstance related to, the
Seller's, any Shareholder's or any predecessor's ownership, occupation, use or
operation of any of the Acquired Assets, the Excluded Assets or any other
assets or properties or the conduct of its or their business, regardless of
whether such act, omission, event or circumstance occurred or existed prior to,
at or after the Closing Date or whether a claim with respect to such matter was
asserted before or is asserted after the Closing Date, any Liability of the
Seller or any Shareholder not included in the Assumed Liabilities (including,
without limitation, those concerning Hazardous Materials or the failure of the
Seller, any Shareholder or any predecessor to comply with any Environmental
Obligation or other Legal
- 17 -
<PAGE> 21
Requirement), and any Liability resulting from any failure of the parties to
comply with any applicable bulk sales or transfer Legal Requirement in
connection with the transactions contemplated by this Agreement.
(iii) If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within a reasonable time, the dispute will be resolved by arbitration
pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against the Seller or any Shareholder during the
Escrow Period will be paid to the Buyer first out of the funds escrowed
pursuant to the Escrow Agreement, along with interest from the Closing Date at
the rate applicable to the escrowed funds. The Seller and the Shareholders
will have joint and several Liability for any additional amounts needed to
cover such claims, which amounts will be paid directly to the Buyer. At the
end of the Escrow Period amounts that may be needed to cover pending
indemnification claims made by the Buyer (such amounts to be determined by the
Buyer based upon the reasonable exercise of its business judgment) will be
retained in the Escrow Account until such claims are resolved, and any excess
on deposit therein, including any accrued interest, will be paid to the Seller.
Nothing in this Section 7.1(b) will be construed to limit the Buyer's right to
indemnification to amounts on deposit in the Escrow Account. The Buyer and the
Shareholders' Agent shall jointly give instructions to the Escrow Agent to
carry out the intent of this Section 7.1(b). Any disputes concerning the
escrowed funds will be settled by arbitration as provided in this Agreement.
7.2. Indemnification Provisions for Benefit of the Seller and the
Shareholders. If the Buyer breaches (or if any Person other than the Seller or
a Shareholder alleges facts that, if true, would mean the Buyer has breached)
any of its representations or warranties contained herein and the Shareholders'
Agent gives notice of a claim for indemnification against the Buyer within the
Survival Period, or if the Buyer breaches (or if any Person other than the
Seller or a Shareholder alleges facts that, if true, would mean the Buyer has
breached) any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other Buyer Agreement and the
Shareholders' Agent gives notice thereof to the Buyer, then the Buyer agrees to
indemnify and hold harmless the Seller and the Shareholders from and against
any Adverse Consequences the Seller and the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Buyer for purposes of this
Section, such representations and warranties shall not be qualified by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within a reasonable time, the dispute will be resolved by arbitration
pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any third party (including, without limitation, any
Governmental Authority) notifies any party (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give rise to a claim
for indemnification against any other party (the "Indemnifying Party"), then
- 18 -
<PAGE> 22
the Indemnified Party will notify each Indemnifying Party thereof in writing
within 15 days after receiving such notice. No delay on the part of the
Indemnified Party in notifying any Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not elect to assume control of or
otherwise participate in the defense or settlement of any Third Party Claim, it
will be bound by the results obtained by the Indemnified Party with respect to
the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to the Seller, any Shareholder or any
relative or affiliate of the Seller or any Shareholder at or after the Closing.
- 19 -
<PAGE> 23
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Shareholders' Agent at any time prior to the Closing (i) in the
event any Seller or Shareholder has breached any representation, warranty or
covenant contained in this Agreement in any material way, the Buyer has
notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before November 4, 1996 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (i) if the
Buyer has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Shareholders' Agent has notified the Buyer
of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before November
4, 1996 because of the failure of any condition precedent to the Seller's and
the Shareholders' obligations to consummate the Closing (unless the failure
results primarily from the Seller or any Shareholder breaching any
representation, warranty or covenant contained in this Agreement in any
material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements
- 20 -
<PAGE> 24
or representations by or among the parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Seller nor any Shareholder may assign this
Agreement or any of their rights, interests or obligations hereunder without
the prior written approval of the Buyer. The Buyer may assign its rights and
obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
If to the Seller or
the Shareholders: Copy to:
Addressed to the Ryland Rivas, Esq.
Shareholders' Agent at: Attorney at Law
628 W. Choctaw
P.O. Box 1436 Chickasha, OK 73018
Chickasha, Oklahoma 73023 Telecopy: (405) 222-3525
Telecopy: (405) 224-1939
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Richard M. Tyler Attn: B. Scott Pullara
Telecopy: (303) 620-9016 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
- 21 -
<PAGE> 25
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Seller and the Shareholders will bear all costs and expenses
(including, without limitation, all legal, accounting and tax related fees and
expenses, all fees, commissions, expenses and other amounts payable to any
broker, finder or agent and the costs of any environmental study and additional
environmental testing contemplated by Section 6.1) incurred by the Seller or
any Shareholder either before or after the date of this Agreement in connection
with this Agreement or the transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Shareholders' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE
WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
- 22 -
<PAGE> 26
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Seller's and Shareholders' Agent. The Seller and each Shareholder
hereby authorizes and appoints the Shareholders' Agent to act as its, his or
her exclusive agent and attorney-in-fact to act on behalf of each of them with
respect to all matters which are the subject of this Agreement, including,
without limitation, (a) receiving or giving all notices, instructions, other
communications, consents or agreements that may be necessary, required or given
hereunder and (b) asserting, settling, compromising, or defending, or
determining not to assert, settle, compromise or defend, (i) any claims which
the Seller or any Shareholder may assert, or have the right to assert, against
the Buyer, or (ii) any claims which the Buyer may assert, or have the right to
assert, against the Seller or any Shareholder. The Shareholder's Agent hereby
accepts such authorization and appointment. Upon the receipt of written
evidence satisfactory to the Buyer to the effect that the Shareholder's Agent
has been substituted as agent of the Seller and the Shareholders by reason of
his death, disability or resignation, the Buyer shall be entitled to rely on
such substituted agent to the same extent as they were theretofore entitled to
rely upon the Shareholder's Agent with respect to the matters covered by this
Section 9.14. Neither the Seller nor any Shareholder shall act with respect to
any of the matters which are the subject of this Agreement except through the
Shareholder's Agent. The Seller and the Shareholders acknowledge and agree
that the Buyer may deal exclusively with the Shareholders' Agent in respect of
such matters, that the enforceability of this Section 9.14 is material to the
Buyer, and that the Buyer has relied upon the enforceability of this Section
9.14 in entering into this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 23 -
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
----------------------------------
Name: Richard M. Tyler
Title: President
SELLER:
U-RENT, INC.
By: /s/ LAWRENCE R. REDWINE
----------------------------------
Name: Lawrence R. Redwine
Title: President
SHAREHOLDERS:
/s/ LAWRENCE R. REDWINE
-------------------------------------
Lawrence R. Redwine
/s/ JOHN P. REDWINE
-------------------------------------
John P. Redwine
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT.]
- 24 -
<PAGE> 1
EXHIBIT 10.10
================================================================================
ASSET PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
U-DO-IT RENTAL CENTERS, INC.,
THE SHAREHOLDER OF U-DO-IT RENTAL CENTERS, INC.,
CAAR PARTNERSHIP
AND
THE PARTNERS OF CAAR PARTNERSHIP
AS OF DECEMBER 17, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . 1
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . 1
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . 1
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . 2
2.5. Closing; Closing Date . . . . . . . . . . . . . . . . . . . 2
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Seller,
the Shareholder, the Partnership and the Partner . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . . . 12
3.3. Survival of Representations . . . . . . . . . . . . . . . . 13
3.4. Representations as to Knowledge . . . . . . . . . . . . . . 13
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 13
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2. Operation and Preservation of Business . . . . . . . . . . . 13
4.3. Full Access . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4. Notice of Developments . . . . . . . . . . . . . . . . . . . 14
4.5. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . 14
4.6. Conveyance of Shareholder Property . . . . . . . . . . . . . 14
4.7. Announcements . . . . . . . . . . . . . . . . . . . . . . . 15
4.8. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . 15
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 15
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . 15
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 15
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . 16
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 16
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . 16
5.8. Certain Environmental Matters . . . . . . . . . . . . . . . 16
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . 17
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . 17
6.2. Conditions to Obligation of the Seller, the
Shareholder, the Partnership and the Partner . . . . . . . . 18
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . 19
7.1. Indemnification Provisions for Benefit of the Buyer . . . . 19
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7.2. Indemnification Provisions for Benefit of the Seller, the
Shareholder, the Partnership and the Partner . . . . . . . . 20
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . 21
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . 22
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 22
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . 22
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . 22
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 23
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . 23
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 23
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . 23
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 23
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 24
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . 24
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . 24
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 24
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . 25
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . 25
9.14. Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
Exhibits:
<TABLE>
<S> <C>
Exhibit 1.1(a) Exhibit 3.1(g)(i)(B)
Exhibit 1.1(b) Exhibit 3.1(g)(ii)
Exhibit 1.1(c)(i) Exhibit 3.1(h)(i)
Exhibit 1.1(c)(ii) Exhibit 3.1(h)(ii)
Exhibit 1.1(d) Exhibit 3.1(i)
Exhibit 1.1(e) Exhibit 3.1(k)
Exhibit 1.1(f) Exhibit 3.1(l)
Exhibit 1.1(g) Exhibit 3.1(m)
Exhibit 1.1(h) Exhibit 3.1(n)
Exhibit 2.3(b) Exhibit 3.1(p)(i)
Exhibit 3.1(c) Exhibit 3.1(p)(ii)
Exhibit 3.1(d)(i) Exhibit 3.1(s)(ii)
Exhibit 3.1(e) Exhibit 3.1(s)(iii)
Exhibit 3.1(f) Exhibit 6.1(j)
Exhibit 3.1(g)(i)(A) Exhibit 6.2(e)
</TABLE>
(ii)
<PAGE> 4
This Asset Purchase Agreement is entered into as of December 17,
1996 among RentX Industries, Inc., a Delaware corporation (the "Buyer"),
UoDooIt Rental Centers, Inc., an Idaho corporation (the "Seller"), Charles E.
Campbell (the "Shareholder"), CAAR Partnership, an Idaho general partnership
(the "Partnership"), Scott W. Arnone ("Mr. Arnone") and Lori K. Arnone ("Mrs.
Arnone") (Mr. Arnone and Mrs. Arnone are referred to individually and
collectively as the "Partner").
Recitals
The Shareholder owns all of the issued and outstanding capital
stock of the Seller. The Shareholder and the Partner are the two general
partners of the Partnership. The Seller and the Partnership each desires to
sell, and the Buyer desires to purchase, substantially all of the Seller's
assets and all of the Partnership's assets as provided in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth
in this Agreement, the Buyer agrees to purchase (a) from the Seller, and the
Seller agrees to sell to the Buyer, all the Acquired Seller Assets free and
clear of any Encumbrance or Tax, and (b) from the Partnership, and the
Partnership agrees to sell to the Buyer, all of the Acquired Partnership Assets
free and clear of any Encumbrance or Tax, in each case for the consideration
specified in Section 2.3. The Buyer will have no obligation under this
Agreement to purchase less than all of the Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to assume and become
responsible at the applicable Closing for all of the Assumed Liabilities
specified with respect to such Closing. The Buyer will not assume or have any
responsibility with respect to any other Liability not expressly assumed at a
Closing pursuant to the Assignment and Assumption Agreement executed at such
Closing.
2.3. Purchase Price; Payment.
(a) The cash purchase price for the First Closing Acquired
Seller Assets is $490,500, for the Second Closing Acquired Seller Assets is
$490,500 and for the Acquired Partnership Assets is $120,000. At the First
Closing, the Buyer will, by wire transfer or other delivery of
immediately available funds, (i) pay to the Seller $490,500 and (ii) assume the
First Closing Assumed Liabilities (and the amount paid to and in respect of the
Seller and the First Closing Assumed Liabilities will constitute the full
purchase price for the First Closing Acquired Seller Assets). At the
Second Closing, the Buyer will, by wire transfer or other delivery of
immediately available funds, (i) (A) pay to the Seller $440,500 and (B)
deposit $50,000 into the Escrow Account and (ii) assume the Second
Closing Assumed Liabilities (and the amounts paid and deposited to and
in respect of the Seller and the Second Closing Assumed Liabilities
will constitute the full purchase price for the Second Closing
Acquired Seller Assets). At the Second Closing,
<PAGE> 5
the Buyer will, by wire transfer or other delivery of immediately
available funds, pay to the Partnership $120,000. The amounts deposited in the
Escrow Account will belong to the Seller, subject to the Seller's
indemnification obligations set forth in this Agreement, and will be held,
invested, administered and disbursed according to Section 7.1(b) hereof and the
Escrow Agreement.
(b) As soon as practicable after the applicable Closing, but
effective as of such Closing, the Buyer and the Agent will prepare and initial
a "Price Allocation Schedule", allocating for Tax reporting purposes the total
consideration for the Acquired Seller Assets conveyed at such Closing among the
various categories of Acquired Seller Assets in the following order and
amounts: (i) to cash and cash equivalents, the $500 amount per store on the
Closing Balance Sheet; (ii) to Closing Inventory, the amount on the Closing
Balance Sheet; (iii) to equipment and leasehold improvements, the greater of
the appraised fair market value (if the Buyer in its sole discretion obtains an
appraisal before or after the applicable Closing) or the current book value
thereof as reflected on the Closing Balance Sheet; (iv) to prepaid expenses,
the unamortized balance on the Closing Balance Sheet; (v) to any other assets,
other than goodwill, the amount on the Closing Balance Sheet; and (vi) the
entire remaining balance of the consideration shall be allocated to the
goodwill of the Seller's business acquired at such Closing or, at the Buyer's
sole discretion, to the other intangible assets which are included in the
Acquired Seller Assets acquired at such Closing. The entire $120,000 paid to
the Partnership at the Second Closing shall be allocated as set forth on
Exhibit 2.3(b) to the equipment constituting the Acquired Partnership Assets.
The parties agree to be bound by the allocations set forth in the Price
Allocation Schedules and set forth on Exhibit 2.3(b) for all federal, state and
local Tax reporting purposes, including for purposes of determining any income,
gain, loss, depreciation or other deductions in respect of such assets. The
parties further agree to prepare and file all Tax Returns (including Form 8594
under the Code) in a manner consistent with such allocations. The parties
acknowledge that such allocations for Tax reporting purposes were determined
pursuant to arm's length bargaining regarding the fair market values of the
Acquired Assets in accordance with the provisions of Code Section 1060.
2.4. Sales Taxes, Etc. The Seller will pay all sales, use, transfer
and other Taxes, fees and charges payable in respect of the sale and transfer
of the Acquired Seller Assets to the Buyer pursuant to this Agreement. The
Partnership will pay all sales, use, transfer and other Taxes, fees and charges
payable in respect of the sale and transfer of the Acquired Partnership Assets
to the Buyer pursuant to this Agreement.
2.5. Closing; Closing Date. The closing of the Buyer's acquisition of
the First Closing Acquired Seller Assets and the related transactions
contemplated by this Agreement (the "First Closing") is anticipated to take
place on December 19, 1996 (but in any event on or before December 31, 1996).
The closing of the Buyer's acquisition of the Second Closing Acquired Assets
and the Acquired Partnership Assets and the related transactions contemplated
by this Agreement (the "Second Closing") is anticipated to take place on
January 8, 1997 (but in any event on or before January 31, 1997). The term
"Closing" as used in this Agreement shall refer to the First Closing or the
Second Closing, as applicable. Each Closing will commence at 8:00 a.m. local
time in Denver, Colorado, at the offices of Sherman & Howard L.L.C., and all
transactions contemplated by this Agreement with respect to a given Closing
will be effective at 11:59 p.m. Idaho time on the day immediately preceding
such Closing (such effective time being the "First Closing Date" or "Second
Closing Date," as applicable).
- 2 -
<PAGE> 6
2.6. Deliveries at the Closing. At the applicable Closing, (a) the
Seller, the Shareholder, the Partnership and the Partner, as applicable, will
deliver, or cause to be delivered, to the Buyer the certificates, instruments
and documents referred to in Section 6.1, (b) the Buyer will deliver to the
Seller, the Shareholder, the Partnership and the Partner, as applicable, the
certificates, instruments and documents referred to in Section 6.2, (c) the
Seller and the Partnership, as applicable, will deliver to the Buyer
instruments transferring to the Buyer title to the applicable Acquired Assets
free and clear of any Encumbrances or Taxes and (d) the Buyer will pay and
deposit the applicable purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Seller, the Shareholder, the
Partnership and the Partner. The Seller and the Shareholder jointly and
severally represent and warrant to the Buyer that the statements contained in
this Section 3.1 (including, without limitation, those contained in the
Sections enumerated in the following sentence) are correct and complete as of
the date of this Agreement and will be correct and complete (i) as of the First
Closing Date (as though made then and as though the First Closing Date were
then substituted for the date of this Agreement throughout this Section 3.1)
and (ii) as of the Second Closing Date (as though made then and as though the
Second Closing Date were then substituted for the date of this Agreement
throughout this Section 3.1); provided, however, that, as of the Second Closing
Date, the First Closing Acquired Seller Assets, the Coeur D'Alene, Idaho
Premises, the First Closing Assumed Liabilities and other matters relating
exclusively to the Seller's business and operations conducted at the Coeur
D'Alene, Idaho Premises shall be deemed excluded from the representations and
warranties made as of the Second Closing Date. In addition, the Partnership
and the Partner jointly and severally represent and warrant to the Buyer that
the statements contained in Sections 3.1(a)(ii), 3.1(b)(ii), 3.1(c)(ii),
3.1(e)(ii), 3.1(f)(ii) and 3.1(g) (but in the case of Section 3.1(g), only to
the extent such representations and warranties specifically refer to the
Partnership, the Partner or the Acquired Partnership Assets) are correct and
complete as of the date of this Agreement and will be correct and complete (i)
as of the First Closing Date (as though made then) and (ii) as of the Second
Closing Date (as though made then).
(a) Organization, Good Standing, Authority, Etc.
(i) The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Idaho,
which is the only jurisdiction in which the nature of the business conducted by
it or the properties owned, leased or operated by it make such qualification
necessary. The Seller has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. This Agreement and the Other Seller Agreements and the consummation
of the transactions contemplated hereby and thereby have been duly and
unanimously approved by the board of directors and shareholders of the Seller,
and this Agreement has been duly executed and delivered by the Seller. The
Seller has full corporate power and authority to execute, deliver and perform
this Agreement and the Other Seller Agreements to which the Seller is a party,
and the Shareholder and each relative or affiliate of the Seller, the
Shareholder, the Partnership or the Partner who is party to any Other Seller
Agreement has full and absolute right, power, authority and legal capacity to
execute, deliver and perform this Agreement and all Other Seller Agreements to
which the Shareholder, the Partner or such relative or affiliate is a party,
and this Agreement constitutes, and the Other Seller Agreements will when
executed and delivered constitute,
- 3 -
<PAGE> 7
the legal, valid and binding obligations of, and shall be enforceable in
accordance with their respective terms against, the Seller, the Shareholder and
each such relative or affiliate who is a party thereto.
(ii) The Partnership is a general partnership duly
organized, validly existing and in good standing under the laws of the State of
Idaho, and the nature of the business conducted by it or the properties owned,
leased or operated by it do not require the Partnership to be qualified in any
other jurisdiction. The Partnership has not engaged in any business or
activities other than owning the Acquired Partnership Assets and leasing the
Acquired Partnership Assets to the Seller. The Partnership has all requisite
partnership power and authority, to own, lease and operate its properties and
to carry on its business as now being conducted. This Agreement and the Other
Seller Agreements and the consummation of the transactions contemplated hereby
and thereby have been duly and unanimously approved by the general partners of
the Partnership, and this Agreement has been duly executed and delivered by the
Partnership. The Partnership has full partnership power and authority to
execute, deliver and perform this Agreement and the Other Seller Agreements to
which the Partnership is a party, and the Partner has full and absolute right,
power, authority and legal capacity to execute, deliver and perform this
Agreement and all Other Seller Agreements to which the Partner is a party, and
this Agreement constitutes, and such Other Seller Agreements will when executed
and delivered constitute, the legal, valid and binding obligations of, and
shall be enforceable in accordance with their respective terms against, the
Partnership and the Partner.
(b) Ownership.
(i) The Shareholder owns, of record and beneficially,
free and clear of any Encumbrance or Tax, 5,000 shares of the common stock, no
par value, of the Seller, which constitute all outstanding shares of the
capital stock of the Seller. No other Person has any right to acquire any
equity interest in the Seller.
(ii) The Shareholder and Mr. Arnone own, of record,
and the Shareholder and the Partner own, beneficially, free and clear of any
Encumbrance or Tax, 50% and 50% general partnership interests in the
Partnership, respectively. The Shareholder and Mr. Arnone are the only
partners of the Partnership. No other Person has any right to acquire any
partnership interest in the Partnership.
(c) No Violation.
(i) The execution, delivery and performance of this
Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which the Seller, the Shareholder or any relative or affiliate
of the Seller, the Shareholder, the Partnership or the Partner who is a party
to any Other Seller Agreement is subject or any provision of the articles of
incorporation or bylaws of the Seller or any such affiliate, or (ii) violate,
with or without the giving of notice or the lapse of time or both, or conflict
with or result in the breach or termination of any provision of, or constitute
a default under, or give any Person the right to accelerate any obligation
under, or result in the creation of any Encumbrance upon any properties, assets
or business of the Seller, the Shareholder or any such relative or affiliate
pursuant to, any indenture, mortgage, deed of trust, lien, lease, license,
Permit, agreement, instrument or other arrangement to which the Seller, the
Shareholder or any such relative or affiliate is a party or by which the
Seller, the Shareholder, the Partnership, the Partner, or any such relative or
affiliate or any of their
- 4 -
<PAGE> 8
respective assets and properties is bound or subject. Except for notices that
will be given and consents that will be obtained by the Seller and the
Shareholder prior to the First Closing with respect to the transactions
contemplated thereby and prior to the Second Closing with respect to the
transactions contemplated thereby (all of which are set forth in Exhibit
3.1(c)), neither the Seller, the Shareholder, the Partnership, the Partner, nor
any such relative or affiliate need give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental Authority or
other Person in order for the parties to consummate the transactions
contemplated by this Agreement and the Other Seller Agreements.
(ii) The execution, delivery and performance of this
Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which the Partnership or the Partner is subject or any provision
of the partnership agreement of the Partnership, or (ii) violate, with or
without the giving of notice or the lapse of time or both, or conflict with or
result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Partnership or the Partner pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, Permit, agreement, instrument or
other arrangement to which the Partnership or the Partner is a party or by
which the Partnership or the Partner or any of their respective assets and
properties is bound or subject. The Partner need not give any notice to, make
any filing with or obtain any authorization, consent or approval of any
Governmental Authority or other Person in order for the Partner to consummate
the transactions contemplated by this Agreement and the Other Seller
Agreements.
(d) Financial Statements. The unaudited balance sheets of the
Seller prepared by management of the Seller as of December 31, 1994 and
December 31, 1995, the related unaudited income schedules prepared by
management of the Seller for the fiscal years then ended, the unaudited balance
sheet of the Seller prepared by management of the Seller as of October 31, 1996
(the latter being referred to as the "Latest Balance Sheet"), and the related
unaudited income schedule prepared by management of the Seller for the ten-
month period then ended, have been prepared in accordance with good accounting
practices and on a basis consistent with those of prior years, are in
accordance with the books and records of the Seller (which books and records
are complete and correct), are accurate and fairly present the financial
position and results of operations of the Seller as of such dates and for each
of the periods indicated, do not list book values for the assets that are in
excess of their fair market values, and, except as set forth on Exhibit
3.1(d)(i), make adequate provision for all Liabilities to which the Seller is
subject. Copies of the financial statements described in the first sentence in
this Section are attached as Exhibit 3.1(d)(i).
(e) Absence of Certain Leases, Changes or Events.
(i) The Seller is not, except as set forth on Exhibit
3.1(e), a party to or otherwise bound by any contract or agreement that has a
term of three or more months pursuant to which the Seller is obligated to
furnish any equipment, products or services, and no such contract or agreement
has been prepaid with respect to any period after the First Closing Date.
Except as set forth on Exhibit 3.1(e), neither the Partnership, the Shareholder
nor the Partner is party to or otherwise bound by any contract or agreement
relating to the Acquired Partnership Assets. Since June 1, 1996, the Seller
has not (A) except as otherwise set forth on Exhibit 3.1(e), incurred any debt,
indebtedness or other Liability, except current Liabilities incurred in the
ordinary course of business; (B) delayed
- 5 -
<PAGE> 9
or postponed the payment of accounts payable or other Liabilities or
accelerated the collection of any receivable beyond stated, normal terms; (C)
except as otherwise set forth on Exhibit 3.1(e), sold or otherwise transferred
any of its equipment or other assets or properties, except for such sales which
were in the ordinary course of business and did not involve more than $5,000
individually or in the aggregate; (D) cancelled, compromised, settled,
released, waived, written-off or expensed any account or note receivable,
right, debt or claim involving more than $5,000 in the aggregate; (E) changed
in any significant manner the way in which it conducts its business; (F) made
or granted any individual wage or salary increase in excess of 10% or $1.00 per
hour, any general wage or salary increase, or, except as otherwise set forth on
Exhibit 3.1(e), any additional benefits of any kind or nature; (G) except as
otherwise set forth on Exhibit 3.1(e) and except as otherwise expressly
permitted by this Section 3.1(e), (1) entered into any contracts or agreements,
or made any commitments, involving more than $5,000 individually or in the
aggregate or (2) accelerated, terminated, delayed, modified or cancelled any
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) involving more than $5,000 individually or in
the aggregate; (H) suffered any adverse fact or change, including, without
limitation, to or in its business, assets, financial condition, prospects or
customer relationships; (I) made any payment or transfer to or for the benefit
of the Shareholder, the Partner, any shareholder, officer or director, or any
relative or affiliate thereof or permitted any Person, including, without
limitation, the Shareholder, the Partner, any shareholder, officer, director,
or employee or any relative or affiliate thereof, to withdraw assets from the
Seller (other than (1) cash and accounts receivable of the Seller distributed
to its shareholder as set forth on Exhibit 3.1(e), (2) the payment to the
Shareholder of the proportionate monthly amount of their respective normal
annualized salaries due and payable during such period and (3) such other
payments, transfers and withdrawals as are set forth on Exhibit 3.1(e)); (J)
failed to make purchases of new or used equipment necessary to maintain its
rental/lease inventory at the level which is reasonably necessary to maintain
the revenue base experienced by the Seller during the 12 months preceding such
date; (K) except as otherwise set forth on Exhibit 3.1(e), rented or leased any
equipment or sold or otherwise transferred any inventory, equipment or services
at below-normal rental or lease rates or margins; (L) suffered any other
significant occurrence, event, incident, action, failure to act or transaction
outside the ordinary course of business; or (M) agreed to incur, take, enter
into, make or permit any of the matters described in clauses (A) through (L).
(ii) Since June 1, 1996, the Partnership has not (A)
except as otherwise set forth on Exhibit 3.1(e), incurred any debt,
indebtedness or other Liability; (B) sold or otherwise transferred any of the
Acquired Partnership Assets; (C) changed in any manner the way in which it
conducts its business; (D) suffered any adverse fact or change with respect to
the Acquired Partnership Assets; or (E) agreed to incur, take, enter into, make
or permit any of the matters described in clauses (A) through (D).
(f) Tax Matters.
(i) Neither the Seller nor the Shareholder has ever
filed (i) an election pursuant to Section 1362 of the Code that the Seller be
taxed as an "S" corporation, except as set forth on Exhibit 3.1(f), or (ii) a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations. The Seller and the Shareholder will pay all Taxes attributable
to the Seller's business and activities, including all Taxes attributable to
the transactions contemplated by this Agreement, on or before the due date.
There are no Encumbrances on any of the assets of the Seller, the Shareholder
or the Partnership that arose in connection with any failure (or alleged
failure) of the Seller, the
- 6 -
<PAGE> 10
Shareholder or the Partnership to pay any Tax. Exhibit 3.1(f) lists all
federal, state and local income Tax Returns filed with respect to the Seller
for taxable periods ended on or after January 1, 1993, indicates those Tax
Returns that have been audited and indicates those Tax Returns that currently
are the subject of audit. The Seller has delivered to the Buyer correct and
complete copies of all federal, state and local income Tax Returns and
examination reports of, and statements of deficiencies assessed against or
agreed to by, the Seller since January 1, 1993.
(ii) The Shareholder and the Partner will pay all
Taxes attributable to the Partnership's business and activities, including all
Taxes attributable to the transactions contemplated by this Agreement, on or
before the due date. There are no encumbrances on any of the assets of the
Shareholder or the Partner that arose in connection with any failure (or
alleged failure) to pay any Tax.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Seller owns
all of the Acquired Seller Assets (other than certain items of Shareholder
Property) and the Partnership owns all of the Acquired Partnership Assets, free
and clear of all Encumbrances (except for those Encumbrances on the First
Closing Acquired Seller Assets which the Seller shall cause to be terminated as
of the First Closing and except for those Encumbrances on the Second Closing
Acquired Seller Assets and the Acquired Partnership Assets which the Seller and
the Partnership shall cause to be terminated as of the Second Closing). As of
the First Closing, all of the First Closing Acquired Seller Assets (including
all of the Shareholder Property) will be owned by the Seller, free and clear of
all Encumbrances, and the Seller will have good and marketable title to (or, in
the case of the First Closing Acquired Seller Assets that are leased, valid
leasehold interests in) all the First Closing Acquired Seller Assets. As of
the Second Closing, all of the Second Closing Acquired Seller Assets will be
owned by the Seller and all of the Acquired Partnership Assets will be owned by
the Partnership, free and clear of all Encumbrances, and the Seller will have
good and marketable title to (or, in the case of the Second Closing Acquired
Seller Assets that are leased, valid leasehold interests in) all the Second
Closing Acquired Seller Assets and the Partnership will have good and
marketable title to all of the Acquired Partnership Assets. The Acquired
Assets consist of (A) the tangible and intangible assets of the Seller
(exclusive of the Excluded Assets) in existence as of June 1, 1996 (except as
set forth on Exhibit 3.1(e) with respect to cash of the Seller which was
distributed to its shareholder and except for such changes in the Seller's
inventory in the ordinary course of business as are not in violation of Section
3.1(e)), (B) the tangible and intangible assets of the Partnership in existence
on June 1, 1996 and at any time since that date and (C) all tangible and
intangible assets, including, without limitation, all improvements, fixtures
and fittings, owned by the Shareholder or any relative or affiliate thereof or
of the Seller which have been used in its business at any time on or after June
1, 1996 (the "Shareholder Property"), including, without limitation, the
tangible and intangible assets set forth on Exhibit 3.1(g)(i)(A) owned by the
Shareholder or any relative or affiliate thereof. Except as set forth on
Exhibit 3.1(g)(i)(B), the Premises constitute all of the real property,
buildings and improvements used by the Seller in its business. The Acquired
Assets are all of the tangible and intangible assets (other than the Excluded
Assets) used by the Seller or the Partnership in, or necessary for the conduct
of, their respective businesses. The Acquired Assets encompass all equipment
used by the Seller to generate the income reflected in the financial statements
attached as Exhibit 3.1(d)(i). Except for the Acquired Partnership Assets, the
Seller does not lease any equipment from the Shareholder, the Partnership or
the Partner or any relative or affiliate of the Seller, the Shareholder, the
Partnership or the Partner. The total revenue earned by the Partnership from
the lease of the Acquired Partnership
- 7 -
<PAGE> 11
Assets to the Seller during the fiscal year ended December 31, 1995 and the
ten- month period ended October 31, 1996 was $51,742 and $34,557, respectively.
Except for items rented or leased to customers, all of the tangible Acquired
Assets are located on the Premises.
(ii) Except as set forth on Exhibit 3.1(g)(ii), the
Premises are free from defects, have been maintained in accordance with normal
industry practice, are in good operating condition and repair and are suitable
for the purposes for which they presently are used. The Seller has not
received notice of violation of any Legal Requirement or Permit relating to its
operations or its owned or leased properties. The Partnership has not received
notice of violation of any Legal Requirement or Permit relating to its
operations or the Acquired Partnership Assets.
(iii) To the best knowledge of the Seller and the
Shareholder, the Premises have received all approvals of Governmental
Authorities (including Permits) required in connection with the occupation and
operation thereof and have been occupied, operated and maintained in accordance
with applicable Legal Requirements. The Premises are supplied with utilities
and other services necessary for the operation of said Premises.
(h) Lists of Properties, Contracts and Other Data. Attached
as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the items
identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All such
rights, licenses, leases, registrations, Permits, Intellectual Property,
applications, contracts, agreements and commitments and other items referred to
in Exhibit 3.1(h)(ii) are valid, in full force and effect, enforceable in
accordance with their respective terms for the period stated therein, and no
party has repudiated any provision thereof and no action or claim is pending or
threatened to revoke, modify, terminate or render invalid any of such items.
Neither the Seller, the Partnership nor any other party thereto is in breach or
default in performance of any of its respective obligations under, and no event
exists which, with the giving of notice or lapse of time or both, would
constitute a breach, default or event of default on the part of a party to, any
of the foregoing that is continuing unremedied.
(i) Litigation, Etc. There is no outstanding Order against,
nor except as set forth on Exhibit 3.1(i) is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or threatened against, the Seller, its properties or its business or
relating to the transactions contemplated by this Agreement, nor is there any
basis for any such action.
(j) [RESERVED].
(k) Product Quality, Warranty and Liability. All products and
services sold, rented, leased, provided or delivered by the Seller to customers
on or prior to (i) the First Closing Date, with respect to the First Closing,
and (ii) the Second Closing Date, with respect to the Second Closing, conform
to applicable contractual commitments, express and implied warranties, product
and service specifications and quality standards, and the Seller has no
Liability and there is no basis for any Liability for replacement or repair
thereof or other damages in connection therewith. No product or service sold,
rented, leased, provided or delivered by the Seller to customers on or prior to
(i) the First Closing Date, with respect to the First Closing, and (ii) the
Second Closing Date, with respect to the Second Closing, is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale, rent or lease. The Seller has no Liability and there is no
basis for any Liability arising out of any injury to a Person or property as a
result of the ownership, possession,
- 8 -
<PAGE> 12
provision or use of any product or service sold, rented, leased, provided or
delivered by the Seller on or prior to (i) the First Closing Date, with respect
to the First Closing, and (ii) the Second Closing Date, with respect to the
Second Closing. All product or service liability claims that have been
asserted against the Seller since January 1, 1990, whether covered by insurance
or not and whether litigation has resulted or not, are listed and summarized on
Exhibit 3.1(k).
(l) Insurance. The Seller has policies of insurance (i)
covering risk of loss on its Acquired Assets, (ii) covering products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption, all, to the
best knowledge of the Seller and the Shareholder, with responsible and
financially sound insurance carriers in adequate amounts and in compliance with
governmental requirements and in accordance with good industry practice. All
such insurance policies are valid, in full force and effect and enforceable in
accordance with their respective terms and no party has repudiated any
provision thereof. All such policies will remain in full force and effect
until midnight on the Closing Date. Neither the Seller nor any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving
of notice or the lapse of time or both, would constitute a breach, default or
event of default, or permit termination, modification or acceleration under any
such policy. There are no claims, actions, proceedings or suits arising out of
or based upon any of such policies nor, to the best knowledge of the Seller and
the Shareholder, does any basis for any such claim, action, suit or proceeding
exist. All premiums have been paid on such policies as of the date of this
Agreement and will be paid on such policies through the Closing Date. The
Seller has been covered during the five years prior to the date of this
Agreement by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. All
claims made during such five-year period with respect to any insurance coverage
of the Seller, other than those described on Exhibit 3.1(k), are set forth on
Exhibit 3.1(l).
(m) Compliance with Applicable Laws and Rights. To the best
knowledge of the Seller and the Shareholder, except as set forth on Exhibit
3.1(m), neither the Seller nor the Seller's assets (including its Premises,
facilities, machinery and equipment) are in violation of any applicable Legal
Requirement or Right. The Seller has not received notice from any Governmental
Authority or other Person of any violation or alleged violation of any Legal
Requirement or Right, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced or is
pending or threatened against the Seller alleging any such violation.
(n) Pension and Employee Benefit Matters. The Buyer will not
suffer any Liability or Adverse Consequence from the Seller's administration or
termination of any of its Employee Benefit Plans or from any failure of any
post-Closing distribution of benefits to employees of the Seller to be made by
the Seller in compliance with all applicable Legal Requirements. The Buyer
will have no obligation to employ any employee of the Seller or to continue any
Employee Benefit Plan, and will have no Liability under any plan or arrangement
maintained by the Seller for the benefit of any employee. The Seller will
remain liable for all costs of employee compensation, including benefits and
Taxes relating to employment and employees attributable to periods through the
First Closing Date and the Second Closing Date, whether reported by such
Closing Date or thereafter, and all group health plan continuation coverage to
which any employee, former employee or dependent is entitled because of a
qualifying event (as defined in Section 4980B(f)(3) of the Code) occurring
through the applicable Closing Date with respect to such Person or as a result
of termination of employment with the Seller
- 9 -
<PAGE> 13
because of the transactions contemplated by this Agreement and any benefit or
excise tax liability or penalty or other costs arising from any failure by the
Seller to provide group health plan continuation coverage. Except as set forth
on Exhibit 3.1(n), neither the Seller nor any Affiliated Group which includes
the Seller (if any) maintains, administers or contributes to, has maintained,
administered or contributed to, or has any Liability to contribute to, any
Employee Benefit Plan. Exhibit 3.1(n) lists each Employee Benefit Plan that
is, or at any time during the past six years was, maintained, administered,
contributed to or required to be contributed to by the Seller or any Affiliated
Group (if any) which includes or has included the Seller, and the date of
termination of each such Employee Benefit Plan (if any) which has been
terminated. The Seller has no Liability (and there is no basis for the
assertion of any Liability) as a result of the Seller's or any such Affiliated
Group's maintenance, administration or termination of, or contribution to, any
Employee Benefit Plan. Neither the Seller nor any member of any Affiliated
Group (if any) which includes or has included the Seller has ever been required
to contribute to any Multiemployer Plan (as defined in ERISA Section 3(37)) nor
has incurred any Liability under Title IV of ERISA.
(o) Employees and Labor. The Seller has not received any
notice, nor, to the best knowledge of the Seller and the Shareholder, is there
any reason to believe that any executive or key employee of the Seller or any
group of employees of the Seller has any plans to terminate his, her or its
employment with the Seller. No executive or key employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Seller prior to the Second Closing Date and, if such
person becomes an employee of the Buyer subsequent to a Closing, to the affairs
of the Buyer after such Closing. The Seller will not be required to give any
notice under the Worker Adjustment and Retraining Notification Act, as amended,
or any similar Legal Requirement as a result of this Agreement, the Other
Seller Agreements or the transactions contemplated hereby or thereby. The
Seller does not have any labor relations problems or disputes, nor has the
Seller experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. The Seller is not a party to or bound by
any collective bargaining agreement, there is no union or collective bargaining
unit at the Seller's facilities, and no union organization effort has been
threatened, initiated or is in progress with respect to any employees of the
Seller.
(p) Customer Relationships. Exhibit 3.1(p)(i) lists each
customer that individually or with its affiliates accounted for 2% or more of
the sales, rental or lease revenues of the Seller's Coeur D'Alene, Idaho store
during either the fiscal year ending December 31, 1995 or the ten-month period
ending October 31, 1996 (the "Principal Coeur D'Alene Customers"). Exhibit
3.1(p)(ii) lists each customer that individually or with its affiliates
accounted for 2% or more of the sales, rental or lease revenues of the Seller's
Sandpoint, Idaho store during either the fiscal year ending December 31, 1995
or the ten- month period ending October 31, 1996 (the "Principal Sandpoint
Customers"). The Seller has good commercial working relationships with its
Principal Coeur D'Alene Customers and its Principal Sandpoint Customers and
since January 1, 1995, no Principal Coeur D'Alene Customer or Principal
Sandpoint Customer has cancelled or otherwise terminated its relationship with
the Seller, materially decreased or limited its purchases, rentals or leases
from the Seller, or threatened to take any such action. The Seller and the
Shareholder have no basis to anticipate any problems with the Seller's customer
or business relationships. Except as set forth on Exhibit 3.1(p)(i) or Exhibit
3.1(p)(ii), to the best knowledge of the Seller and the Shareholder, no
Principal Coeur D'Alene Customer or Principal Sandpoint Customer has any plans
to reduce its purchases, rentals or leases from the Seller below levels
prevailing since January 1, 1995, and the execution and delivery of this
Agreement and the
- 10 -
<PAGE> 14
consummation of the transactions contemplated hereby will not adversely affect
the relationship of the Seller with any Principal Coeur D'Alene Customer or
Principal Sandpoint Customer prior to the First Closing Date or the Second
Closing Date or of the Buyer with any Principal Coeur D'Alene Customer or
Principal Sandpoint Customer after the First Closing Date or the Second Closing
Date.
(q) Resale Inventory. The resale inventory of the Seller
consists of goods which, in the aggregate, are merchantable, are fit for the
purposes for which they were procured and are held by the Seller, are usable in
the ordinary course of the Seller's business and are not obsolete.
(r) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Seller, including, without limitation, the
Acquired Partnership Assets, consists of machinery, equipment and other
tangible personal property which are merchantable, are fit and suitable for the
purpose for which they were procured and are held by the Seller, useable in the
ordinary course of the Seller's business and are not obsolete. All of the
machinery, equipment and other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) has been well
maintained and is in good repair and good operating condition. None of the
machinery, equipment or other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) is damaged
(except for such minor damage to individual pieces of equipment which has
occurred in the ordinary course of business but which is not material to that
piece of equipment and does not affect its merchantability, fitness or
suitability for the rental business) or defective, neither the Seller nor the
Partnership has experienced material problems or deficiencies with respect to
any machinery, equipment and other tangible personal property included in the
Acquired Assets, and, to the best knowledge of the Seller and the Shareholder,
there is no basis to anticipate any such problems or deficiencies.
(s) Environmental Matters.
(i) The Seller is conducting and at all times has
conducted its business and operations, and has occupied, used and operated the
Premises and all other real property and facilities presently or previously
owned, occupied, used or operated by the Seller, in compliance with all
Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on the Seller's business or
activities. The Seller and the Shareholder do not have any knowledge of
pending or proposed changes to any Environmental Obligations which would
require any changes in any of the Seller's Premises, facilities, equipment,
operations or procedures or affect the Seller's business or its cost of
conducting its business as now conducted.
(ii) Except as set forth in the Environmental Study,
no conditions, circumstances or activities have existed or currently exist, and
neither the Seller nor the Shareholder has engaged in any acts or omissions,
with respect to the Premises or any other real properties, facilities or
business presently or previously owned, occupied, used or operated by the
Seller or any predecessor (including, without limitation, off-site disposal or
treatment of Hazardous Materials) which could give rise to any Liability
pursuant to any Environmental Obligation. Exhibit 3.1(s)(ii) identifies all
real properties and facilities, including the addresses thereof, which have
been owned, occupied, used or operated by the Seller or any predecessor at any
time on or prior to the date of this Agreement. There are no outstanding,
pending or threatened Orders against the Seller or the Shareholder, nor are
there any current, pending or threatened investigations of any kind against the
Seller or the Shareholder, concerning any Environmental Obligations. There are
no actions, suits or administrative,
- 11 -
<PAGE> 15
arbitral or other proceedings alleged, claimed, threatened, pending against or
affecting the Seller or the Shareholder at law or in equity with respect to any
Environmental Obligations, and neither the Seller nor the Shareholder has
knowledge of any existing grounds on which any such action, suit or proceedings
might be commenced.
(iii) Any chemicals and chemical compounds and mixtures
which are included among the assets of the Seller are integral to and required
for the conduct of the its business, have not been and are not intended to be
discarded or abandoned, and are not waste or waste materials. Except as set
forth in the environmental studies attached as Exhibit 3.1(s)(iii)
(collectively, the "Environmental Study"), the Seller has not generated,
handled, used, transported or disposed of Hazardous Materials. All waste
materials which are generated as part of the business of the Seller are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental Study,
no underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any facilities presently or previously
owned, occupied, used or operated by the Seller or any predecessor. Except as
set forth in the Environmental Study, neither any of the Premises nor any other
real properties or facilities presently or previously owned, occupied, used or
operated by the Seller or any predecessor has been used at any time as a
gasoline service station or any facility for storing, pumping, dispensing or
producing gasoline or any other petroleum products (other than such storage,
pumping and dispensing of gasoline and other petroleum products as is
incidental to the Seller's equipment rental/lease business) or Hazardous
Materials. No building or other structure on any of the Premises contains
asbestos-containing materials. There are not nor have there been any
incinerators, septic tanks, leach fields, cesspools or wells (including without
limitation dry, drinking, industrial, agricultural and monitoring wells) on any
of the Premises.
(t) Intellectual Property. The Seller owns or has the legal
right to use and, except for the Solutions by Computer Software License
Agreement, to transfer to the Buyer each item of Intellectual Property required
to be identified on Exhibit 3.1(h)(ii). The continued operation of the
business of the Seller as currently conducted will not interfere with, infringe
upon, misappropriate or conflict with any Intellectual Property rights of
another Person. To the best knowledge of the Seller and the Shareholder, no
other Person has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property rights of the Seller or any
Intellectual Property included in the Shareholder Property. Neither the Seller
nor any owner of any Intellectual Property included in the Shareholder Property
has granted any license, sublicense or permission with respect to any
Intellectual Property owned or used in the Seller's business. The Partnership
does not own any Intellectual Property, nor is any necessary for the ownership,
operation or use of the Acquired Partnership Assets.
(u) Disclosure. None of the documents or information provided
to the Buyer by the Seller, the Shareholder, the Partnership or the Partner or
any agent or employee thereof in the course of the Buyer's due diligence
investigation and the negotiation of this Agreement and Section 3.1 of this
Agreement and the disclosure Exhibits referred to therein, including the
financial statements referred to above in Section 3.1, contain any untrue
statement of any material fact or omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact which materially adversely affects the business, prospects,
condition, affairs or operations of the
- 12 -
<PAGE> 16
Seller, any of its properties or assets or any of the Acquired Partnership
Assets which has not been set forth in this Agreement or such Exhibits,
including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Seller, the Shareholder, the Partnership and the
Partner acknowledge and agree that the fact that they have made disclosures
pursuant to Section 3.1 or otherwise of matters, or did not have knowledge of
matters, which result in Adverse Consequences to the Buyer shall not relieve
the Seller, the Shareholder, the Partnership and the Partner of their
obligation pursuant to Article 7 to indemnify and hold the Buyer harmless from
all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller, the Shareholder, the Partnership and the Partner
that the statements contained in this Section 3.2 are correct and complete as
of the date of this Agreement and will be correct and complete as of the
applicable Closing Date (as though made then and as though the applicable
Closing Date were substituted for the date of this Agreement throughout this
Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other Buyer Agreements
and the transactions contemplated hereby and thereby have been duly approved by
all requisite corporate action. The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Buyer
Agreements, and this Agreement constitutes, and the Other Buyer Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of the Buyer, and shall be enforceable in accordance with their
respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery
and performance of this Agreement and the Other Buyer Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Buyer is subject or any provision of
the certificate of incorporation or bylaws of the Buyer or (ii) violate, with
or without the giving of notice or the lapse of time or both, or conflict with
or result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Buyer pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Buyer is a party or which the Buyer or any of its assets and properties is
bound or subject. Except for notices and consents that will be given or
obtained by the Buyer prior to the applicable Closing, the Buyer does not need
to give any notice to, make any filing with or obtain any authorization,
consent or approval of any Governmental Authority or other Person in order for
the parties to consummate the transactions contemplated by this Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof
- 13 -
<PAGE> 17
by the parties and shall survive for four years following the later of the
First Closing or the Second Closing, except that the Liabilities of the Seller
and the Shareholder with respect to the representations and warranties set
forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(n), 3.1(s),
3.1(t) and 3.1(u), the Liabilities of the Partnership and the Partner with
respect to the Partnership's and the Partner's representations and warranties
set forth in Sections 3.1(a)(ii), 3.1(b)(ii), 3.1(c)(ii), 3.1(f)(ii) and
3.1(g), and the Liabilities of the Buyer with respect to the representations
and warranties set forth in Sections 3.2(a) and 3.2(b), shall survive without
termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the reasonable
best efforts of such party and be exercised always in a reasonable manner and
within reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Second Closing.
4.1. General. Each of the parties will use its reasonable best efforts
to take all actions necessary, proper or advisable in order to consummate and
make effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholder will and will cause the Seller and the Partnership
to, and the Partner will and will cause the Partnership to, give any notices,
make any filings and obtain any consents, authorizations or approvals needed to
consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Seller will not, and
the Shareholder will not cause or permit the Seller to, engage in any practice,
take any action or enter into any transaction outside its ordinary course of
business; provided, however, that in no event will any action be taken or fail
to be taken or any transaction be entered into which would result in a breach
of any representation, warranty or covenant of the Seller, the Shareholder, the
Partnership or the Partner. The Seller will, and the Shareholder will cause
the Seller to, keep its business and properties, including its current
operations, physical facilities, working conditions, and relationships with
customers, suppliers, lessors, licensors and employees, intact and, in
connection therewith, to continue to purchase new or used equipment necessary
to maintain its rental/lease inventory at the level specified in Section
3.1(e)(i)(J). The Partnership will not, and the Shareholder and the Partner
will not cause or permit the Partnership to, enter into any transaction with
any other Person which would have any effect on the Acquired Partnership Assets
or the transaction contemplated hereby; provided, however, that in no event
will any action be taken or fail to be taken or any transaction entered into
which would result in a breach of any representation, warranty or covenant of
the Seller, the Shareholder, the Partnership or the Partner. The Partnership
will, and the Shareholder and the Partner will cause the Partnership to, keep
the Acquired Partnership Assets intact and in compliance with all applicable
representations and warranties.
4.3. Full Access. The Seller and the Partnership will permit the Buyer
and its agents to have full access at all reasonable times, and in a manner so
as not to interfere with the normal business
- 14 -
<PAGE> 18
operations of the Seller or the Partnership, to all premises, properties,
personnel, books, records (including Tax records), contracts and documents of
or pertaining to the Seller or the Partnership.
4.4. Notice of Developments. The Seller and the Partnership will give
prompt written notice to the Buyer of any material development which occurs
after the date of this Agreement and affects the business, assets, Liabilities,
financial condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Seller or
the Acquired Partnership Assets. No such written notice, however, will be
deemed to amend or supplement any disclosure Exhibit (except as set forth in
the next two sentences with respect to clause (i)(J) of Exhibit 3.1(e)) or to
prevent or cure any misrepresentation, breach of warranty or breach of
covenant. Between the First Closing and the Second Closing, the Seller may
make payments or transfers to or for the benefit of the Shareholder of the type
described in clause (i)(J) of Section 3.1(e)(i) in connection with the Seller's
year-end tax planning; provided, however, that such payments or transfers may
only be of Excluded Assets or proceeds therefrom and may not be of Acquired
Seller Assets or any assets which, but for their sale, transfer, liquidation or
other disposition by the Seller would have been Acquired Seller Assets, or from
any proceeds therefrom. Between the First Closing and the Second Closing, the
Seller may update clause (i)(J) of Exhibit 3.1(e) to reflect such permitted
tax-planning payments and transfers.
4.5. Exclusivity. Neither the Seller, the Shareholder, the Partnership
nor the Partner will, and neither the Shareholder nor the Partner will cause or
permit the Seller or the Partnership to, (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, any partnership or similar
interest in, or any portion of the assets of, the Seller or the Partnership
(including any acquisition structured as a merger, consolidation or share
exchange) or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in or facilitate
in any other manner any effort or attempt by any Person to do or seek any of
the foregoing. Neither the Shareholder nor the Partner will vote shares of the
Seller's stock or interests in the Partnership in favor of any such
transaction. The Seller, the Shareholder, the Partnership and the Partner will
notify the Buyer immediately if the Person makes any proposal, offer, inquiry
or contact with respect to any of the foregoing.
4.6. Conveyance of Shareholder Property. Prior to the First Closing
Date, the Shareholder shall convey, and shall cause each relative or affiliate
to convey, to the Seller, free and clear of any Encumbrance or Tax, all of the
Shareholder's, relative's or affiliate's right, title and interest to the
Shareholder Property included in the Acquired Seller Assets.
4.7. Announcements. Prior to the First Closing, no party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
parties.
4.8. Bulk Sales Laws. In reliance upon its indemnification rights set
forth in Section 7, the Buyer waives compliance by the Seller and the
Partnership with the bulk transfer law and any other similar law of any
applicable jurisdiction in respect to the transactions contemplated by this
Agreement.
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the First Closing.
- 15 -
<PAGE> 19
5.1. Further Assurances. In case at any time after the First Closing
any further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. The Shareholder will assist with the transition of
(a) the Seller's Coeur D'Alene, Idaho business to the Buyer during the first
six months following the First Closing and (b) the Seller's Sandpoint, Idaho
business to the Buyer during the first six months following the Second Closing,
in each case, at no cost to the Buyer. Notwithstanding the foregoing, the
Shareholder shall not be required to devote more than an average of 15 hours
per week to such activities. The assistance with transition to be provided by
the Shareholder shall be in answering in person or by telephone during normal
business hours, questions of any employee of the Buyer, not to exceed a total
of three hours on any one day of the week. Neither the Seller, the
Shareholder, the Partnership nor the Partner will take any action at any time
that is designed or intended to have the effect of discouraging any customer,
supplier, lessor, licensor or other business associate of (a) the Seller's
Coeur D'Alene, Idaho operations from establishing or continuing a business
relationship with the Buyer after the First Closing or (b) the Seller's
Sandpoint, Idaho operations from establishing or continuing a business
relationship with the Buyer after the Second Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to (a) the First
Closing Date involving any of the First Closing Acquired Seller Assets or the
Seller's business relating thereto or (b) the Second Closing Date involving any
of the Second Closing Acquired Seller Assets, the Acquired Partnership Assets
or the Seller's business relating thereto, each of the other parties will
cooperate with such party and its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to indemnification
therefor under Section 7).
5.4. Confidentiality. The Seller, the Shareholder, the Partnership and
the Partner will treat and hold as confidential all Confidential Information
concerning the Buyer, the Seller's business or the Acquired Assets, refrain
from using any such Confidential Information and deliver promptly to the Buyer
or destroy, at the request and option of the Buyer, all of such Confidential
Information in its or their possession.
5.5. Post-Closing Announcements. Following the First Closing, neither
the Seller, the Shareholder, the Partnership nor the Partner will issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Buyer.
5.6. Financial Statements. The Seller, the Shareholder, the
Partnership and the Partner will, upon request of the Buyer, cooperate with the
Buyer to produce such historical and on-going financial statements and audits
as the Buyer may request, all at the sole cost and expense of the Buyer.
- 16 -
<PAGE> 20
5.7. Satisfaction of Liabilities.
(a) The Seller and the Shareholder will pay and perform, as
and when due, all Liabilities (other than Assumed Liabilities) relating to the
Seller, the business and activities of the Seller and the Acquired Seller
Assets, including, without limitation, all Taxes attributable to the
transactions contemplated by this Agreement and all accrued vacation and other
accrued employee benefits; provided, however, that accrued vacation and other
accrued employee benefits with respect to those persons who as of the
applicable Closing Date are employees of the Seller and who become employees of
the Buyer in connection with the Closing corresponding to such Closing Date
will be satisfied by payment of the amount thereof by the Seller to the Buyer
as the Buyer provides such benefits or makes cash payments in lieu thereof to
such employees. The Partnership, the Shareholder and the Partner will pay and
perform, as and when due, all Liabilities of the Partnership, the business of
the Partnership and the Acquired Partnership Assets, including, without
limitation, all Taxes attributable to the transactions contemplated by this
Agreement. Further, the Seller and the Shareholder, at their expense, will,
upon receipt of notice from the Buyer at any time, promptly take or cause to be
taken any action necessary to remedy any failure of the Premises or the
acquired business to comply at the applicable Closing Date with any Legal
Requirement.
(b) The Seller will pay to the applicable Governmental
Authorities, on or before December 20, 1996, all personal property taxes on the
Acquired Seller Assets and the Acquired Partnership Assets attributable to the
period from January 1, 1996 to and including December 31, 1996. If the Second
Closing occurs, the Buyer will be responsible for all personal property taxes
on the Second Closing Acquired Seller Assets and the Acquired Partnership
Assets attributable to the period commencing on January 1, 1997, including,
without limitation those attributable to the period from January 1, 1997 to and
including the date on which the Second Closing occurs.
(c) The Buyer will pay and perform, as and when due (except to
the extent the validity thereof or the liability therefor is being contested by
the Buyer), the Assumed Liabilities.
5.8. Certain Environmental Matters. The Seller and the Shareholder
shall, within 14 days after receipt of notice from the Buyer, pay to the Buyer
an amount equal to all costs and expenses incurred by the Buyer in installing a
wash water recycling system at the Coeur D'Alene store in compliance with
applicable Environmental Obligations, connecting the wash system at the
Sandpoint, Idaho store to the store's sanitary sewer connection in compliance
with applicable Environmental Obligations, obtaining all applicable Permits in
connection therewith and taking such actions as are necessary in connection
therewith; provided, however, that the amount payable by the Seller and the
Shareholder pursuant to this sentence shall not exceed $16,000. The Seller and
the Shareholder shall, within 120 days of the Second Closing, complete all
actions necessary to comply with applicable Environmental Obligations relating
to the removal by the Seller in 1996 of two underground storage tanks from its
Sandpoint, Idaho Premises, including, without limitation, making any required
filings with Governmental Authorities. Nothing in this Section 5.8 shall
relieve the Seller or the Shareholder from any obligation or Liability under
Section 7 of this Agreement, obligate the Buyer to take any action (except as
specifically set forth in the first sentence of this Section 5.8) or impose any
Liability on the Buyer.
5.9. Second Closing. The Buyer shall be obligated to consummate the
Second Closing if the conditions set forth in Section 6.1 applicable to the
Second Closing have been satisfied. The Seller,
- 17 -
<PAGE> 21
the Shareholder, the Partnership and the Partner shall be obligated to
consummate the Second Closing if the conditions set forth in Section 6.2
applicable to the Second Closing have been satisfied.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the purchase of the Acquired Assets and the consummation of
the other transactions contemplated by this Agreement at the applicable Closing
is subject to satisfaction of the following conditions:
(a) the Seller's, the Shareholder's, the Partnership's and the
Partner's representations and warranties shall be correct and complete at and
as of such Closing Date and such Closing and any written notices delivered to
the Buyer pursuant to Section 4.5 and the subject matter thereof shall be
satisfactory to the Buyer;
(b) the Seller, the Shareholder, the Partnership and the
Partner shall have performed and complied with all of their covenants hereunder
through such Closing;
(c) the Seller, the Shareholder, the Partnership and the
Partner shall have given all notices and procured all of the third-party
consents, authorizations and approvals required to consummate the transactions
contemplated by this Agreement with respect to such Closing, all in form and
substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets or to conduct the
acquired business, and no such Order shall be in effect;
(e) there shall have been no adverse change in the Acquired
Assets or the Seller's business between the date of execution of this Agreement
and such Closing;
(f) the Seller and the Partnership shall have delivered to the
Buyer a certificate to the effect that each of the conditions specified above
in Sections 6.1(a) through (e) is satisfied in all respects and as to the
adoption of resolutions by the board of directors and shareholders of the
Seller and the partners of the Partnership authorizing the execution, delivery
and performance of this Agreement and the Other Seller Agreements and the
consummation of the transactions contemplated hereby and thereby;
(g) the Buyer shall have completed its due diligence with
respect to the Seller, the Partnership, the Seller's business and the Acquired
Assets with results satisfactory to the Buyer.
(h) the Other Seller Agreements and documentation necessary to
accomplish the conveyance of the specific ownership tax and fee payments made
by the Seller or the Partnership prior to such Closing in respect of vehicles
and mobile equipment included in the Acquired Assets relating to such Closing
shall have been executed and delivered by the Seller, the Shareholder, the
Partnership and the Partner, as applicable;
- 18 -
<PAGE> 22
(i) the Premises Leases shall have been executed and delivered
by the parties thereto and the owners of the real property underlying the
Premises Leases, and each Person having an Encumbrance on such property, shall
have executed and delivered estoppel, nondisturbance and landlord waiver
agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the Seller,
the Shareholder, the Partnership and the Partner an opinion in form and
substance as set forth in Exhibit 6.1(j) addressed to the Buyer and its debt
and equity financing sources and dated as of such Closing;
(k) financing necessary for the consummation of the
transactions contemplated by such Closing and the operation of the business to
be acquired at such Closing shall be available to the Buyer on terms and
conditions satisfactory to the Buyer;
(l) a "Phase I" environmental study of the Premises, and such
additional environmental testing as the Buyer shall request, shall have been
completed at the Seller's expense and supplied to the Buyer, and the contents
and results thereof shall be satisfactory to the Buyer;
(m) the Seller shall have delivered to the Buyer possession
and control of the Acquired Assets relating to such Closing;
(n) the Seller and the Shareholder shall have executed and
delivered to the Buyer (i) appropriate documentation to transfer to the Buyer
record ownership of the trade name "U.Do.It Rental Centers" and all other
registered Intellectual Property and applications therefor and (ii) an
amendment to the Seller's articles of incorporation for the purpose of changing
its name to a name that does not include the term "U.Do.It" or any derivation
thereof; and
(o) the Seller, the Shareholder, the Partnership and the
Partner shall have delivered, or caused the Seller to deliver, to the Buyer
such other instruments, certificates and documents as are reasonably requested
by the Buyer in order to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the applicable Closing.
6.2. Conditions to Obligation of the Seller, the Shareholder, the
Partnership and the Partner. The obligation of the Seller, the Shareholder,
the Partnership and the Partner to consummate the sale of the Acquired Assets
at the applicable Closing is subject to satisfaction of the following
conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of such Closing Date and such Closing;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder through such Closing Date;
(c) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Sections 6.2(a)
and (b) is satisfied in all respects;
- 19 -
<PAGE> 23
(d) the Other Buyer Agreements shall have been executed and
delivered by the Buyer;
(e) the Seller, the Shareholder, the Partnership and the
Partner shall have received from counsel to the Buyer an opinion in form and
substance as set forth in Exhibit 6.2(e), addressed to the Seller, the
Shareholder, the Partnership and the Partner and dated as of such Closing; and
(f) the Buyer shall have paid and deposited the purchase price
for the Acquired Assets relating to such Closing pursuant to Section 2.3.
The Agent may waive any condition specified in this Section 6.2 at or prior to
the applicable Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) If the Seller, the Shareholder, the Partnership or the
Partner breaches (or if any Person other than the Buyer alleges facts that, if
true, would mean the Seller, the Shareholder, the Partnership or the Partner
has breached) any of the representations or warranties of the Seller, the
Shareholder, the Partnership or the Partner contained herein and the Buyer
gives notice thereof to the Agent within the Survival Period, or if the Seller,
the Shareholder, the Partnership or the Partner breaches (or if any Person
other than the Buyer alleges facts that, if true, would mean the Seller, the
Shareholder, the Partnership or the Partner has breached) any covenants of the
Seller, the Shareholder, the Partnership or the Partner contained herein or any
representations, warranties or covenants of the Seller, the Shareholder, the
Partnership or the Partner contained in any Other Seller Agreement and the
Buyer gives notice thereof to the Agent, then the Seller, the Shareholder and
the Partner agree to jointly and severally indemnify and hold harmless the
Buyer from and against any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to or caused by any of the foregoing regardless
of whether the Adverse Consequences are suffered during or after the Survival
Period; provided, however, that the Partner shall be required to indemnify and
hold harmless the Buyer from and against only such Adverse Consequences as
result from, arise out of, relate to or are caused by breaches of the
representations, warranties or covenants of the Partner. In determining
whether there has been a breach of any representation or warranty contained in
Section 3.1 and in determining for purposes of the preceding sentence the
amount of Adverse Consequences suffered by the Buyer, such representations and
warranties shall not be qualified (other than by the references to "material"
set forth in Section 3.1(u)) by "material," "materiality," "in all material
respects," "best knowledge," "best of knowledge" or "knowledge" or words of
similar import, or by any phrase using any such terms or words. The Seller and
the Shareholder also agree to jointly and severally indemnify and hold harmless
the Buyer from and against any Adverse Consequences the Buyer may suffer which
result from, arise out of, relate to or are caused by the consummation of the
transactions contemplated by this Agreement, whether or not such matter was
known or disclosed to the Buyer, was disclosed on any Exhibit hereto or is a
matter with respect to which the Seller, the Shareholder, the Partnership or
the Partner did or did not have knowledge, including, without limitation, any
act or omission of the Seller, the Shareholder, the Partnership or the Partner
or any predecessor with respect to, or any event or circumstance related to,
the Seller's, the Shareholder's, the Partnership's or the Partner's or any
predecessor's ownership, occupation, use or operation of any of the Acquired
Assets, the Excluded Assets or any other assets or properties or the conduct of
its or their business, regardless of whether
- 20 -
<PAGE> 24
such act, omission, event or circumstance occurred or existed prior to or at
the Closing Date or whether a claim with respect to such matter was asserted
before or is asserted after the Closing Date, any Liability of the Seller, the
Shareholder, the Partnership or the Partner not included in the Assumed
Liabilities (including, without limitation, those concerning Hazardous
Materials or the failure of the Seller, the Shareholder, the Partnership or
the Partner or any predecessor to comply with any Environmental Obligation or
other Legal Requirement), and any Liability resulting from any failure of the
parties to comply with any applicable bulk sales or transfer Legal Requirement
in connection with the transactions contemplated by this Agreement. If any
dispute arises concerning whether any indemnification is owing which cannot be
resolved by negotiation among the parties within a reasonable time, the dispute
will be resolved by arbitration pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against the Seller, the Shareholder, the
Partnership or the Partner during the Escrow Period will be paid to the Buyer
first out of the funds escrowed pursuant to the Escrow Agreement, along with
interest from the applicable Closing Date at the rate applicable to the
escrowed funds. The Seller and the Shareholder will have joint and several
Liability for any additional amounts needed to cover such claims, which amounts
will be paid directly to the Buyer. At the end of the Escrow Period amounts
that may be needed to cover pending indemnification claims made by the Buyer
(such amounts to be determined by the Buyer based upon the reasonable exercise
of its business judgment) will be retained in the Escrow Account until such
claims are resolved, and any excess on deposit therein, including any accrued
interest, will be paid to the Seller. Nothing in this Section 7.1(b) will be
construed to limit the Buyer's right to indemnification to amounts on deposit
in the Escrow Account. The Buyer and the Agent shall jointly give instructions
to the Escrow Agent to carry out the intent of this Section 7.1(b). Any
disputes concerning the escrowed funds will be settled by arbitration as
provided in this Agreement. The Buyer, on the one hand, and the Seller and the
Shareholder jointly and severally, on the other hand, shall each be responsible
for one-half of the fees, charges and expenses payable to the Escrow Agent
pursuant to paragraph a. of Article 2 of the Escrow Agreement and, except as
otherwise determined pursuant to Section 9.11 of this Agreement, one-half of
any amounts payable pursuant to paragraph b. of such Article 2.
7.2. Indemnification Provisions for Benefit of the Seller, the
Shareholder, the Partnership and the Partner. If the Buyer breaches (or if any
Person other than the Seller, the Shareholder, the Partnership or the Partner
alleges facts that, if true, would mean the Buyer has breached) any of its
representations or warranties contained herein and the Agent gives notice of a
claim for indemnification against the Buyer within the Survival Period, or if
the Buyer breaches (or if any Person other than the Seller, the Shareholder,
the Partnership or the Partner alleges facts that, if true, would mean the
Buyer has breached) any of its covenants contained herein or any of its
representations, warranties or covenants contained in any Other Buyer Agreement
and the Agent gives notice thereof to the Buyer, then the Buyer agrees to
indemnify and hold harmless the Seller, the Shareholder, the Partnership and
the Partner from and against any Adverse Consequences the Seller, the
Shareholder, the Partnership and the Partner may suffer which result from,
arise out of, relate to, or are caused by the breach or alleged breach,
regardless of whether the Adverse Consequences are suffered during or after the
Survival Period. In determining whether there has been a breach of any
representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Buyer for purposes of this
Section, such representations and warranties shall not be qualified by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any
- 21 -
<PAGE> 25
dispute arises concerning whether any indemnification is owing which cannot be
resolved by negotiation among the parties within a reasonable time, the dispute
will be resolved by arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any third party (including, without limitation, any
Governmental Authority) notifies any party (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give rise to a claim
for indemnification against any other party (the "Indemnifying Party"), then
the Indemnified Party will notify each Indemnifying Party thereof in writing
within 15 days after receiving such notice. No delay on the part of the
Indemnified Party in notifying any Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not elect to assume control of or
otherwise participate in the defense or settlement of any Third Party Claim, it
will be bound by the results obtained by the Indemnified Party with respect to
the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will
- 22 -
<PAGE> 26
remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to or caused by the Third Party
Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to the Seller, the Shareholder, the
Partnership, the Partner or any relative or affiliate of any of them at or
after the First Closing or the Second Closing.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Agent may terminate this Agreement by
mutual written consent at any time prior to the First Closing or the Second
Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Agent at any time prior to either Closing (i) in the event the
Seller, the Shareholder, the Partnership or the Partner has breached any
representation, warranty or covenant contained in this Agreement in any
material way, the Buyer has notified the Agent of the breach, and the breach
has not been cured within 10 days after the notice of breach, (ii) if the First
Closing has not occurred on or before December 31, 1996 because of the failure
of any condition precedent to the Buyer's obligations to consummate the First
Closing (unless the failure results primarily from the Buyer breaching any
representation, warranty or covenant contained in this Agreement in any
material way) or (iii) if the Second Closing has not occurred on or before
January 31, 1997 because of the failure of any condition precedent to the
Buyer's obligations to consummate the Second Closing (unless the failure
results primarily from the Buyer breaching any representation, warranty or
covenant contained in this Agreement in any material way); or
(c) the Agent may terminate this Agreement by giving written
notice to the Buyer at any time prior to either Closing (i) if the Buyer has
breached any representation, warranty or covenant contained in this Agreement
in any material way, the Agent has notified the Buyer of the breach, and the
breach has not been cured within 10 days after the notice of breach, (ii) if
the First Closing has not occurred on or before December 31, 1996 because of
the failure of any condition precedent to the Seller's, the Shareholder's, the
Partnership's and the Partner's obligations to consummate the First Closing
(unless the failure results primarily from the Seller, the Shareholder, the
Partnership or the Partner breaching any representation, warranty or covenant
contained in this Agreement in any material way) or (iii) if the Second Closing
has not occurred on or before January 31, 1997 because of the failure of any
condition precedent to the Seller's, the Shareholder's, the Partnership's and
the Partner's obligations to consummate the Second Closing (unless the failure
results primarily from the Seller, the Shareholder, the Partnership or the
Partner breaching any representation, warranty or covenant contained in this
Agreement in any material way).
- 23 -
<PAGE> 27
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Seller, the Shareholder, the Partnership nor
the Partner may assign this Agreement or any of their rights, interests or
obligations hereunder without the prior written approval of the Buyer. The
Buyer may assign its rights and obligations hereunder as permitted by law,
including, without limitation, to any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
If to the Seller, the Shareholder Copy to:
the Partnership or the Partner:
Addressed to the Stephen F. Smith, Esq.
Agent at: Cooke, Lamanna, Smith, Cogswell
& Elliott Chartered
Charles E. Campbell P.O. Box C
2221 Gypsy Bay Road 102 Superior Street
- 24 -
<PAGE> 28
Sagle, Idaho 83860 Sandpoint, Idaho 83864
Telecopy: (___) ___-____ Telecopy: (208)263-8932
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Richard M. Tyler Attn: B. Scott Pullara
Telecopy: (303) 620-9016 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Agent. No waiver by any party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, will be
deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence, and no waiver
will be effective unless set forth in writing and signed by the party against
whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Seller, the Shareholder, the Partnership and the Partner
will bear all costs and expenses (including, without limitation, all legal,
accounting and tax related fees and expenses, all fees, commissions, expenses
and other amounts payable to any broker, finder or agent and the costs of any
environmental study and additional environmental testing contemplated by
Section 6.1) incurred by the Seller, the Shareholder, the Partnership or the
Partner either before or after the date of this Agreement in connection with
this Agreement or the transactions contemplated hereby; provided, however, that
the Buyer shall bear any cost of the Environmental Study charged to the Seller
by Stewart Environmental Consultants which is in excess of the first $2,400 so
charged by Stewart Environmental Consultants.
- 25 -
<PAGE> 29
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Agent and the third selected by the
other two arbitrators. The arbitrators shall have full authority to order
specific performance and award damages and other relief available under this
Agreement or applicable law, but shall have no authority to add to, detract
from, change or amend the terms of this Agreement or existing law. All
arbitration proceedings, including settlements and awards, shall be
confidential. The decision of the arbitrators will be final and binding, and
judgment on the award by the arbitrators may be entered in any court of
competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE
SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Agent. The Seller, the Shareholder, the Partnership and the
Partner hereby authorizes and appoints the Agent to act as its, his or her
exclusive agent and attorney-in-fact to act on behalf of each of them with
respect to all matters which are the subject of this Agreement, including,
without limitation, (a) receiving or giving all notices, instructions, other
communications, consents or agreements that may be necessary, required or given
hereunder and (b) asserting, settling, compromising, or defending, or
determining not to assert, settle, compromise or defend, (i) any claims which
the Seller, the Shareholder, the Partnership or the Partner may assert, or have
the right to assert, against the Buyer, or (ii) any claims which the Buyer may
assert, or have the right to assert, against the Seller, the Shareholder, the
Partnership or the Partner. The Agent hereby accepts such authorization and
appointment. Upon the receipt of written evidence satisfactory to the Buyer to
the effect that the Agent has been substituted as agent of the Seller, the
Shareholder, the Partnership and the Partner by
- 26 -
<PAGE> 30
reason of his death, disability or resignation, the Buyer shall be entitled to
rely on such substituted agent to the same extent as they were theretofore
entitled to rely upon the Agent with respect to the matters covered by this
Section 9.14. Neither the Seller, the Shareholder, the Partnership nor the
Partner shall act with respect to any of the matters which are the subject of
this Agreement except through the Agent. The Seller, the Shareholder, the
Partnership and the Partner acknowledge and agree that the Buyer may deal
exclusively with the Agent in respect of such matters, that the enforceability
of this Section 9.14 is material to the Buyer, and that the Buyer has relied
upon the enforceability of this Section 9.14 in entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
-------------------------------------------
Name: Richard M. Tyler
-----------------------------------------
Title: President
----------------------------------------
SELLER:
U-DO-IT RENTAL CENTERS, INC.
By: /s/ CHARLES E. CAMPBELL
-------------------------------------------
Charles E. Campbell
President
SHAREHOLDER:
/s/ CHARLES E. CAMPBELL
----------------------------------------------
Charles E. Campbell
- 27 -
<PAGE> 31
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT.]
PARTNERSHIP:
CAAR PARTNERSHIP
By: /s/ CHARLES E. CAMPBELL
-------------------------------------------
Charles E. Campbell
General Partner
By: /s/ SCOTT W. ARNONE
-------------------------------------------
Scott W. Arnone
General Partner
PARTNER:
/s/ SCOTT W. ARNONE
----------------------------------------------
Scott W. Arnone
/s/ LORI K. ARNONE
----------------------------------------------
Lori K. Arnone
- 28 -
<PAGE> 32
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT.]
- 29 -
<PAGE> 1
EXHIBIT 10.11
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 to Asset Purchase Agreement (this
"Amendment") is entered into as of January 31, 1997, among RentX Industries,
Inc., a Delaware corporation (the "Buyer"), Rifle Rentals, Inc., a Colorado
corporation ("Rifle"), Rental Country U.S.A., Inc., a Colorado corporation
("Country"), Rocky Mountain Rentals, Inc., a Colorado corporation ("Rocky")
(Rifle, Country and Rocky may be referred to individually as "Seller" and
collectively, as "Sellers") and Glen R. Miller and Elizabeth Miller
(individually, a "Shareholder" and collectively, the "Shareholders").
Recitals
The parties (along with G.R.M. Company, Inc., which was
dissolved on January 15, 1997) are party to an Asset Purchase Agreement (the
"Purchase Agreement") dated as of August 2, 1996. The Buyer has elected to
exercise the Option pursuant to Section 9.15 of the Purchase Agreement. The
parties desire to amend the Purchase Agreement as set forth herein in
connection with the Second Closing, which will occur at 12:01 a.m. on February
1, 1997. All capitalized terms used but not defined in this Amendment have the
meanings given them in the Purchase Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
A. The Purchase Agreement is amended as follows:
1. Section 2.3, Purchase Price; Payment. The amount of
"$188,525" appearing in the second sentence of Section 2.3(a) is amended to be
"$164,213."
2. Section 3.1(e) No Violation of Agreements, Etc.
Exhibit 3.1(e) is amended by adding the following at the end thereof:
6. Consent of Ford Motor Credit Corporation
("FMCC") under that certain Motor Vehicle Lease
Agreement (the "FMCC Truck Lease"), dated November
26, 1996, entered into by Rifle and Columbine Ford,
Inc. ("Columbine"), as assigned by Columbine to
FMCC, for the lease of a Ford F-250 truck, VIN:
1FTHX26G7VEA05284.
<PAGE> 2
3. Section 3.1(f) Financial Statements. (a) The words
"and December 31, 1996" are inserted after "December 31, 1995" in the first
sentence of Section 3.1(f).
(b) For purposes of the Second Closing, the
reference to the "Latest Balance Sheet" shall be to the balance sheet of Rifle
as of December 31, 1996.
(c) Exhibit 3.1(f)(ii) is amended by adding
thereto the Rifle financial statements attached as Exhibit 3.1(f)(ii) to this
Amendment.
4. Section 3.1(g) Absence of Undisclosed Liabilities.
Section 3.1(g) is amended by adding the following at the end of clause (i) of
the second sentence thereof:
(except that the Liability evidenced by the FMCC
Truck Lease is not reflected on the Latest Balance
Sheet)
5. Section 3.1(h) Absence of Certain Changes or Events.
Exhibit 3.1(h) is amended as follows:
(a) Item (iv) thereof is amended by adding the
following at the end thereof:
One 1979 Ford pickup, VIN F26SPEA2105, which was
fully depreciated, was transferred by Rifle to the
Shareholders prior to the Second Closing.
(b) Item (viii) thereof is amended by adding the
following at the end thereof:
The employees of Rifle received bonuses in the
amounts set forth on Exhibit 3.1(l)(x) for the year
ended December 31, 1996.
(c) Item (x) is amended by adding the following
sentence at the end thereof:
Rifle entered into the FMCC Truck Lease.
6. Section 3.1(k) Assets and Properties. Section
3.1(k)(i) is amended by adding the following at the end thereof:
Propane bottles of the local distributor are on the
Glenwood Springs, Colorado Premises but are not the
property of Rifle. The bottles are traded out
periodically by the distributor.
-2-
<PAGE> 3
7. Section 3.1(k) Assets and Properties. Exhibit 3.1(k)
is amended by adding the following at the end thereof:
7. The information set forth in the Glenwood
Environmental Study is incorporated herein by this
reference.
8. Glen R. Miller, as lessee, and Lois L.
Gilstrap have entered into a Lease Agreement, dated
October 24, 1996, for the lease of the Glenwood
Springs, Colorado Premises by the lessee from and
after May 1, 1997.
8. Section 3.1(l) List of Properties, Contracts and
Other Data.
(a) Item (i) of Exhibit 3.1(l) is amended by
adding thereto the updated list of Rifle rental equipment inventory at the
Glenwood store attached hereto as Exhibit 3.1(l)(i).
(b) Item (vi) of Exhibit 3.1(l) is amended by
deleting the third sentence and fourth sentences relating to a claim against
B&B Excavating for approximately $12,000 in damages and deposits in the amount
of $2,045 owned by Rifle and held by various parties, respectively. The
dispute referenced in 3. has been resolved and the $2,045 referenced in 4. has
been written off.
(c) Item (vii) of Exhibit 3.1(l) is amended by
adding the following at the end thereof:
The Glenwood Springs, Colorado Fire Department has
raised some question as to whether Rifle is required
to obtain a Permit to have fuel tanks on its Glenwood
Springs, Colorado Premises. The Sellers believe
there is no Legal Requirement for such a Permit.
(d) Item (ix) is amended by adding the following
at the end of item 6 thereof:
This lease expires April 30, 1997 and, as noted in
Section 6 of this Amendment, a new lease has been
entered into to become effective as of May 1, 1997.
-3-
<PAGE> 4
(e) Item (ix) of Exhibit 3.1(l) is amended by
adding the following at the end thereof:
12. The FMCC Truck Lease.
(f) The 1996 Annual Wages schedule attached as
Item (x) is amended with respect to Rifle as set forth on Exhibit 3.1(l)(x)
attached hereto.
9. Exhibit 3.1(s) is amended by adding thereto the
following at the end thereof:
The Glenwood Environmental Study is incorporated
herein by this reference.
10. Section 3.1(u) Employees and Labor. The first
sentence of Section 3.1(u) is amended by adding the following at the end
thereof:
, except that the employees of Rifle may or may not
continue their employment by RentX after the Second
Closing.
11. Section 3.1(v) Supplier and Customer Relationships.
Exhibit 3.1(v) is amended by adding thereto the list of customers set forth on
Exhibit 3.1(v) attached to this Amendment, which customers constitute the
Principal Customers of Rifle with respect to the period from August 1, 1996
through December 31, 1996.
12. Section 3.1(w) Condition, Adequacy and Type of
Equipment. Section 3.1(w) is amended by adding the following at the end of the
first sentence thereof:
(except for a portable welder, which originally cost
$4,500 and may have repair costs in excess of $4,500,
owned by Rifle)
13. Sections 3.1(x) Environmental Obligations. Exhibit
3.1(x) is amended by adding thereto the environmental studies attached to this
Amendment as Exhibit 3.1(x) (the "Glenwood Environmental Study").
14. Section 3.1(z) No Outstanding Orders or Actions.
The first and second sentences of Section 3.1(z) are amended by adding the
following at the beginning of each of such sentences:
Except as set forth in the Glenwood Environmental
Study,
-4-
<PAGE> 5
15. Section 4.2 Operation of Business. Exhibit 4.2(b)
is amended by adding thereto the information attached to this Amendment as
Exhibit 4.2(b).
16. Section 5.2 Transition. Section 5.2 is amended by
adding the following sentence at the end thereof:
Notwithstanding anything to the contrary contained in
this Section 5.2, the obligation of Glen R. Miller to
assist with the transition of the Business of Rifle
will terminate on February 28, 1997, and Elizabeth
Miller will have no obligation to assist with the
transition of the Rifle Business.
17. Section 5.9 Use of Certain Assets. Section 5.9(b) is
amended by adding the following sentences immediately following the first
sentence thereof:
Until the first anniversary of the Second Closing,
the Buyer may use Mr. Miller's car wash to be located
on the Glenwood Springs, Colorado Premises in
connection with the Buyer's rental business, to the
extent such car wash is not then being used by
customers of the car wash. After such time, Buyer
may use Mr. Miller's car wash at a price to be agreed
upon. Likewise, until the first anniversary of the
Second Closing, Glen R. Miller may use the Buyer's
rental equipment located at the Glenwood Springs,
Colorado Premises for his personal use, to the extent
the rental equipment requested by Mr. Miller is not
needed by the Buyer for rental to its customers.
Such use by Mr. Miller will be subject to the Buyer's
standard rental terms and conditions, except that Mr.
Miller will not be charged any rental fee or required
to make any security deposit.
18. Section 5.13 Certain Environmental Matters.
(a) The Sellers obligation to notify the CDPHE
pursuant to the first sentence of Section 5.13 is waived by the Buyer.
(b) Section 5.13 is further amended by adding the
following immediately following the second sentence of Section 5.13:
-5-
<PAGE> 6
The Sellers shall, before the Second Closing,
construct at their own expense a concrete secondary
containment fueling pad at a location on the Glenwood
Springs, Colorado Premises to be agreed to by the
Buyer, which will be under the above-ground fuel
storage tanks at the site to which they are relocated
from their present site on the Glenwood Springs,
Colorado Premises (the "Glenwood ASTs"). The
concrete secondary containment fueling pad will
consist of a concrete containment area with a
concrete floor and concrete side walls not less than
12" in height and will be protected generally by
concrete-filled steel posts. The volumetric size of
the containment area will be sufficient to contain
any spills from the Glenwood ASTs. The containment
fueling pad will be constructed by the Sellers in
compliance with all applicable Environmental
Obligations and Legal Requirements. Upon request of
the Buyer, the Sellers shall cause the contaminated
soil presently located in the area where the Glenwood
ASTs were located on December 31, 1996 to be
remediated in compliance with all applicable
Environmental Obligations and Legal Requirements.
The Sellers may, prior to such request of the Buyer,
undertake such remediation of their own volition
provided that such remediation is in compliance with
all applicable environmental obligations and legal
requirements. The Sellers shall restore the surface
area to normal upon completion of such remediation.
19. The parties acknowledge that the following items
located on the Glenwood Springs, Colorado Premises are fixtures that are owned
by Lois Gilstrap, the master landlord:
(a) One Model SP11A9B Rotary Hoist, Serial Number L33852
(b) One Model VT 720-8 Saylor Beal Air Compressor
B. This Amendment constitutes an amendment to the Purchase
Agreement. Nothing contained in this Amendment shall alter any of the
representations and warranties, covenants, agreements or obligations of any
Seller or Shareholder under the Purchase Agreement. Except as expressly set
forth in this Amendment, the Purchase Agreement shall remain unmodified and in
full force and effect. This Amendment may be executed in any number of
counterparts, each
-6-
<PAGE> 7
of which shall be an original but all of which shall constitute one instrument.
Telecopied signatures of this Amendment shall bind the parties for all
purposes.
[SIGNATURE PAGE FOLLOWS]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
----------------------------------
Name: RICHARD M. TYLER
--------------------------------
Title: Vice President
-------------------------------
SELLERS:
RIFLE RENTALS, INC.
By: /s/ GLEN R. MILLER
----------------------------------
Name: Glen R. Miller
Title: President
RENTAL COUNTRY U.S.A., INC.
By: /s/ GLEN R. MILLER
----------------------------------
Name: Glen R. Miller
Title: President
ROCKY MOUNTAIN RENTALS, INC.
By: /s/ GLEN R. MILLER
----------------------------------
Name: Glen R. Miller
Title: President
SHAREHOLDERS:
/s/ GLEN R. MILLER
-------------------------------------
Glen R. Miller
/s/ ELIZABETH A. MILLER
-------------------------------------
Elizabeth Miller
-8-
<PAGE> 1
EXHIBIT 10.12
================================================================================
ASSET PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
HAYS RENTAL & SALES OF EL DORADO, INC.,
HAYS RENTAL & SALES OF HOT SPRINGS, INC.,
HAYS RENTAL & SALES OF MAGNOLIA, INC.,
HAYS RENTAL & SALES OF CAMDEN, INC.,
HAYS RENTAL & SALES OF ARKADELPHIA, INC.,
HAYS LEASING, INC.
AND THE
SHAREHOLDER
OF CERTAIN
OF
SUCH SELLERS
AS OF JANUARY 31, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . . 1
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . 1
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Closing; Closing Date . . . . . . . . . . . . . . . . . . . . 3
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Sellers and the
Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . . . . 11
3.3. Survival of Representations . . . . . . . . . . . . . . . . . 11
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . 11
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2. Operation and Preservation of Business . . . . . . . . . . . . 12
4.3. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4. Notice of Developments . . . . . . . . . . . . . . . . . . . . 12
4.5. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6. Conveyance of Shareholder Property . . . . . . . . . . . . . . 13
4.7. Announcements . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . 13
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 13
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 13
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 13
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . 13
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . 14
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . 14
5.8. Certain Environmental Matters . . . . . . . . . . . . . . . . 14
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . . 14
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . 15
6.2. Conditions to Obligation of the Sellers and the Shareholder . 16
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . 17
7.1. Indemnification Provisions for Benefit of the Buyer . . . . . 17
7.2. Indemnification Provisions for Benefit of the Sellers and the
Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . 18
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . 19
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 19
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . 19
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . 20
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 20
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 20
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 20
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . 20
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 21
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 21
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . 22
9.14. Sellers' and Shareholder's Agent. . . . . . . . . . . . . . . 23
</TABLE>
Exhibits:
Exhibit 1.1(a) Exhibit 3.1(g)(i)(A)
Exhibit 1.1(b) Exhibit 3.1(g)(i)(B)
Exhibit 1.1(c)(i) Exhibit 3.1(g)(i)(C)
Exhibit 1.1(c)(ii) Exhibit 3.1(g)(ii)
Exhibit 1.1(d) Exhibit 3.1(h)(i)
Exhibit 1.1(e) Exhibit 3.1(h)(ii)
Exhibit 1.1(f) Exhibit 3.1(i)
Exhibit 1.1(g) Exhibit 3.1(k)
Exhibit 1.1(h) Exhibit 3.1(l)
Exhibit 1.1(i) Exhibit 3.1(m)
Exhibit 1.1(j) Exhibit 3.1(n)
Exhibit 1.1(k) Exhibit 3.1(p)(i)
Exhibit 3.1(c) Exhibit 3.1(p)(ii)
Exhibit 3.1(d)(i) Exhibit 3.1(s)(ii)
Exhibit 3.1(d)(ii) Exhibit 3.1(s)(iii)
Exhibit 3.1(d)(iii) Exhibit 5.8
Exhibit 3.1(e) Exhibit 6.1(j)
Exhibit 3.1(f) Exhibit 6.2(e)
(ii)
<PAGE> 4
This Asset Purchase Agreement is entered into as of January 31,
1997 among RentX Industries, Inc., a Delaware corporation (the "Buyer"), Hays
Rental & Sales of El Dorado, Inc., an Arkansas corporation ("El Dorado"), Hays
Rental & Sales of Hot Springs, Inc., an Arkansas corporation ("Hot Springs"),
Hays Rental & Sales of Magnolia, Inc., an Arkansas corporation ("Magnolia"),
Hays Rental & Sales of Camden, Inc., an Arkansas corporation ("Camden"), Hays
Rental & Sales of Arkadelphia, Inc., an Arkansas corporation ("Arkadelphia"),
Hays Leasing, Inc., an Arkansas corporation ("Leasing") (El Dorado, Hot
Springs, Magnolia, Camden, Arkadelphia and Leasing are also referred to
individually as a "Seller" and collectively as the "Sellers"), and John H. Hays
(the "Shareholder").
Recitals
The Shareholder owns all of the issued and outstanding capital
stock of El Dorado, Arkadelphia and Leasing. El Dorado owns all of the issued
and outstanding capital stock of Hot Springs, Magnolia and Camden. The Sellers
desire to sell, and the Buyer desires to purchase, substantially all of each
Seller's assets as provided in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the
meanings designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth
in this Agreement, the Buyer agrees to purchase from each Seller, and each
Seller agrees to sell to the Buyer, all the Acquired Assets free and clear of
any Encumbrance or Tax, for the consideration specified in Section 2.3. The
Buyer will have no obligation under this Agreement to purchase less than all of
the Acquired Assets of all the Sellers.
2.2. Assumption of Certain Liabilities. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to assume and become
responsible at the Closing, but effective as of the Closing Date, for all of
the Assumed Liabilities. The Buyer will not assume or have any responsibility
with respect to any other Liability not expressly included within the
definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The cash purchase price for the Acquired Assets of (i) El
Dorado is $480,000, (ii) Hot Springs is $295,000, (iii) Magnolia is $135,000,
(iv) Camden is $100,000, (v) Arkadelphia is $110,000 and (vi) Leasing is
$3,420,609. At the Closing, the Buyer will, by wire transfer or other delivery
of immediately available funds, (i) (A) pay to the Sellers (subject to Section
2.3(b)) $4,090,609, less the estimated Pre-Closing Personal Property Tax Amount
(which estimated amount shall be agreed upon by the Buyer and the Seller's
Agent at least three business days prior to the Closing), and (B) deposit
$450,000 into the Escrow Account and (ii) assume the Assumed Liabilities (and
the amounts paid and deposited to and in respect of the Sellers and the Assumed
Liabilities will constitute the full purchase price for the Acquired Assets).
The amount deposited in the Escrow
<PAGE> 5
Account will belong to the Sellers, subject to the Sellers' indemnification
obligations set forth in this Agreement, and will be held, invested,
administered and disbursed according to Section 7.1(b) hereof and the Escrow
Agreement.
(b) At the Closing, the Buyer will deposit into a demand
deposit account in the name of the Buyer and the Sellers' Agent, from the
amount otherwise payable to the Sellers pursuant to Section 2.3(a)(i)(A), an
amount equal to the Reserve Amount, and such funds shall initially constitute
the Liabilities Reserve. The funds on deposit in the Liabilities Reserve will
belong to the Sellers, subject to the provisions of this Section 2.3(b).
Following the Closing, the Liabilities Reserve will be applied to the payment
of Reserved Seller Liabilities, by disbursements from that account by the Buyer
or the Sellers' Agent, as the Reserved Seller Liabilities become due and
payable. To the extent that the Buyer receives a bill or invoice representing,
or is otherwise aware of, any Reserved Seller Liabilities, the Buyer may cause
funds to be disbursed from the Reserve Amount to satisfy such Reserved Seller
Liabilities. Reserved Seller Liabilities representing accrued vacation and
other accrued employee benefits with respect to those persons who are employees
of any Seller as of the Closing Date and who become employees of the Buyer
effective as of the Closing will be satisfied by payment of the amount thereof
to the Buyer as the Buyer provides such benefits or makes cash payments in lieu
thereof to employees. The Sellers' Agent will take all actions necessary to
cause the Liabilities Reserve to be applied to satisfy Reserved Seller
Liabilities and, if the Liabilities Reserve has been exhausted, the Sellers and
the Shareholder will provide additional funds as required to satisfy Reserved
Seller Liabilities. Nothing in this Agreement will be deemed to limit the
joint and several obligations of the Sellers and the Shareholder to pay the
Reserved Seller Liabilities in full. After all Reserved Seller Liabilities
have been satisfied, any excess Liabilities Reserve on deposit in the account
created pursuant to this Section 2.3(b) will be paid to the Sellers. Any
disputes concerning the Liabilities Reserve will be settled by arbitration as
provided in this Agreement.
(c) As soon as practicable after the Closing, but effective as
of the Closing, the Buyer and the Sellers' Agent will prepare and initial a
"Price Allocation Schedule" with respect to each Seller, allocating for Tax
reporting purposes the total consideration for the Acquired Assets acquired
from such Seller among the various categories of Acquired Assets acquired from
such Seller in the following order and amounts: (i) to cash and cash
equivalents, the $400 amount on the Closing Balance Sheet applicable to such
Seller (except there will be no such amount allocated to Leasing); (ii) to
Closing Accounts Receivable, the amount on the Closing Balance Sheet applicable
to such Seller; (iii) to Closing Inventory, the amount on the Closing Balance
Sheet applicable to such Seller; (iv) to equipment and leasehold improvements,
the greater of the appraised fair market value (if the Buyer in its sole
discretion obtains an appraisal before or after the Closing) or the current
book value thereof as reflected on the Closing Balance Sheet applicable to such
Seller; (v) to prepaid expenses, the unamortized balance on the Closing Balance
Sheet applicable to such Seller; (vi) to any other assets, other than goodwill,
the amount on the Closing Balance Sheet applicable to such Seller; and (vii)
the entire remaining balance of the consideration shall be allocated to the
goodwill of such Seller's business or, at the Buyer's sole discretion, to the
other intangible assets which are included in the Acquired Assets acquired from
such Seller. The parties acknowledge that such allocations for Tax reporting
purposes were determined pursuant to arm's length bargaining regarding the fair
market values of the Acquired Assets in accordance with the provisions of Code
Section 1060. The parties agree to be bound by the allocations set forth in
the Price Allocation Schedules for all federal, state and local Tax reporting
purposes, including for purposes of determining any income, gain, loss,
depreciation or other deductions in respect of such assets. The parties
further agree to prepare and file
- 2 -
<PAGE> 6
all Tax Returns (including Form 8594 under the Code) in a manner consistent
with such allocations.
2.4. Sales Taxes, Etc. The Sellers will pay all sales, use, transfer
and other Taxes, fees and charges payable in respect of the sale and transfer
of the Acquired Assets to the Buyer pursuant to this Agreement, including,
without limitation, all vehicle sales and transfer Taxes. The Buyer will have
obtained an Arkansas Sales and Use Tax Permit from the State of Arkansas prior
to the Closing.
2.5. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place promptly upon
satisfaction of all conditions to the Closing on a date agreed upon by the
parties, commencing at 8:00 a.m. local time in Denver, Colorado, at the offices
of Sherman & Howard L.L.C., and all transactions contemplated by this Agreement
will be effective at 11:59 p.m. local time in Arkansas on the day immediately
preceding the Closing (such effective time being the "Closing Date").
2.6. Deliveries at the Closing. At the Closing, (a) the Sellers and
the Shareholder will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Sellers and the Shareholder the certificates,
instruments and documents referred to in Section 6.2, (c) the Sellers will
deliver to the Buyer instruments transferring to the Buyer title to the
Acquired Assets free and clear of any Encumbrances or Taxes and (d) the Buyer
will pay and deposit the purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Sellers and the
Shareholder. The Sellers and the Shareholder jointly and severally represent
and warrant to the Buyer that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were then substituted for the date of this Agreement throughout this
Section 3.1).
(a) Organization, Good Standing, Authority, Etc. Each Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Arkansas, and is duly qualified and authorized to do
business as a foreign corporation and is in good standing in Arkansas which is
the only jurisdiction in which the nature of the business conducted by it or
the properties owned, leased or operated by it make such qualification
necessary. Each Seller has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. This Agreement and the Other Seller Agreements and the consummation
of the transactions contemplated hereby and thereby have been duly and
unanimously approved by the board of directors and shareholder of each Seller,
and this Agreement has been duly executed and delivered by each Seller. Each
Seller has full corporate power and authority to execute, deliver and perform
this Agreement and the Other Seller Agreements to which such Seller is a party,
the Shareholder and each relative or affiliate of such Seller or the
Shareholder who is party to any Other Seller Agreement has full and absolute
right, power, authority and legal capacity to execute, deliver and perform this
Agreement and all Other Seller Agreements to which such Shareholder, relative
or affiliate is a party, and this Agreement constitutes, and the Other Seller
Agreements will when executed and delivered constitute, the legal, valid and
binding obligations of, and shall be enforceable in accordance with their
- 3 -
<PAGE> 7
respective terms against, each Seller, the Shareholder and each such relative
or affiliate who is a party thereto.
(b) Ownership. The Shareholder owns, beneficially and of
record, free and clear of any Encumbrance or Tax, 3,520, 300 and 300 shares of
the common stock, $1.00 par value, of El Dorado, Arkadelphia and Leasing,
respectively, which constitutes all outstanding shares of the capital stock of
such Sellers. El Dorado owns, beneficially and of record, free and clear of
any Encumbrance or Tax, 300, 210 and 510 shares of the common stock, $1.00 par
value, of Hot Springs, Magnolia and Camden, respectively, which constitutes all
outstanding shares of capital stock of such Sellers. No other Person has any
right to acquire any equity interest in any Seller.
(c) No Violation. The execution, delivery and performance of
this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which any Seller, the Shareholder, or any relative or affiliate
of any Seller or the Shareholder who is a party to any Other Seller Agreement
or Patricia A. Pipkin is subject or any provision of the articles of
incorporation or bylaws of any Seller or any such affiliate, or (ii) violate,
with or without the giving of notice or the lapse of time or both, or conflict
with or result in the breach or termination of any provision of, or constitute
a default under, or give any Person the right to accelerate any obligation
under, or result in the creation of any Encumbrance upon any properties, assets
or business of any Seller, the Shareholder, any such relative or affiliate or
Ms. Pipkin pursuant to, any indenture, mortgage, deed of trust, lien, lease,
license, Permit, agreement, instrument or other arrangement to which any
Seller, the Shareholder, any such relative or affiliate or Ms. Pipkin is a
party or by which any Seller, the Shareholder, any such relative or affiliate
or Ms. Pipkin or any of their respective assets and properties is bound or
subject. Except for notices that will be given and consents that will be
obtained by the Sellers and the Shareholder prior to the Closing (which are set
forth in Exhibit 3.1(c)), neither any Seller, the Shareholder, any such
relative or affiliate nor Ms. Pipkin need give any notice to, make any filing
with or obtain any authorization, consent or approval of any Governmental
Authority or other Person in order for the parties to consummate the
transactions contemplated by this Agreement and the Other Seller Agreements.
(d) Financial Statements. The financial statements identified
on the first page of Exhibit 3.1(d)(ii) have been prepared in accordance with
good accounting practices and on a basis consistent with those of prior years,
are in accordance with the books and records of the applicable Seller or
Sellers (which books and records are complete and correct), are accurate and
fairly present the financial position and results of operations of the
applicable Seller or Sellers as of the dates and for each of the periods
indicated, do not list book values for the assets that are in excess of their
fair market values, and, except as set forth on Exhibit 3.1(d)(i), make
adequate provision for all Liabilities to which each Seller is subject. Copies
of the financial statements described in the first sentence of this Section are
attached as part of Exhibit 3.1(d)(ii). The expenses itemized on Exhibit
3.1(d)(iii) and reflected in the Sellers' financial performance for the 12-
month period ended October 31, 1996 (and information sufficient to determine
such financial performance has been provided by the Sellers to the Buyer prior
to the date of this Agreement) will not be realized on an on-going basis.
(e) Absence of Certain Leases, Changes or Events. No Seller
is, except as set forth on Exhibit 3.1(e), a party to or otherwise bound by
any contract or agreement that has a term of three or more months
pursuant to which such Seller is obligated to furnish any equipment,
- 4 -
<PAGE> 8
products or services, and no such contract or agreement has been prepaid with
respect to any period after the Closing Date. Since May 1, 1996, no Seller
has, except as set forth on Exhibit 3.1(e), (i) incurred any debt, indebtedness
or other Liability, except current Liabilities incurred in the ordinary course
of business; (ii) delayed or postponed the payment of accounts payable
or other Liabilities or accelerated the collection of any receivable beyond
stated, normal terms; (iii) sold or otherwise transferred any of its equipment
or other assets or properties; (iv) cancelled, compromised, settled, released,
waived, written-off or expensed any account or note receivable, right, debt or
claim involving more than $5,000 in the aggregate for such Seller, and the
aggregate amount thereof for all Sellers does not involve more than $10,000;
(v) changed in any significant manner the way in which it conducts its
business; (vi) made or granted any individual wage or salary increase in excess
of 10% or $1.00 per hour, any general wage or salary increase, or any
additional benefits of any kind or nature; (vii) except as otherwise expressly
permitted by this Section 3.1(e), (A) entered into any contracts or agreements,
or made any commitments, involving more than $5,000 individually or in the
aggregate for such Seller, and the aggregate amount thereof for all Sellers
does not involve more than $5,000, or (B) accelerated, terminated, delayed,
modified or cancelled any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) involving more than $5,000
individually or in the aggregate for such Seller, and the aggregate amount
thereof for all Sellers does not involve more than $5,000; (viii) suffered any
adverse fact or change, including, without limitation, to or in its business,
assets, financial condition, prospects or customer or supplier relationships;
(ix) made any payment or transfer to or for the benefit of any shareholder,
officer or director or any relative or affiliate thereof or permitted any
Person, including, without limitation, any shareholder, officer, director or
employee or any relative or affiliate thereof, to withdraw assets from the
Seller (other than cash of the Seller distributed to its shareholder as set
forth on Exhibit 3.1(e) and other than the payment to the Shareholder of the
proportionate monthly amount of his normal annualized salaries due and payable
during such period); (x) failed to make purchases of new or used equipment
necessary to maintain its rental/lease inventory at the level which is
reasonably necessary to maintain the revenue base experienced by the Seller
during the 12 months preceding such date; (xi) increased or decreased its lease
rate with respect to any equipment by 10% or more from the applicable lease
rate in effect on May 1, 1996 or rented or leased any equipment or sold or
otherwise transferred any inventory, equipment or services at below-normal
rental or lease rates or margins; (xii) suffered any other significant
occurrence, event, incident, action, failure to act or transaction outside the
ordinary course of business; or (xiii) agreed to incur, take, enter into, make
or permit any of the matters described in clauses (i) through (xii).
(f) Tax Matters. Neither any Seller nor any of its
shareholders has ever filed (i) an election pursuant to Section 1362 of the
Code that the Seller be taxed as an "S" corporation, except as set forth on
Exhibit 3.1(f), or (ii) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Sellers and the Shareholder will pay
all Taxes attributable to each Seller's business and activities, including all
Taxes attributable to the transactions contemplated by this Agreement, on or
before the due date. There are no Encumbrances on any of the assets of any
Seller that arose in connection with any failure (or alleged failure) to pay
any Tax. Exhibit 3.1(f) lists all federal, state and local income Tax Returns
filed with respect to each Seller for taxable periods ended on or after January
1, 1990, indicates those Tax Returns that have been audited and indicates those
Tax Returns that currently are the subject of audit. The Sellers have
delivered to the Buyer correct and
- 5 -
<PAGE> 9
complete copies of all federal, state and local income Tax Returns and
examination reports of, and statements of deficiencies assessed against or
agreed to by, any Seller since January 1, 1990.
(g) Assets and Properties.
(i) As of the date of this Agreement, each Seller owns
all of the Acquired Assets (other than certain items of Shareholder Property),
free and clear of all Encumbrances (except for those Encumbrances which the
Sellers shall cause to be terminated as of the Closing). As of the Closing,
all of the Acquired Assets of each Seller (including all of the Shareholder
Property) will be owned by such Seller, free and clear of all Encumbrances, and
such Seller will have good and marketable title to (or, in the case of Acquired
Assets that are leased, valid leasehold interests in) all the Acquired Assets
of each Seller. The Acquired Assets of each Seller consist of (A) the tangible
and intangible assets of such Seller (exclusive of the Excluded Assets) in
existence as of May 1, 1996 (except as set forth on Exhibit 3.1(e) with respect
to cash of such Seller which was distributed to its shareholder and except for
such changes in inventory and in accounts receivable in the ordinary course of
business as are not in violation of Section 3.1(e)) and (B) all tangible and
intangible assets, including, without limitation, all improvements, fixtures
and fittings, owned by the Shareholder or any relative or affiliate thereof or
of any Seller which have been used in its business at any time on or after
October 31, 1995 (the "Shareholder Property"), including, without limitation,
the tangible and intangible assets set forth on Exhibit 3.1(g)(i)(A) owned by
the Shareholder or relative or affiliate thereof. Except as set forth in
Exhibit 3.1(g)(i)(B), the Premises constitute all of the real property,
buildings and improvements used by the Sellers in their respective businesses.
The Acquired Assets of each Seller are all of the tangible and intangible
assets (other than the Excluded Assets) used by such Seller in, or necessary
for the conduct of, its business. The Acquired Assets of each Seller and the
equipment leased by such Seller from third parties who are not relatives or
affiliates of the Sellers or the Shareholder for lease by such Seller to its
customers (the "Third-Party Equipment") encompass all equipment used by such
Seller to generate the income reflected in the financial statements attached as
Exhibit 3.1(d)(ii), and the aggregate total cost to all Sellers to lease such
Third-Party Equipment during the fiscal year ended October 31, 1996 and the
two-month period ended December 31, 1996 did not exceed $40,000 and $6,000,
respectively. Exhibit 3.1(g)(i)(C) lists all Third Party Equipment. No Seller
leases any equipment from the Shareholder or any relative or affiliate of any
Seller or the Shareholder, except that certain of the Sellers lease from
Leasing the Acquired Assets of Leasing. Except for items rented or leased to
customers, all of the tangible Acquired Assets of the Sellers are located on
the Premises.
(ii) Except as set forth on Exhibit 3.1(g)(ii), the
Premises are free from defects, have been maintained in accordance with normal
industry practice, are in good operating condition and repair and are suitable
for the purposes for which they presently are used. No Seller has received
notice of violation of any Legal Requirement or Permit relating to its
operations or its owned or leased properties.
(iii) No party to any lease has repudiated any provision
thereof, and there are no disputes, oral agreements or forbearance programs in
effect as to any such lease. To the best knowledge of the Sellers and the
Shareholder, the Premises have received all approvals of Governmental
Authorities (including Permits) required in connection with the occupation and
operation thereof and have been occupied, operated and maintained in accordance
with applicable Legal
- 6 -
<PAGE> 10
Requirements. The Premises are supplied with utilities and other services
necessary for the operation of said Premises.
(h) Lists of Properties, Contracts and Other Data. Attached
as Exhibit 3.1(h)(ii) is a correct and complete list setting forth, as to each
Seller, the items identified on Exhibit 3.1(h)(i). True and complete copies of
the items referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer.
All such rights, licenses, leases, registrations, Permits, Intellectual
Property, applications, contracts, agreements and commitments and other items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither any Seller nor any other party thereto is in breach
or default in performance of any of its respective obligations under, and no
event exists which, with the giving of notice or lapse of time or both, would
constitute a breach, default or event of default on the part of a party to, any
of the foregoing that is continuing unremedied.
(i) Litigation, Etc. There is no outstanding Order against,
nor is there any litigation (except as set forth on Exhibit 3.1(i)),
proceeding, arbitration or investigation by any Governmental Authority or other
Person pending or threatened against, any Seller, its properties or its
business or relating to the transactions contemplated by this Agreement, nor is
there any basis for any such action.
(j) Notes and Accounts Receivable. The notes receivable, if
any, and accounts receivable of each Seller reflected on its Latest Balance
Sheet, and all notes and accounts receivable arising prior to the Closing Date
in existence as of the Closing Date), arose and will arise from bona fide
transactions by such Seller in the ordinary course of business, are valid
receivables with trade customers subject to no setoffs or counterclaims, and
are current and collectible.
(k) Product Quality, Warranty and Liability. All products and
services sold, rented, leased, provided or delivered by each Seller to
customers on or prior to the Closing Date conform to applicable contractual
commitments, express and implied warranties, product and service specifications
and quality standards, and no Seller has any Liability and there is no basis
for any Liability for replacement or repair thereof or other damages in
connection therewith. No product or service sold, rented, leased, provided or
delivered by any Seller to customers on or prior to the Closing is subject to
any guaranty, warranty or other indemnity beyond the applicable standard terms
and conditions of sale, rent or lease. No Seller has any Liability and there
is no basis for any Liability arising out of any injury to a Person or property
as a result of the ownership, possession, provision or use of any product or
service sold, rented, leased, provided or delivered by any Seller on or prior
to the Closing Date. All product or service liability claims that have been
asserted against any Seller since January 1, 1991, whether covered by insurance
or not and whether litigation has resulted or not, are listed and summarized on
Exhibit 3.1(k).
(l) Insurance. Each Seller has policies of insurance (i)
covering risk of loss on its Acquired Assets, (ii) covering products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption, all, to the
best knowledge of the Sellers and the Shareholder, with responsible and
financially sound insurance carriers in adequate amounts and in compliance with
governmental requirements and in accordance with good industry practice. All
such insurance policies are valid, in full force and effect and enforceable in
- 7 -
<PAGE> 11
accordance with their respective terms and no party has repudiated any
provision thereof. All such policies will remain in full force and effect
until midnight on the Closing Date. Neither any Seller nor any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving
of notice or the lapse of time or both, would constitute a breach, default or
event of default, or permit termination, modification or acceleration under any
such policy. There are no claims, actions, proceedings or suits arising out of
or based upon any of such policies nor, to the best knowledge of the Sellers
and the Shareholder, does any basis for any such claim, action, suit or
proceeding exist. All premiums have been paid on such policies as of the date
of this Agreement and will be paid on such policies through the Closing Date.
Each Seller has been covered during the five years prior to the date of this
Agreement by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. All
claims made during such five-year period with respect to any insurance coverage
of each Seller, other than those described on Exhibit 3.1(k), are set forth on
Exhibit 3.1(l).
(m) Compliance with Applicable Laws and Rights. To the best
knowledge of the Sellers and the Shareholder, except as set forth on Exhibit
3.1(m), neither any Seller nor any Seller's assets (including its Premises,
facilities, machinery and equipment) are in violation of any applicable Legal
Requirement or Right. No Seller has received notice from any Governmental
Authority or other Person of any violation or alleged violation of any Legal
Requirement or Right, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced or is
pending or threatened against any Seller alleging any such violation.
(n) Pension and Employee Benefit Matters. The Buyer will not
suffer any Liability or Adverse Consequence from any Seller's administration or
termination of any of its Employee Benefit Plans or from any failure of any
pre-Closing or post-Closing distribution of benefits to employees of any Seller
to be made by such Seller in compliance with all applicable Legal Requirements.
The Buyer will have no obligation to employ any employee of any Seller or to
continue any Employee Benefit Plan, and will have no Liability under any plan
or arrangement maintained by any Seller for the benefit of any employee. Each
Seller will remain liable for all costs of employee compensation, including
benefits and Taxes relating to employment and employees attributable to periods
through the Closing Date, whether reported by the Closing Date or thereafter,
and all group health plan continuation coverage to which any employee, former
employee or dependent is entitled because of a qualifying event (as defined in
Section 4980B(f)(3) of the Code) occurring through the Closing Date or as a
result of termination of employment with any Seller because of the transactions
contemplated by this Agreement and any benefit or excise tax liability or
penalty or other costs arising from any failure by any Seller to provide group
health plan continuation coverage. Except as set forth on Exhibit 3.1(n),
neither any Seller nor any Affiliated Group which includes any Seller (if any)
maintains, administers or contributes to, has maintained, administered or
contributed to, or has any Liability to contribute to, any Employee Benefit
Plan. Exhibit 3.1(n) lists each Employee Benefit Plan that is, or at any time
during the past six years was, maintained, administered, contributed to or
required to be contributed to by any Seller or any Affiliated Group (if any)
which includes or has included any Seller, and the date of termination of each
such Employee Benefit Plan (if any) which has been terminated. No Seller has
any Liability (and there is no basis for the assertion of any Liability) as a
result of any Seller's or any such Affiliated Group's maintenance,
administration or termination of, or contribution to, any Employee Benefit
Plan. Neither any Seller nor any member of any Affiliated Group (if any) which
includes or has included any Seller has ever been required to
- 8 -
<PAGE> 12
contribute to any Multiemployer Plan (as defined in ERISA Section 3(37)) nor
has incurred any Liability under Title IV of ERISA.
(o) Employees and Labor. No Seller has received any notice,
nor, to the best knowledge of the Sellers and the Shareholder, is there any
reason to believe that any executive or key employee of any Seller or any group
of employees of any Seller has any plans to terminate his, her or its
employment with such Seller. No executive or key employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Sellers prior to the Closing Date and, if such
person becomes an employee of the Buyer, to the affairs of the Buyer after the
Closing Date. No Seller will be required to give any notice under the Worker
Adjustment and Retraining Notification Act, as amended, or any similar Legal
Requirement as a result of this Agreement, the Other Seller Agreements or the
transactions contemplated hereby or thereby. No Seller has any labor relations
problems or disputes, nor has any Seller experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. No
Seller is a party to or bound by any collective bargaining agreement, there is
no union or collective bargaining unit at any Seller's facilities, and no union
organization effort has been threatened, initiated or is in progress with
respect to any employees of any Seller.
(p) Customer and Supplier Relationships. Exhibit 3.1(p)(i)
lists, as to the Sellers (in the aggregate), each customer that individually or
with its affiliates was, based upon the sales, rental or lease revenues of the
Sellers (in the aggregate) during the period consisting of the fiscal years
ended October 31, 1993 through October 31, 1996, one of such Seller's 20
largest customers during such period (the "Principal Customers"). Exhibit
3.1(p)(ii) lists, as to the Sellers (in the aggregate), each supplier that
individually or with its affiliates was, based upon the purchases of inventory
or supplies by the Sellers (in the aggregate) during the period from January 1,
1996 through December 31, 1996, one of such Seller's 10 largest suppliers
during such period (the "Principal Suppliers"). Each Seller has good
commercial working relationships with its Principal Customers and Principal
Suppliers and since November 1, 1994 no Principal Customer has, and since
January 1, 1996 no Principal Supplier has, cancelled or otherwise terminated
its relationship with such Seller, materially decreased or limited its
purchases, rentals or leases from, or inventory or supplies supplied to, such
Seller, or threatened to take any such action. The Sellers and the Shareholder
have no basis to anticipate any problems with any Seller's customer, supplier
or business relationships. No Principal Customer or Principal Supplier has any
plans to reduce its purchases, rentals or leases from, or inventory or supplies
supplied to, any Seller below levels prevailing since November 1, 1994 with
respect to Principal Customers and since January 1, 1996 with respect to
Principal Suppliers, and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not adversely affect
the relationship of any Seller with any Principal Customer or Principal
Supplier prior to the Closing Date or of the Buyer with any Principal Customer
or Principal Supplier after the Closing Date.
(q) Resale Inventory. The resale inventory of each Seller
consists of goods which, in the aggregate, are merchantable, are fit for the
purposes for which they were procured and are held by such Seller, are usable
in the ordinary course of such Seller's business and are not obsolete.
(r) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of each Seller consists of machinery, equipment and
other tangible personal property which are merchantable, are fit and suitable
for the purpose for which they were procured and are held by such Seller,
useable
- 9 -
<PAGE> 13
in the ordinary course of such Seller's business and are not obsolete. All of
the machinery, equipment and other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) has been well
maintained and is in good repair and good operating condition. None of the
machinery, equipment or other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) is damaged or
defective, no Seller has experienced material problems or deficiencies with
respect to its machinery, equipment and other tangible personal property, and,
to the best knowledge of the Sellers and the Shareholder, there is no basis to
anticipate any such problems or deficiencies.
(s) Environmental Matters.
(i) Each Seller is conducting and at all times has
conducted its business and operations, and has occupied, used and operated the
Premises and all other real property and facilities presently or previously
owned, occupied, used or operated by such Seller, in compliance with all
Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on such Seller's business or
activities. The Sellers and the Shareholder do not have any knowledge of
pending or proposed changes to any Environmental Obligations which would
require any changes in any Seller's Premises, facilities, equipment, operations
or procedures or affect any Seller's business or its cost of conducting its
business as now conducted.
(ii) Except as set forth in the Environmental Study,
no conditions, circumstances or activities have existed or currently exist, and
neither any Seller nor the Shareholder has engaged in any acts or omissions,
with respect to the Premises or any other real properties, facilities or
business presently or previously owned, occupied, used or operated by any Seller
or any predecessor (including, without limitation, off-site disposal or
treatment of Hazardous Materials) which could give rise to any Liability
pursuant to any Environmental Obligation. Exhibit 3.1(s)(ii) identifies all
real properties and facilities, including the addresses thereof, which have
been owned, occupied, used or operated by any Seller or any predecessor at any
time on or prior to the date of this Agreement. There are no outstanding,
pending or threatened Orders against any Seller or the Shareholder, nor are
there any current, pending or threatened investigations of any kind against
any Seller or the Shareholder, concerning any Environmental Obligations. There
are no actions, suits or administrative, arbitral or other proceedings alleged,
claimed, threatened, pending against or affecting any Seller or the Shareholder
at law or in equity with respect to any Environmental Obligations, and neither
any Seller nor the Shareholder has knowledge of any existing grounds on which
any such action, suit or proceedings might be commenced.
(iii) Any chemicals and chemical compounds and mixtures
which are included among the assets of any Seller are integral to and required
for the conduct of such Seller's business, have not been and are not intended
to be discarded or abandoned, and are not waste or waste materials. Except as
set forth in the environmental studies attached as Exhibit 3.1(s)(iii)
(collectively, the "Environmental Study"), no Seller has generated, handled,
used, transported or disposed of Hazardous Materials. All waste materials
which are generated as part of the business of any Seller are handled, stored,
treated and disposed of in accordance with applicable Legal Requirements and
Environmental Obligations.
(iv) Except as set forth in the Environmental Study, no
underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any
- 10 -
<PAGE> 14
facilities presently or previously owned, occupied, used or operated by any
Seller or any predecessor. Except as set forth in the Environmental Study,
neither any of the Premises nor any other real properties or facilities
presently or previously owned, occupied, used or operated by any Seller or any
predecessor has been used at any time as a gasoline service station or any
facility for storing, pumping, dispensing or producing gasoline or any other
petroleum products (other than such storage, pumping and dispensing of gasoline
and oil as is incidental to each Seller's equipment rental/leasing business) or
Hazardous Materials. No building or other structure on any of the Premises
contains asbestos-containing materials. There are not nor have there been any
incinerators, septic tanks, leach fields, cesspools or wells (including without
limitation dry, drinking, industrial, agricultural and monitoring wells) on any
of the Premises.
(t) Intellectual Property. Each Seller owns or has the legal
right to use and to transfer to the Buyer each item of Intellectual Property
required to be identified by it on Exhibit 3.1(h)(ii). The continued operation
of the business of each Seller as currently conducted will not interfere with,
infringe upon, misappropriate or conflict with any Intellectual Property rights
of another Person. To the best knowledge of the Sellers and the Shareholder,
no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of any
Seller or any Intellectual Property included in the Shareholder Property.
Neither any Seller nor any owner of any Intellectual Property included in the
Shareholder Property has granted any license, sublicense or permission with
respect to any Intellectual Property owned or used in any Seller's business.
(u) Disclosure. None of the documents or information provided
to the Buyer by any Seller, the Shareholder or any agent or employee thereof in
the course of the Buyer's due diligence investigation and the negotiation of
this Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, contain any untrue statement of any material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact which materially adversely affects
the business, prospects, condition, affairs or operations of any Seller or any
of its properties or assets which has not been set forth in this Agreement or
such Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Sellers and the Shareholder acknowledge and agree that
the fact that they have made disclosures pursuant to Section 3.1 or otherwise
of matters, or did not have knowledge of matters, which result in Adverse
Consequences to the Buyer shall not relieve the Sellers and the Shareholder of
their obligation pursuant to Article 7 to indemnify and hold the Buyer harmless
from all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers and the Shareholder that the statements
contained in this Section 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
- 11 -
<PAGE> 15
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other Buyer Agreements
and the transactions contemplated hereby and thereby have been duly approved by
all requisite corporate action. The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Buyer
Agreements, and this Agreement constitutes, and the Other Buyer Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of the Buyer, and shall be enforceable in accordance with their
respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery
and, if the Closing occurs, performance of this Agreement and the Other Buyer
Agreements, and the consummation, if the Closing occurs, of the transactions
contemplated hereby and thereby will not (i) violate any Legal Requirement to
which the Buyer is subject or any provision of the certificate of incorporation
or bylaws of the Buyer or (ii) violate, with or without the giving of notice or
the lapse of time or both, or conflict with or result in the breach or
termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Buyer
pursuant to, any indenture, mortgage, deed of trust, lien, lease, license,
agreement, instrument or other arrangement to which the Buyer is a party or
which the Buyer or any of its assets and properties is bound or subject.
Except for notices and consents that will be given or obtained by the Buyer
prior to the Closing if the Closing occurs, the Buyer does not need to give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that (a) the Liabilities of
the Sellers and the Shareholder with respect to the representations and
warranties set forth in Sections 3.1(f) and 3.1(n) shall survive until
expiration of all applicable statutes of limitation and (b) the Liabilities of
the Sellers and the Shareholder with respect to the representations and
warranties set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(g), 3.1(s), 3.1(t)
and 3.1(u), and the Liabilities of the Buyer with respect to the
representations and warranties set forth in Sections 3.2(a) and 3.2(b), shall
survive without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of such party and be exercised always in a reasonable manner and within
reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
- 12 -
<PAGE> 16
4.1. General. Each of the parties will use its best efforts to take
all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholder will, and will cause the Sellers to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. No Seller will, and the
Shareholder will not cause or permit any Seller to, engage in any practice,
take any action or enter into any transaction outside its ordinary course of
business; provided, however, that in no event will any action be taken or fail
to be taken or any transaction be entered into which would result in a breach
of any representation, warranty or covenant of any Seller or the Shareholder.
The Sellers will, and the Shareholder will cause the Sellers to, keep their
business and properties, including their current operations, physical
facilities, working conditions, and relationships with customers, suppliers,
lessors, licensors and employees, intact and, in connection therewith, to
continue to purchase new or used equipment necessary to maintain its
rental/lease inventory at the level specified in Section 3.1(e)(x).
4.3. Full Access. The Sellers will permit the Buyer and its agents to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Sellers, to all premises,
properties, personnel, books, records (including Tax records), contracts and
documents of or pertaining to the Sellers.
4.4. Notice of Developments. The Sellers will give prompt written
notice to the Buyer of any material development which occurs after the date of
this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of any Seller.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.5. Exclusivity. Neither any Seller nor the Shareholder will, and
the Shareholder will not cause or permit any Seller to, (a) solicit, initiate
or encourage the submission of any proposal or offer from any Person relating
to the acquisition of any capital stock or other voting securities, or any
portion of the assets of, any Seller (including any acquisition structured as a
merger, consolidation or share exchange) or (b) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Neither any Seller nor the
Shareholder will vote shares of any Seller's stock in favor of any such
transaction. The Sellers and the Shareholder will notify the Buyer immediately
if the Person makes any proposal, offer, inquiry or contact with respect to any
of the foregoing.
4.6. Conveyance of Shareholder Property. Prior to the Closing Date,
the Shareholder shall convey, and shall cause each relative or affiliate of the
Shareholder or of any Seller to convey, to the applicable Seller, free and
clear of any Encumbrance or Tax, all of the Shareholder's and each such
relative's or affiliate's right, title and interest to the Shareholder
Property.
- 13 -
<PAGE> 17
4.7. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties;
provided, however, that the Buyer may announce the transaction contemplated
hereby at the rental industry trade show in January and February, 1997.
4.8. Bulk Sales Laws. In reliance upon its indemnification rights set
forth in Section 7, the Buyer waives compliance by the Seller with the bulk
transfer law and any other similar law of any applicable jurisdiction in
respect to the transactions contemplated by this Agreement.
5. Post-Closing Covenants. The parties agree as follows with respect to
the period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Neither any Seller nor the Shareholder will take any
action at any time that is designed or intended to have the effect of
discouraging any customer, supplier, lessor, licensor or other business
associate of any Seller from establishing or continuing a business relationship
with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or any Seller's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
5.4. Confidentiality. Each Seller and the Shareholder will treat and
hold as confidential all Confidential Information concerning the Buyer, each
Seller's business or the Acquired Assets, refrain from using any such
Confidential Information and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all of such Confidential Information in its or
their possession.
5.5. Post-Closing Announcements. Following the Closing, neither any
Seller nor the Shareholder will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer.
5.6. Financial Statements. The Sellers and the Shareholder will, upon
request of the Buyer, cooperate with the Buyer to produce such historical and
on-going financial statements and audits as the Buyer may request, all at the
sole cost and expense of the Buyer.
- 14 -
<PAGE> 18
5.7. Satisfaction of Liabilities. The Sellers and the Shareholder
will pay and perform, as and when due, all Liabilities (other than the Assumed
Liabilities) relating to any Seller, the business of any Seller and the
Acquired Assets, including, without limitation, all Taxes attributable to the
transactions contemplated by this Agreement and all accrued vacation and other
accrued employee benefits; provided, however, that accrued vacation and other
accrued employee benefits with respect to those persons who are employees of
any Seller as of the Closing Date and who become employees of the Buyer
effective as of the Closing will be satisfied as set forth in Section 2.3(b).
In addition, the Sellers and the Shareholder will pay to the Buyer an amount
equal to the portion of the personal property taxes on the Acquired Assets of
the Sellers attributable to the period from January 1, 1997 to and including
the date on which the Closing occurs (the "Pre-Closing Personal Property Tax
Amount"). The Pre-Closing Personal Property Amount payable by the Sellers and
the Shareholder will be determined by prorating personal property taxes on the
Acquired Assets of the Sellers for 1997 in proportion to the number of days in
the year prior to and including the date on which the Closing occurs compared
to the number of days in the year remaining after the date on which the Closing
occurs. If the actual Pre-Closing Property Tax Amount exceeds the estimated
Pre-Closing Property Tax Amount used for purposes of Section 2.3(a), the
Sellers and the Shareholder shall pay such excess amount to the Buyer within
five days after their receipt of notice from the Buyer stating the amount
payable by them and a copy of the invoices from Governmental Authorities
relating thereto. If the estimated Pre-Closing Property Tax Amount used for
purposes of Section 2.3(a) exceeds the actual Pre-Closing Property Tax Amount,
the Buyer shall pay such excess amount to the Sellers within five days of
receipt of the invoices from Governmental Authorities relating thereto. The
Buyer will pay and perform, as and when due (except to the extent the validity
thereof or the liability therefor is being contested by the Buyer), the Assumed
Liabilities. Further, the Sellers and the Shareholder, at their expense,
promptly will take or cause to be taken any action necessary to remedy any
failure of the Premises or the acquired businesses to comply at the Closing
Date with any Legal Requirement, upon receipt of notice from the Buyer at any
time.
5.8. Certain Environmental Matters. The Sellers and the Shareholder
shall (a) within 45 days of the Closing remove such of the above-ground storage
tanks ("ASTs") located on the Premises as are agreed upon by the Buyer and the
Seller and construct concrete secondary containment fueling pads relating to
any remaining ASTs at a location on each of the applicable Premises and in a
design to be determined by the Buyer, in each case in compliance with all
applicable Environmental Obligations, and (b) take or cause to be taken, in
compliance with all applicable Environmental Obligations, such actions with
respect to other environmental matters or Environmental Obligations disclosed
in the Environmental Study as are requested by the Buyer in writing to the
Seller prior to the Closing, which written request(s) shall be attached hereto
as Exhibit 5.8 when given. The Sellers and the Shareholder shall take such
actions at their expense. Nothing in this Section 5.8 shall relieve the
Sellers or the Shareholder from any obligation or Liability under Section 7 of
this Agreement, obligate the Buyer to take any action or impose any Liability
on the Buyer.
5.9. Repurchase of Unpaid Receivables. The Sellers and the
Shareholder jointly and severally guarantee that the Closing Accounts
Receivable will be fully paid to the Buyer in accordance with their terms at
their recorded amounts not later than 120 days from the Closing Date. Upon
demand by the Buyer at any time after 120 days from the Closing Date, the
Sellers and the Shareholder shall jointly and severally pay to the Buyer the
full amount of any unpaid Closing Accounts Receivables which are the subject of
such demand. Upon such payment to the Buyer, the Closing Accounts Receivable
which are so paid for by the Sellers and the Shareholder shall, without further
action of any party, become
- 15 -
<PAGE> 19
the property of the Seller that owned such Closing Account Receivable
immediately prior to the Closing.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the purchase of the Acquired Assets and the consummation of
the other transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) each Seller's and the Shareholder's representations and
warranties shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to the Buyer pursuant to Section 4.5
and the subject matter thereof shall be satisfactory to the Buyer;
(b) each Seller and the Shareholder shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) each Seller and the Shareholder shall have given all
notices and procured all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets of any Seller or to
conduct the acquired business, and no such Order shall be in effect;
(e) there shall have been no adverse change in the Acquired
Assets of any Seller or any Seller's business between the date of execution of
this Agreement and the Closing;
(f) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects and as to the adoption
of resolutions by the board of directors and shareholders of each Seller
authorizing the execution, delivery and performance of this Agreement and the
Other Seller Agreements and the consummation of the transactions contemplated
hereby and thereby;
(g) the Buyer shall have completed its due diligence with
respect to each Seller, each Seller's business and the Acquired Assets of each
Seller with results satisfactory to the Buyer.
(h) the Other Seller Agreements and documentation necessary to
accomplish the conveyance of the specific ownership tax and fee payments made
by the Seller prior to the Closing in respect of vehicles and mobile equipment
included in the Acquired Assets shall have been executed and delivered by the
Sellers and the Shareholder, as applicable;
(i) each Person having an Encumbrance on any property subject
to a Shareholder Lease shall have executed and delivered a nondisturbance
agreement relating thereto satisfactory to the Buyer;
- 16 -
<PAGE> 20
(j) the Buyer shall have received from counsel to the Sellers
and the Shareholder an opinion in form and substance as set forth in Exhibit
6.1(j) addressed to the Buyer and its debt and equity financing sources and
dated as of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) "Phase I" environmental studies of the Premises, and such
additional environmental testing as the Buyer shall request, shall have been
completed at the Sellers' expense and supplied to the Buyer, and the contents
and results thereof shall be satisfactory to the Buyer;
(m) each Seller shall have delivered to the Buyer possession
and control of the Acquired Assets;
(n) the Sellers and the Shareholder shall have executed and
delivered to the Buyer (i) appropriate documentation to transfer to the Buyer
record ownership of all registered Intellectual Property and applications
therefor and (ii) an amendment to each Seller's articles of incorporation for
the purpose of changing its name to a name that does not include the term "Hays
Rental & Sales" or "Hays Rental and Sales" or any derivation thereof; and
(o) the Sellers and the Shareholder shall have delivered, or
caused the Sellers to deliver, to the Buyer such other instruments,
certificates and documents as are reasonably requested by the Buyer in order to
consummate the transactions contemplated by this Agreement, all in form and
substance reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Sellers and the Shareholder. The
obligation of the Sellers and the Shareholder to consummate the sale of the
Acquired Assets is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above in
Sections 6.2(a) and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed and
delivered by the Buyer;
(e) the Sellers and Shareholder shall have received from
counsel to the Buyer an opinion in form and substance as set forth in Exhibit
6.2(e), addressed to the Sellers and Shareholder and dated as of the Closing;
and
- 17 -
<PAGE> 21
(f) the Buyer shall have paid and deposited the purchase price
for the Acquired Assets pursuant to Section 2.3.
The Sellers' Agent may waive any condition specified in this Section 6.2 at or
prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) If any Seller or the Shareholder breaches (or if any
Person other than the Buyer alleges facts that, if true, would mean any Seller
or the Shareholder has breached) any of the representations or warranties of
any Seller or the Shareholder contained herein and the Buyer gives notice
thereof to the Sellers' Agent within the Survival Period, or if any Seller or
the Shareholder breaches (or if any Person other than the Buyer alleges facts
that, if true, would mean any Seller or the Shareholder has breached) any
covenants of any Seller or the Shareholder contained herein or any
representations, warranties or covenants of any Seller or the Shareholder
contained in any Other Seller Agreement and the Buyer gives notice thereof to
the Sellers' Agent, then the Sellers and the Shareholder agree to jointly and
severally indemnify and hold harmless the Buyer from and against any Adverse
Consequences the Buyer may suffer resulting from, arising out of, relating to
or caused by any of the foregoing regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In determining
whether there has been a breach of any representation or warranty contained in
Section 3.1 and in determining for purposes of the preceding sentence the
amount of Adverse Consequences suffered by the Buyer, such representations and
warranties shall not be qualified (other than by the references to "material"
set forth in Section 3.1(u)) by "material," "materiality," "in all material
respects," "best knowledge," "best of knowledge" or "knowledge" or words of
similar import, or by any phrase using any such terms or words. The Sellers
and the Shareholder also agree to jointly and severally indemnify and hold
harmless the Buyer from and against any Adverse Consequences the Buyer may
suffer which result from, arise out of, relate to or are caused by the
consummation of the transactions contemplated by this Agreement, whether or not
such matter was known or disclosed to the Buyer, was disclosed on any Exhibit
hereto or is a matter with respect to which any Seller or the Shareholder did
or did not have knowledge, including, without limitation, any act or omission
of any Seller, the Shareholder or any predecessor with respect to, or any event
or circumstance related to, any Seller's, the Shareholder's or any
predecessor's ownership, occupation, use or operation of any of the Acquired
Assets, the Excluded Assets or any other assets or properties or the conduct of
its or their business, regardless of whether such act, omission, event or
circumstance occurred or existed prior to, at or after the Closing Date or
whether a claim with respect to such matter was asserted before or is asserted
after the Closing Date, any Liability of any Seller or the Shareholder not
included in the Assumed Liabilities (including, without limitation, those
concerning Hazardous Materials or the failure of any Seller, the Shareholder or
any predecessor to comply with any Environmental Obligation or other Legal
Requirement), and any Liability resulting from any failure of the parties to
comply with any applicable bulk sales or transfer Legal Requirement in
connection with the transactions contemplated by this Agreement. If any
dispute arises concerning whether any indemnification is owing which cannot be
resolved by negotiation among the parties within 30 days of notice of the claim
for indemnification from the party claiming indemnification to the party
against whom such claim is asserted, the dispute will be resolved by
arbitration pursuant to this Agreement.
- 18 -
<PAGE> 22
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against any Seller or the Shareholder during the
Escrow Period will be paid to the Buyer first out of the funds escrowed
pursuant to the Escrow Agreement, along with interest from the date of the
Closing at the rate applicable to the escrowed funds. The Sellers and the
Shareholder will have joint and several Liability for any additional amounts
needed to cover such claims, which amounts will be paid directly to the Buyer.
At the end of the Escrow Period amounts that may be needed to cover pending
indemnification claims made by the Buyer (such amounts to be determined by the
Buyer based upon the reasonable exercise of its business judgment) will be
retained in the Escrow Account until such claims are resolved, and any excess
on deposit therein, including any accrued interest, will be paid to the
Sellers. Nothing in this Section 7.1(b) will be construed to limit the Buyer's
right to indemnification to amounts on deposit in the Escrow Account. The
Buyer and the Sellers' Agent shall jointly give instructions to the Escrow
Agent to carry out the intent of this Section 7.1(b). Any disputes concerning
the escrowed funds will be settled by arbitration as provided in this
Agreement. The Buyer, on the one hand, and the Sellers and the Shareholder
jointly and severally, on the other hand, shall each be responsible for one-
half of the fees, charges and expenses payable to the Escrow Agent pursuant to
paragraph a. of Article 2 of the Escrow Agreement and, except as otherwise
determined pursuant to Section 9.11 of this Agreement, one-half of any amounts
payable pursuant to paragraph b. of such Article 2.
7.2. Indemnification Provisions for Benefit of the Sellers and the
Shareholder. If the Buyer breaches (or if any Person other than any Seller or
the Shareholder alleges facts that, if true, would mean the Buyer has breached)
any of its representations or warranties contained herein and the Sellers'
Agent gives notice of a claim for indemnification against the Buyer within the
Survival Period, or if the Buyer breaches (or if any Person other than any
Seller or the Shareholder alleges facts that, if true, would mean the Buyer has
breached) any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other Buyer Agreement and the Sellers'
Agent gives notice thereof to the Buyer, then the Buyer agrees to indemnify and
hold harmless the Sellers and the Shareholder from and against any Adverse
Consequences the Sellers and the Shareholder may suffer which result from,
arise out of, relate to, or are caused by the breach or alleged breach,
regardless of whether the Adverse Consequences are suffered during or after the
Survival Period. In determining whether there has been a breach of any
representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Buyer for purposes of this
Section, such representations and warranties shall not be qualified by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of the claim for indemnification from the
party claiming indemnification to the party against whom such claim is
asserted, the dispute will be resolved by arbitration pursuant to this
Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including,
without limitation, any Governmental Authority) notifies any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in
- 19 -
<PAGE> 23
notifying any Indemnifying Party will relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to any Seller, the Shareholder or any
relative or affiliate of any Seller or the Shareholder at or after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
- 20 -
<PAGE> 24
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Sellers' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Sellers' Agent at any time prior to the Closing (i) in the event
any Sellers or the Shareholder has breached any representation, warranty or
covenant contained in this Agreement in any material way, the Buyer has
notified the Sellers' Agent of the breach, and the breach has not been cured
within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before March 15, 1997 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Sellers' Agent may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (i) if the Buyer
has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Sellers' Agent has notified the Buyer of the
breach, and the breach has not been cured within 10 days after the notice of
breach or (ii) if the Closing has not occurred on or before March 15, 1997
because of the failure of any condition precedent to the Sellers' and the
Shareholder's obligations to consummate the Closing (unless the failure results
primarily from any Seller or the Shareholder breaching any representation,
warranty or covenant contained in this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party
will treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
- 21 -
<PAGE> 25
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither any Seller nor the Shareholder may assign this
Agreement or any of their rights, interests or obligations hereunder without
the prior written approval of the Buyer. The Buyer may assign its rights and
obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
If to any Seller or
the Shareholder: Copy to:
Addressed to the Compton, Prewett, Thomas & Hickey P.A.
Sellers' Agent at: P.O. Box 1917
423 North Washington Avenue
John H. Hays El Dorado, Arkansas 71731-1917
2700 James Blvd. Attn: Floyd M. Thomas, Jr., Esq.
El Dorado, Arkansas 71730 Telecopy: (501) 862-7228
Telecopy: (___) ___-____
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Richard M. Tyler Attn: B. Scott Pullara
Telecopy: (303) 620-9016 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law
- 22 -
<PAGE> 26
provision or rule (whether of the State of Colorado or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Sellers' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Sellers and the Shareholder will bear all costs and expenses
(including, without limitation, all legal, accounting and tax related fees and
expenses, all fees, commissions, expenses and other amounts payable to any
broker, finder or agent and the costs of any environmental study and additional
environmental testing contemplated by Section 6.1) incurred by the Sellers or
the Shareholder either before or after the date of this Agreement in connection
with this Agreement or the transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Sellers' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE
WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
- 23 -
<PAGE> 27
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Sellers' and Shareholder's Agent. Each Seller and the
Shareholder hereby authorize and appoint the Sellers' Agent to act as its, his
or her exclusive agent and attorney-in-fact to act on behalf of each of them
with respect to all matters which are the subject of this Agreement, including,
without limitation, (a) receiving or giving all notices, instructions, other
communications, consents or agreements that may be necessary, required or given
hereunder and (b) asserting, settling, compromising, or defending, or
determining not to assert, settle, compromise or defend, (i) any claims which
any Seller or the Shareholder may assert, or have the right to assert, against
the Buyer, or (ii) any claims which the Buyer may assert, or have the right to
assert, against any Seller or the Shareholder. The Sellers' Agent hereby
accepts such authorization and appointment. Upon the receipt of written
evidence satisfactory to the Buyer to the effect that the Sellers' Agent has
been substituted as agent of the Sellers and the Shareholder by reason of his
death, disability or resignation, the Buyer shall be entitled to rely on such
substituted agent to the same extent as they were theretofore entitled to rely
upon the Sellers' Agent with respect to the matters covered by this Section
9.14. Neither any Seller nor the Shareholder shall act with respect to any of
the matters which are the subject of this Agreement except through the Sellers'
Agent. The Sellers and the Shareholder acknowledge and agree that the Buyer
may deal exclusively with the Sellers' Agent in respect of such matters, that
the enforceability of this Section 9.14 is material to the Buyer, and that the
Buyer has relied upon the enforceability of this Section 9.14 in entering into
this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 24 -
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ JEFFREY N. MACDOWELL
----------------------------------
Name: JEFFREY N. MACDOWELL
--------------------------------
Title: Vice President
-------------------------------
SELLERS:
HAYS RENTAL & SALES OF EL DORADO,
INC.
By: /s/ JOHN H. HAYS
----------------------------------
Name: John H. Hays
Title: President
HAYS RENTAL & SALES OF HOT SPRINGS,
INC.
By: /s/ JOHN H. HAYS
----------------------------------
Name: John H. Hays
Title: President
HAYS RENTAL & SALES OF MAGNOLIA, INC.
By: /s/ JOHN H. HAYS
----------------------------------
Name: John H. Hays
Title: President
HAYS RENTAL & SALES OF CAMDEN, INC.
By: /s/ JOHN H. HAYS
----------------------------------
Name: John H. Hays
Title: President
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT.]
- 25 -
<PAGE> 29
HAYS RENTAL & SALES OF ARKADELPHIA,
INC.
By: /s/ JOHN H. HAYS
----------------------------------
Name: John H. Hays
Title: President
HAYS LEASING, INC.
By: /s/ JOHN H. HAYS
----------------------------------
Name: John H. Hays
Title: President
SHAREHOLDER:
/s/ JOHN H. HAYS
-------------------------------------
John H. Hays
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT.]
- 26 -
<PAGE> 1
EXHIBIT 10.13
================================================================================
ASSET PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
CVR, INC.
AND THE
SHAREHOLDERS
OF
CVR, INC.
AS OF MARCH 14, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . . 1
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . 1
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Closing; Closing Date . . . . . . . . . . . . . . . . . . . . 2
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Seller and the
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . . . . 10
3.3. Survival of Representations . . . . . . . . . . . . . . . . . 11
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . 11
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2. Operation and Preservation of Business . . . . . . . . . . . . 12
4.3. Acquisitions and Dispositions of Rental Equipment . . . . . . 12
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . 12
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7. Conveyance of Shareholder Property . . . . . . . . . . . . . . 13
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . 13
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 13
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 13
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 13
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . 14
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . 14
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . 14
5.8. Certain Environmental Matters . . . . . . . . . . . . . . . . 14
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . . 14
5.10. Use of Certain Assets and Services . . . . . . . . . . . . . . 15
5.11. Location 7 . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . 16
6.2. Conditions to Obligation of the Seller and the Shareholders . 17
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . 18
7.1. Indemnification Provisions for Benefit of the Buyer . . . . . 18
7.2. Indemnification Provisions for Benefit of the Seller and the
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . 19
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . 20
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . 20
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . 21
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 21
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 21
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 21
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . 21
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 22
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 22
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . 23
9.14. Seller's and Shareholders' Agent. . . . . . . . . . . . . . . 24
</TABLE>
(ii)
<PAGE> 4
Exhibits:
Exhibit 1.1(a)
Exhibit 1.1(b)
Exhibit 1.1(c)
Exhibit 1.1(d)
Exhibit 1.1(e)
Exhibit 1.1(f)
Exhibit 1.1(g)
Exhibit 1.1(h)
Exhibit 1.1(i)
Exhibit 1.1(j)
Exhibit 1.1(k)
Exhibit 1.1(l)
Exhibit 1.1(m)
Exhibit 1.1(n)
Exhibit 3.1(c)
Exhibit 3.1(d)(i)
Exhibit 3.1(d)(ii)
Exhibit 3.1(e)(i)
Exhibit 3.1(e)(ii)
Exhibit 3.1(f)
Exhibit 3.1(g)(i)(A)
Exhibit 3.1(g)(i)(B)
Exhibit 3.1(g)(ii)
Exhibit 3.1(h)(i)
Exhibit 3.1(h)(ii)
Exhibit 3.1(i)(A)
Exhibit 3.1(i)(B)
Exhibit 3.1(k)
Exhibit 3.1(l)
Exhibit 3.1(m)
Exhibit 3.1(o)(i)
Exhibit 3.1(o)(ii)
Exhibit 3.1(r)(ii)
Exhibit 3.1(r)(iii)
Exhibit 4.3
Exhibit 6.1(j)
Exhibit 6.2(e)
(iii)
<PAGE> 5
This Asset Purchase Agreement is entered into as of March 14,
1997 among RentX Industries, Inc., a Delaware corporation (the "Buyer"), CVR,
Inc., a Virginia corporation (the "Seller"), and Norman C. Kiser, Richard H.
Baldwin, Daniel C. Showalter and Tracy C. Smith (individually, a "Shareholder"
and collectively, the "Shareholders").
Recitals
The Shareholders own all of the issued and outstanding capital
stock of the Seller. The Seller desires to sell, and the Buyer desires to
purchase, substantially all of the Seller's assets as provided in this
Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the
meanings designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth
in this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all the Acquired Assets free and clear of any
Encumbrance or Tax, for the consideration specified in Section 2.3. The Buyer
will have no obligation under this Agreement to purchase less than all of the
Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Buyer will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The cash purchase price for the Acquired Assets is
$4,502,400. At the Closing, the Buyer will, by wire transfer or other
delivery of immediately available funds, (i) (A) pay to the Seller (subject to
Section 2.3(b)), subject to increase or decrease as applicable for the Net
Rental Equipment Adjustment, $4,052,400, and (B) deposit $450,000 into the
Escrow Account and (ii) assume the Assumed Liabilities (and the amounts paid
and deposited to and in respect of the Seller and the Assumed Liabilities will
constitute the full purchase price for the Acquired Assets). The amount
deposited in the Escrow Account will belong to the Seller, subject to the
Seller's indemnification obligations set forth in this Agreement, and will be
held, invested, administered and disbursed according to Section 7.1(b) hereof
and the Escrow Agreement.
(b) At the Closing, the Buyer will deposit into a demand
deposit account in the name of the Buyer and the Shareholders' Agent, from the
amount otherwise payable to the Seller pursuant to Section 2.3(a)(i)(A), an
amount equal to the Reserve Amount, and such funds shall initially constitute
the Liabilities Reserve. The funds on deposit in the Liabilities Reserve will
belong to the Seller, subject to the provisions of this Section 2.3(b).
Following the Closing, the Liabilities Reserve will be applied to the payment
of Reserved Seller Liabilities, by disbursements from that account by
<PAGE> 6
the Buyer or the Shareholders' Agent, as the Reserved Seller Liabilities become
due and payable. To the extent that the Buyer receives a bill or invoice
representing, or is otherwise aware of, any Reserved Seller Liabilities, the
Buyer may cause funds to be disbursed from the Reserve Amount to satisfy such
Reserved Seller Liabilities. Reserved Seller Liabilities representing accrued
vacation and other accrued employee benefits with respect to those persons who
are employees of the Seller as of the Closing Date and who become employees of
the Buyer effective as of the Closing will be satisfied by payment of the
amount thereof to the Buyer as the Buyer provides such benefits or makes cash
payments in lieu thereof to employees. The Shareholders' Agent will take all
actions necessary to cause the Liabilities Reserve to be applied to satisfy
Reserved Seller Liabilities and, if the Liabilities Reserve has been exhausted,
the Seller and the Shareholders will provide additional funds as required to
satisfy Reserved Seller Liabilities. Nothing in this Agreement will be deemed
to limit the joint and several obligations of the Seller and the Shareholders
to pay the Reserved Seller Liabilities in full. After all Reserved Seller
Liabilities have been satisfied, any excess Liabilities Reserve on deposit in
the account created pursuant to this Section 2.3(b) will be paid to the Seller.
Any disputes concerning the Liabilities Reserve will be settled by arbitration
as provided in this Agreement.
(c) As soon as practicable after the Closing, but effective as
of the Closing, the parties will prepare and initial a "Price Allocation
Schedule", allocating for Tax reporting purposes the total consideration for
the Acquired Assets among the various categories of Acquired Assets in the
following order and amounts: (i) to cash and cash equivalents, the $2,400
amount on the Closing Balance Sheet; (ii) to Closing Accounts Receivable, the
amount on the Closing Balance Sheet; (iii) to Closing Inventory, the amount on
the Closing Balance Sheet; (iv) to equipment and leasehold improvements, the
greater of the appraised fair market value (if the Buyer in its sole discretion
obtains an appraisal before or after the Closing) or the current book value
thereof as reflected on the Closing Balance Sheet; (v) to prepaid expenses, the
unamortized balance on the Closing Balance Sheet; (vi) to any other assets,
other than goodwill, the amount on the Closing Balance Sheet; and (vii) the
entire remaining balance of the consideration shall be allocated to the
goodwill of the Seller's business or, at the Buyer's sole discretion, to the
other intangible assets which are included in the Acquired Assets. The parties
acknowledge that such allocations for Tax reporting purposes were determined
pursuant to arm's length bargaining regarding the fair market values of the
Acquired Assets in accordance with the provisions of Code Section 1060. The
parties agree to be bound by the allocations set forth in the Price Allocation
Schedule for all federal, state and local Tax reporting purposes, including for
purposes of determining any income, gain, loss, depreciation or other
deductions in respect of such assets. The parties further agree to prepare and
file all Tax Returns (including Form 8594 under the Code) in a manner
consistent with such allocations.
2.4. Sales Taxes, Etc. The Seller will pay all sales, use, transfer
and other Taxes, fees and charges payable in respect of the sale and transfer
of the Acquired Assets to the Buyer pursuant to this Agreement.
2.5. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
March 14, 1997 (but in any event on or before April 1, 1997), commencing at
8:00 a.m. local time in Denver, Colorado, at the offices of Sherman & Howard
L.L.C., and all transactions contemplated by this Agreement will be effective
at 12:00 a.m. local time in Waynesboro, Virginia, on the day of the Closing
(such effective time being the "Closing Date").
- 2 -
<PAGE> 7
2.6. Deliveries at the Closing. At the Closing, (a) the Seller and
the Shareholders will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Seller and the Shareholders the certificates,
instruments and documents referred to in Section 6.2, (c) the Seller will
deliver to the Buyer instruments transferring to the Buyer title to the
Acquired Assets free and clear of any Encumbrances or Taxes and (d) the Buyer
will pay and deposit the purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Seller and the
Shareholders. The Seller and the Shareholders jointly and severally represent
and warrant to the Buyer that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were then substituted for the date of this Agreement throughout this
Section 3.1).
(a) Organization, Good Standing, Authority, Etc. The Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Virginia and is not required to be qualified to do
business as a foreign corporation in any other jurisdiction. The Seller has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. This Agreement
and the Other Seller Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and unanimously approved by the
board of directors and shareholders of the Seller, and this Agreement has been
duly executed and delivered by the Seller. The Seller has full corporate power
and authority to execute, deliver and perform this Agreement and the Other
Seller Agreements to which the Seller is a party, each Shareholder and each
relative or affiliate of the Seller or of a Shareholder who is party to any
Other Seller Agreement has full and absolute right, power, authority and legal
capacity to execute, deliver and perform this Agreement and all Other Seller
Agreements to which such Shareholder, relative or affiliate is a party, and
this Agreement constitutes, and the Other Seller Agreements will when executed
and delivered constitute, the legal, valid and binding obligations of, and
shall be enforceable in accordance with their respective terms against, the
Seller and each such Shareholder, relative or affiliate who is a party thereto.
(b) Ownership. Norman C. Kiser, Richard H. Baldwin, Daniel C.
Showalter and Tracy C. Smith own, beneficially and of record, free and clear of
any Encumbrance or Tax, 755 shares, 349 shares, 79 shares, and 17 shares,
respectively, of the common stock, $563.96 par value, of the Seller, which
constitute all outstanding shares of the capital stock of the Seller. No other
Person has any right to acquire any equity interest in the Seller.
(c) No Violation. The execution, delivery and performance of
this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which the Seller, any Shareholder, or any relative or affiliate
of the Seller or of any Shareholder who is a party to any Other Seller
Agreement is subject or any provision of the articles of incorporation or
bylaws of the Seller or of any such affiliate, or (ii) violate, with or without
the giving of notice or the lapse of time or both, or conflict with or result
in the breach or termination of any provision of, or constitute a default
under, or give any Person the right to accelerate any obligation under, or
result in the creation of any Encumbrance upon any properties, assets or
business of the Seller, of any Shareholder, or of any such relative or
affiliate pursuant to, any
- 3 -
<PAGE> 8
indenture, mortgage, deed of trust, lien, lease, license, Permit, agreement,
instrument or other arrangement to which the Seller, any Shareholder or any
such relative or affiliate is a party or by which the Seller, any Shareholder,
or any such relative or affiliate or any of their respective assets and
properties is bound or subject. Except for notices that will be given and
consents that will be obtained by the Seller and the Shareholders prior to the
Closing (which are set forth in Exhibit 3.1(c)), neither the Seller, any
Shareholder, nor any such relative or affiliate need give any notice to, make
any filing with or obtain any authorization, consent or approval of any
Governmental Authority or other Person in order for the parties to consummate
the transactions contemplated by this Agreement and the Other Seller
Agreements.
(d) Financial Statements. The unaudited balance sheets of the
Seller as of December 31, 1991, December 31, 1992, December 31, 1993, December
31, 1994, and December 31, 1995, and the related statements of income, for the
fiscal years then ended, the unaudited balance sheet of the Seller as of
December 31, 1996 (the latter being referred to as the "Latest Balance Sheet"),
and the related statement of income, for the fiscal year then ended, have been
prepared in accordance with good accounting practices and on a basis consistent
with those of prior years, are in accordance with the books and records of the
Seller (which books and records are complete and correct), are accurate and
fairly present the financial position and results of operations of the Seller
as of such dates and for each of the periods indicated, do not list book values
for the assets that are in excess of their fair market values, and, except as
set forth on Exhibit 3.1(d)(i), make adequate provision for all Liabilities to
which the Seller is subject. Copies of the financial statements described in
the first sentence in this Section are attached as Exhibit 3.1(d)(ii).
(e) Absence of Certain Leases, Changes or Events. The Seller
is not, except as set forth on Exhibit 3.1(e)(i), a party to or otherwise bound
by any contract or agreement that has a term of three or more months pursuant
to which the Seller is obligated to furnish any equipment, products or
services, and no such contract or agreement has been prepaid with respect to
any period after the Closing Date. Since November 30, 1996, the Seller has
not, except as set forth on Exhibit 3.1(e)(ii), (i) incurred any debt,
indebtedness or other Liability, except current Liabilities incurred in the
ordinary course of business; (ii) delayed or postponed the payment of accounts
payable or other Liabilities or accelerated the collection of any receivable
beyond stated, normal terms; (iii) sold (except as set forth on Exhibit 4.3
with respect to the period between November 30, 1996, and the date of this
Agreement and as permitted by Section 4.3 with respect to the period after the
date of this Agreement and before the Closing Date) or otherwise transferred
any of its equipment or other assets or properties; (iv) cancelled,
compromised, settled, released, waived, written-off or expensed any account or
note receivable, right, debt or claim involving more than $10,000 in the
aggregate; (v) changed in any significant manner the way in which it conducts
its business; (vi) made or granted any individual wage or salary increase in
excess of 10% or $1.00 per hour, any general wage or salary increase, or any
additional benefits of any kind or nature; (vii) except as otherwise expressly
permitted by this Section 3.1(e), (A) entered into any contracts or agreements,
or made any commitments, involving more than $15,000 individually or in the
aggregate or (B) accelerated, terminated, delayed, modified or cancelled any
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) involving more than $15,000 individually or in
the aggregate; (viii) suffered any adverse fact or change, including, without
limitation, to or in its business, assets, financial condition, prospects or
customer or supplier relationships; (ix) made any payment or transfer to or for
the benefit of any shareholder, officer or director or any relative or
affiliate thereof or permitted any Person, including, without limitation, any
shareholder, officer, director or employee or any relative or affiliate
thereof,
- 4 -
<PAGE> 9
to withdraw assets from the Seller (other than cash of the Seller distributed
to its shareholders as set forth on Exhibit 3.1(e)(ii) and other than the
payment to the Shareholders of the proportionate monthly amount of their
respective normal annualized salaries due and payable during such period); (x)
failed to make purchases of new or used equipment necessary to maintain its
rental/lease inventory at the level which is reasonably necessary to maintain
the revenue base experienced by the Seller during the 12 months preceding such
date; (xi) decreased its lease rate with respect to any equipment by 10% or
more from the applicable lease rate in effect on November 30, 1996, or rented
or leased any equipment or sold or otherwise transferred any inventory,
equipment or services at below-normal rental or lease rates or margins; (xii)
suffered any other significant occurrence, event, incident, action, failure to
act or transaction outside the ordinary course of business; or (xiii) agreed to
incur, take, enter into, make or permit any of the matters described in clauses
(i) through (xii).
(f) Tax Matters. Neither the Seller nor any of its
shareholders has ever filed (i) an election pursuant to Section 1362 of the
Code that the Seller be taxed as an "S" corporation, except as set forth on
Exhibit 3.1(f), or (ii) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Seller and the Shareholders will pay
all Taxes attributable to the Seller's business and activities, including all
Taxes attributable to the transactions contemplated by this Agreement, on or
before the due date. There are no Encumbrances on any of the assets of the
Seller that arose in connection with any failure (or alleged failure) to pay
any Tax. Exhibit 3.1(f) lists all federal, state and local income Tax Returns
filed with respect to the Seller for taxable periods ended on or after January
1, 1991, indicates those Tax Returns that have been audited and indicates those
Tax Returns that currently are the subject of audit. The Seller has delivered
to the Buyer correct and complete copies of all federal, state and local income
Tax Returns and examination reports of, and statements of deficiencies assessed
against or agreed to by, the Seller since January 1, 1991.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Seller owns
all of the Acquired Assets (other than certain items of Shareholder Property),
free and clear of all Encumbrances (except for those Encumbrances which the
Seller shall cause to be terminated as of the Closing). As of the Closing, all
of the Acquired Assets (including all of the Shareholder Property) will be
owned by the Seller, free and clear of all Encumbrances, and the Seller will
have good and marketable title to (or, in the case of Acquired Assets that are
leased, valid leasehold interests in) all the Acquired Assets. The Acquired
Assets consist of (A) the tangible and intangible assets of the Seller
(exclusive of the Excluded Assets) in existence as of November 30, 1996 (except
as set forth on Exhibit 3.1(e) with respect to cash of the Seller which was
distributed to its shareholders and except for such changes in inventory and in
accounts receivable in the ordinary course of business as are not in violation
of Section 3.1(e)) or Section 4.3, increased by New Rental Equipment acquired
from and after the date of this Agreement in compliance with Section 4.3,
decreased by Current Rental Equipment disposed of from and after the date of
this Agreement in compliance with Section 4.3, and decreased by Current Rental
Equipment sold or otherwise transferred on or after November 30, 1996 but
before the date of this Agreement as set forth on Exhibit 4.3 and (B) all
tangible and intangible assets, including, without limitation, all
improvements, fixtures and fittings, owned by any Shareholder or relative or
affiliate thereof or of the Seller which have been used in its business at any
time on or after November 30, 1996 (the "Shareholder Property"), including,
without limitation, the tangible and intangible assets set forth on Exhibit
3.1(g)(i)(A) owned by any Shareholder or relative or affiliate thereof.
Between November 30, 1996 and the day before the date of this Agreement, the
Seller has purchased the New
- 5 -
<PAGE> 10
Rental Equipment and has sold, for cash or a Current Rental Equipment
Receivable only, the Current Rental Equipment described in Exhibit 4.3, but has
not otherwise sold, traded, transferred or otherwise disposed of any Current
Rental Equipment. The Acquired Assets are all of the tangible and intangible
assets (other than the Excluded Assets) used by the Seller in, or necessary for
the conduct of, its business. The Acquired Assets and the equipment leased by
the Seller from third parties who are not relatives or affiliates of the Seller
or any Shareholder for lease by the Seller to its customers (the "Third-Party
Equipment") encompass all equipment used by the Seller to generate the income
reflected in the financial statements attached as Exhibit 3.1(d)(ii), and the
total cost to the Seller to lease such Third-Party Equipment during the fiscal
years ending December 31, 1995 and December 31, 1996 did not exceed $400,000
and $274,000, respectively. Exhibit 3.1(g)(i)(B) lists all Third Party
Equipment leased by the Seller as of the date hereof. The Seller does not
lease any equipment from any Shareholder or any relative or affiliate of the
Seller or any Shareholder. Except for items rented or leased to customers, all
of the tangible Acquired Assets are located on the Premises.
(ii) The Premises constitute all of the real property,
buildings and improvements used by the Seller in its business and are supplied
with utilities and other services necessary for the operation thereof. Except
as set forth on Exhibit 3.1(g)(ii), the Premises are free from defects, have
been maintained in accordance with normal industry practice, are in good
operating condition and repair and are suitable for the purposes for which they
presently are used. To the best knowledge of the Seller and the Shareholders,
the Premises have received all approvals of Governmental Authorities (including
Permits) required in connection with the occupation and operation thereof and
have been occupied, operated and maintained in accordance with applicable Legal
Requirements. The Seller has not received notice of violation of any Legal
Requirement or Permit relating to its owned or leased properties.
(iii) No party to any lease has repudiated any provision
thereof, and there are no disputes, oral agreements or forbearance programs in
effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data. Attached
as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the items
identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Seller nor any other party thereto is in breach
or default in performance of any of its respective obligations under, and no
event exists which, with the giving of notice or lapse of time or both, would
constitute a breach, default or event of default on the part of a party to, any
of the foregoing that is continuing unremedied.
(i) Litigation; Compliance with Applicable Laws and Rights.
There is no outstanding Order against, nor, except as set forth on Exhibit
3.1(i)(A) is there any litigation, proceeding, arbitration or investigation by
any Governmental Authority or other Person pending or threatened against, the
Seller, its properties or its business or relating to the transactions
contemplated by this Agreement, nor is there any basis for any such action. To
the best knowledge of the Seller and the Shareholders, except as set forth on
Exhibit 3.1(i)(B), neither the Seller nor the Seller's assets (including its
Premises, facilities, machinery and equipment) are in violation of any
applicable Legal Requirement or Right. The Seller has not received notice from
any Governmental Authority or other
- 6 -
<PAGE> 11
Person of any violation or alleged violation of any Legal Requirement or Right,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice has been filed or commenced or is pending or threatened
against the Seller alleging any such violation.
(j) Notes and Accounts Receivable. The accounts receivable of
the Seller reflected on its Latest Balance Sheet, and all accounts receivable
arising prior to the Closing Date (including, without limitation, any Current
Rental Equipment Receivables in existence as of the Closing Date), arose and
will arise from bona fide transactions by the Seller in the ordinary course of
business, are valid receivables with trade customers subject to no setoffs or
counterclaims, and are current and collectible.
(k) Product Quality, Warranty and Liability. All products and
services sold, rented, leased, provided or delivered by the Seller to customers
on or prior to the Closing Date conform to applicable contractual commitments,
express and implied warranties, product and service specifications and quality
standards, and the Seller has no Liability and there is no basis for any
Liability for replacement or repair thereof or other damages in connection
therewith. No product or service sold, rented, leased, provided or delivered
by the Seller 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. The Seller has no Liability and there is no
basis for any Liability arising out of any injury to a Person or property as a
result of the ownership, possession, provision or use of any product or service
sold, rented, leased, provided or delivered by the Seller on or prior to the
Closing Date. All product or service liability claims that have been asserted
against the Seller since January 1, 1992, other than those set forth on Exhibit
3.1(i)(A), whether covered by insurance or not and whether litigation has
resulted or not, are listed and summarized on Exhibit 3.1(k).
(l) Insurance. The Seller has policies of insurance (i)
covering risk of loss on its Acquired Assets, (ii) covering products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption, all, to the
best knowledge of the Seller and the Shareholders, with responsible and
financially sound insurance carriers in adequate amounts and in compliance with
governmental requirements and in accordance with good industry practice. All
such insurance policies are valid, in full force and effect and enforceable in
accordance with their respective terms and no party has repudiated any
provision thereof. All such policies will remain in full force and effect
until midnight on the Closing Date. Neither the Seller nor any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving
of notice or the lapse of time or both, would constitute a breach, default or
event of default, or permit termination, modification or acceleration under any
such policy. There are no claims, actions, proceedings or suits arising out of
or based upon any of such policies nor, to the best knowledge of the Seller and
the Shareholders, does any basis for any such claim, action, suit or proceeding
exist. All premiums have been paid on such policies as of the date of this
Agreement and will be paid on such policies through the Closing Date. The
Seller has been covered during the five years prior to the date of this
Agreement by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. All
claims made during such five-year period with respect to any insurance coverage
of the Seller, other than those described on Exhibit 3.1(k), are set forth on
Exhibit 3.1(l).
- 7 -
<PAGE> 12
(m) Pension and Employee Benefit Matters. The Buyer will not
suffer any Liability or Adverse Consequence from any Seller's administration or
termination of any of its Employee Benefit Plans or from any failure of any
pre-Closing or post-Closing distribution of benefits to employees of the Seller
to be made by the Seller in compliance with all applicable Legal Requirements.
The Buyer will have no obligation to employ any employee of the Seller or to
continue any Employee Benefit Plan, and will have no Liability under any plan
or arrangement maintained by the Seller for the benefit of any employee. The
Seller will remain liable for all costs of employee compensation, including
benefits and Taxes relating to employment and employees attributable to periods
through the Closing Date, whether reported by the Closing Date or thereafter,
and all group health plan continuation coverage to which any employee, former
employee or dependent is entitled because of a qualifying event (as defined in
Section 4980B(f)(3) of the Code) occurring through the Closing Date or as a
result of termination of employment with the Seller because of the transactions
contemplated by this Agreement and any benefit or excise tax liability or
penalty or other costs arising from any failure by the Seller to provide group
health plan continuation coverage. Except as set forth on Exhibit 3.1(m),
neither the Seller nor any Affiliated Group which includes the Seller (if any)
maintains, administers or contributes to, has maintained, administered or
contributed to, or has any Liability to contribute to, any Employee Benefit
Plan. Exhibit 3.1(m) lists each Employee Benefit Plan that is, or at any time
during the past six years was, maintained, administered, contributed to or
required to be contributed to by the Seller or any Affiliated Group (if any)
which includes or has included the Seller, and the date of termination of each
such Employee Benefit Plan (if any) which has been terminated. The Seller has
no Liability (and there is no basis for the assertion of any Liability) as a
result of the Seller's or any such Affiliated Group's maintenance,
administration or termination of, or contribution to, any Employee Benefit
Plan. Neither the Seller nor any member of any Affiliated Group (if any) which
includes or has included the Seller has ever been required to contribute to any
Multiemployer Plan (as defined in ERISA Section 3(37)) nor has incurred any
Liability under Title IV of ERISA.
(n) Employees and Labor. The Seller has not received any
notice, nor, to the best knowledge of the Seller and the Shareholders, is there
any reason to believe that any executive or key employee of the Seller or any
group of employees of the Seller has any plans to terminate his, her or its
employment with the Seller. No executive or key employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Seller prior to the Closing Date and, if such person
becomes an employee of the Buyer, to the affairs of the Buyer after the Closing
Date. The Seller will not be required to give any notice under the Worker
Adjustment and Retraining Notification Act, as amended, or any similar Legal
Requirement as a result of this Agreement, the Other Seller Agreements or the
transactions contemplated hereby or thereby. The Seller does not have any
labor relations problems or disputes, nor has the Seller experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Seller's facilities, and no union organization effort has been threatened,
initiated or is in progress with respect to any employees of the Seller.
(o) Customer and Supplier Relationships. Exhibit 3.1(o)(i)
lists each customer that individually or with its affiliates accounted for 2%
or more of the Seller's sales, rental or lease revenues during either of the
fiscal years ending December 31, 1995 or December 31, 1996 (the "Principal
Customers"). Exhibit 3.1(o)(ii) lists each supplier that individually or with
its affiliates accounted for 2% or more of the Seller's purchases of inventory
or supplies during the fiscal year
- 8 -
<PAGE> 13
ending December 31, 1995 or December 31, 1996 (the "Principal Suppliers"). The
Seller has good commercial working relationships with its Principal Customers
and Principal Suppliers and since January 1, 1996, no Principal Customer or
Principal Supplier has cancelled or otherwise terminated its relationship with
the Seller, materially decreased or limited its purchases, rentals or leases
from, or inventory or supplies supplied to the Seller, or threatened to take
any such action. The Seller and the Shareholders have no basis to anticipate
any problems with the Seller's customer, supplier or business relationships.
To the best knowledge of the Seller and the Shareholders, no Principal Customer
or Principal Supplier has any plans to reduce its purchases, rentals or leases
from, or inventory or supplies supplied to, the Seller below levels prevailing
since January 1, 1996, and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not adversely affect
the relationship of the Seller with any Principal Customer or Principal
Supplier prior to the Closing Date or of the Buyer with any Principal Customer
or Principal Supplier after the Closing Date.
(p) Resale Inventory. The resale inventory of the Seller
consists of goods which, in the aggregate, are merchantable, are fit for the
purposes for which they were procured and are held by the Seller, are usable in
the ordinary course of the Seller's business and are not obsolete.
(q) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Seller consists of machinery, equipment and other
tangible personal property which are merchantable, are fit and suitable for the
purpose for which they were procured and are held by the Seller, useable in the
ordinary course of the Seller's business and are not obsolete. All of the
machinery, equipment and other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) has been
maintained in accordance with good industry practice and is in good repair and
good operating condition. None of the machinery, equipment or other tangible
personal property included in the Acquired Assets (including that held for
rental, lease or sale) is damaged or defective, the Seller has not experienced
material problems or deficiencies with respect to its machinery, equipment and
other tangible personal property, and, to the best knowledge of the Seller and
the Shareholders, there is no basis to anticipate any such problems or
deficiencies. In the normal course of business certain items which are held
for rental or lease suffer damage in the course of use by the Seller's
customers, and such items are reparable and are in the process of being
repaired by the Seller for use in the Seller's rental and leasing business, and
the Seller has repaired and shall continue through the Closing Date to repair
such items on a basis consistent with good industry practice and the aggregate
cost to the Buyer after the Closing Date to repair all such items which are in
need of repair or are in the process of being repaired as of the Closing Date
will not exceed $20,000.
(r) Environmental Matters.
(i) The Seller is conducting and at all times has
conducted its business and operations, and has occupied, used and operated the
Premises and all other real property and facilities previously owned, occupied,
used or operated by the Seller, in compliance with all Environmental
Obligations and so as not to give rise to Liability under any Environmental
Obligations or to any impact on the Seller's business or activities. The
Seller and the Shareholders do not have any knowledge of pending or proposed
changes to any Environmental Obligations which would require any changes in any
of the Seller's Premises, facilities, equipment, operations or procedures or
affect the Seller's business or its cost of conducting its business as now
conducted.
- 9 -
<PAGE> 14
(ii) No conditions, circumstances or activities have
existed or currently exist, and neither the Seller nor any Shareholder has
engaged in any acts or omissions, with respect to the Premises or any other
real properties, facilities or business previously owned, occupied, used or
operated by the Seller or any predecessor (including, without limitation, off-
site disposal or treatment of Hazardous Materials) which could give rise to any
Liability pursuant to any Environmental Obligation. Exhibit 3.1(r)(ii)
identifies all real properties and facilities, including the addresses thereof,
which have been owned, occupied, used or operated by the Seller or its
predecessors at any time on or prior to the date of this Agreement. There are
no outstanding, pending or threatened Orders against the Seller or any
Shareholder, nor are there any current, pending or threatened investigations of
any kind against the Seller or any Shareholder, concerning any Environmental
Obligations. There are no actions, suits or administrative, arbitral or other
proceedings alleged, claimed, threatened, pending against or affecting the
Seller or any Shareholder at law or in equity with respect to any Environmental
Obligations, and neither the Seller nor any Shareholder has knowledge of any
existing grounds on which any such action, suit or proceedings might be
commenced.
(iii) Any chemicals and chemical compounds and mixtures
which are included among the assets of the Seller are integral to and required
for the conduct of the Seller's business, have not been and are not intended to
be discarded or abandoned, and are not waste or waste materials. Except as set
forth in the environmental studies attached as Exhibit 3.1(r)(iii)
(collectively, the "Environmental Study"), the Seller has not generated,
handled, used, transported or disposed of Hazardous Materials. All waste
materials which are generated as part of the business of the Seller are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental Study, no
underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any facilities presently or previously
owned, occupied, used or operated by the Seller or any predecessor. Except as
set forth in the Environmental Study, neither any of the Premises nor any other
real properties or facilities presently or previously owned, occupied, used or
operated by the Seller or any predecessor has been used at any time as a
gasoline service station or any facility for storing, pumping, dispensing or
producing gasoline or any other petroleum products (other than such storage,
pumping and dispensing of fuels and lubricants as is incidental to the Seller's
equipment rental/leasing business) or Hazardous Materials. No building or
other structure on any of the Premises contains asbestos-containing materials.
There are not nor have there been any incinerators, septic tanks, leach fields,
cesspools or wells (including without limitation dry, drinking, industrial,
agricultural and monitoring wells) on any of the Premises.
(s) Intellectual Property. The Seller owns or has the legal
right to use and to transfer to the Buyer each item of Intellectual Property
required to be identified on Exhibit 3.1(h)(ii). The continued operation of
the business of the Seller as currently conducted will not interfere with,
infringe upon, misappropriate or conflict with any Intellectual Property rights
of another Person. To the best knowledge of the Seller and the Shareholders,
no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of the
Seller or any Intellectual Property included in the Shareholder Property.
Neither the Seller nor any owner of any Intellectual Property included in the
Shareholder Property has granted any license, sublicense or permission with
respect to any Intellectual Property owned or used in the Seller's business.
- 10 -
<PAGE> 15
(t) Disclosure. None of the documents or information provided
to the Buyer by the Seller, any Shareholder or any agent or employee thereof in
the course of the Buyer's due diligence investigation and the negotiation of
this Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, contain any untrue statement of any material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact which materially adversely affects
the business, prospects, condition, affairs or operations of the Seller or any
of its properties or assets which has not been set forth in this Agreement or
such Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Seller and the Shareholders acknowledge and agree that
the fact that they have made disclosures pursuant to Section 3.1 or otherwise
of matters, or did not have knowledge of matters, which result in Adverse
Consequences to the Buyer shall not relieve the Seller and the Shareholders of
their obligation pursuant to Article 7 to indemnify and hold the Buyer harmless
from all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller and the Shareholders that the statements
contained in this Section 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other Buyer Agreements
and the transactions contemplated hereby and thereby have been duly approved by
all requisite corporate action. The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Buyer
Agreements, and this Agreement constitutes, and the Other Buyer Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of the Buyer, and shall be enforceable in accordance with their
respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery
and performance of this Agreement and the Other Buyer Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Buyer is subject or any provision of
the certificate of incorporation or bylaws of the Buyer or (ii) violate, with
or without the giving of notice or the lapse of time or both, or conflict with
or result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Buyer pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Buyer is a party or which the Buyer or any of its assets and properties is
bound or subject. Except for notices and consents that will be given or
- 11 -
<PAGE> 16
obtained by the Buyer prior to the Closing, the Buyer does not need to give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for the lesser of four years or the applicable
statute of limitations, except that the Liabilities of the Seller and the
Shareholders with respect to the representations and warranties set forth in
Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(m), 3.1(r), 3.1(s) and
3.1(t), and the Liabilities of the Buyer with respect to the representations
and warranties set forth in Sections 3.2(a) and 3.2(b), shall survive without
termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of such party and be exercised always in a reasonable manner and within
reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to take
all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will, and will cause the Seller to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Seller will not, and
Shareholders will not cause or permit the Seller to, engage in any practice,
take any action or enter into any transaction outside its ordinary course of
business; provided, however, that in no event will any action be taken or fail
to be taken or any transaction be entered into which would result in a breach
of any representation, warranty or covenant of the Seller or any Shareholder.
The Seller will, and the Shareholders will cause the Seller to, keep its
business and properties, including its current operations, physical facilities,
working conditions, and relationships with customers, suppliers, lessors,
licensors and employees, intact and, in connection therewith, to continue to
purchase new or used equipment necessary to maintain its rental/lease inventory
at the level specified in Section 3.1(e)(x).
4.3. Acquisitions and Dispositions of Rental Equipment. From the date
of this Agreement through the Closing Date, the Seller may purchase new or used
rental or lease equipment for use in the growth and expansion of its business
("New Rental Equipment;" provided, however, that the term New Rental Equipment
shall not include any new or used rental or lease equipment acquired to
maintain the Seller's business) or may sell (but only for cash or a Current
Rental Equipment Receivable) rental or lease equipment owned by the Seller on
or after October 31, 1996 ("Current Rental Equipment"), but may not otherwise
sell, trade, transfer or dispose of any Current Rental
- 12 -
<PAGE> 17
Equipment; provided, however, that between the date of this Agreement and the
Closing Date, no New Rental Equipment shall be purchased and no Current Rental
Equipment shall be sold without the express prior written approval of an
officer of the Buyer and without the Shareholders' Agent and an officer of the
Buyer expressly agreeing on the amount by which the purchase price payable
pursuant to Section 2.3(a) shall be increased in respect of such New Rental
Equipment purchases ("New Rental Equipment Increases") and the amount by which
the purchase price payable pursuant to Section 2.3(a) shall be decreased in
respect of such Current Rental Equipment sales ("Current Rental Equipment
Decreases"). Exhibit 4.3 sets forth (a) New Rental Equipment Increases with
respect to New Rental Equipment purchased between October 31, 1996 and the date
of this Agreement and (b) Current Rental Equipment Decreases with respect to
Current Rental Equipment sold or otherwise transferred between October 31, 1996
and the date of this Agreement, as agreed by the Shareholders' Agent and an
officer of the Buyer. If any New Rental Equipment purchases or Current Rental
Equipment sales or other transfers occur after the date hereof and before the
Closing Date, Exhibit 4.3 shall be amended to reflect any agreed upon New
Rental Equipment Increases and Current Rental Equipment Decreases relating
thereto.
4.4. Full Access. The Seller will permit the Buyer and its agents to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Seller, to all premises,
properties, personnel, books, records (including Tax records), contracts and
documents of or pertaining to the Seller.
4.5. Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development which occurs after the date of
this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Seller.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.6. Exclusivity. Neither the Seller nor any Shareholder will, and no
Shareholder will cause or permit the Seller to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any portion
of the assets of, the Seller (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
the Seller's stock in favor of any such transaction. The Seller and
Shareholders will notify the Buyer immediately if the Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
4.7. Conveyance of Shareholder Property. Prior to the Closing Date,
the Shareholders shall convey, and shall cause each relative or affiliate of
the Seller or of any Shareholder to convey, to the Seller, free and clear of
any Encumbrance or Tax, all of each Shareholder's and each such relative's or
affiliate's right, title and interest to the Shareholder Property.
4.8. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
- 13 -
<PAGE> 18
4.9. Bulk Sales Laws. In reliance upon its indemnification rights set
forth in Section 7, the Buyer waives compliance by the Seller with the bulk
transfer law and any other similar law of any applicable jurisdiction in
respect to the transactions contemplated by this Agreement.
5. Post-Closing Covenants. The parties agree as follows with respect to
the period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Neither the Seller nor any Shareholder will take any
action at any time that is designed or intended to have the effect of
discouraging any customer, supplier, lessor, licensor or other business
associate of the Seller from establishing or continuing a business relationship
with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Seller's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
5.4. Confidentiality. The Seller and the Shareholders will treat and
hold as confidential all Confidential Information concerning the Buyer, the
Seller's business or the Acquired Assets, refrain from using any such
Confidential Information and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all of such Confidential Information in its or
their possession.
5.5. Post-Closing Announcements. Following the Closing, neither the
Seller nor any Shareholder will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer.
5.6. Financial Statements. The Seller and the Shareholders will, upon
request of the Buyer, cooperate with the Buyer to produce such historical and
on-going financial statements and audits as the Buyer may request, all at the
sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities. The Seller and the Shareholders
will pay and perform, as and when due, all Liabilities (other than the Assumed
Liabilities) relating to the Seller, the business of the Seller and the
Acquired Assets, including without limitation, all Taxes attributable to the
transactions contemplated by this Agreement and all accrued vacation and other
accrued employee benefits; provided, however, that accrued vacation and other
accrued employee benefits with respect to those
- 14 -
<PAGE> 19
persons who are employees of the Seller as of the Closing Date and who become
employees of the Buyer effective as of the Closing will be satisfied as set
forth in Section 2.3(b). In addition, the Seller and the Shareholders will pay
to the Buyer, promptly after their receipt of notice from the Buyer stating the
amount payable by them and a copy of the invoices from Governmental Authorities
relating thereto, an amount equal to the portion of the personal property taxes
on the Acquired Assets of the Seller attributable to the period from January 1,
1997 to and including the date on which the Closing occurs (the "Pre-Closing
Personal Property Tax Amount"). The Pre-Closing Personal Property Tax Amount
payable by the Shareholders and the Seller will be determined by prorating
personal property taxes on the Acquired Assets of the Seller for 1997 in
proportion to the number of days in the year prior to and including the date on
which the Closing occurs compared to the number of days in the year remaining
after the date on which the Closing occurs. If the actual Pre-Closing Personal
Property Tax Amount exceeds the estimated Pre-Closing Personal Property Tax
Amount used for purposes of Section 2.3(a), the Seller and the Shareholders
shall pay such excess amount to the Buyer within five days after their receipt
of notice from the Buyer stating the amount payable by them and a copy of the
invoices from Governmental Authorities relating thereto. If the estimated Pre-
Closing Personal Property Tax Amount used for purposes of Section 2.3(a)
exceeds the actual Pre-Closing Personal Property Tax Amount, the Buyer shall
pay such excess amount to the Seller within five days of receipt of the
invoices from Governmental Authorities relating thereto. The Buyer will pay
and perform, as and when due (except to the extent the validity thereof or the
liability therefor is being contested by the Buyer), the Assumed Liabilities.
Further, the Seller and the Shareholders, at their expense, promptly will take
or cause to be taken any action necessary to remedy any failure of the Premises
or the acquired business to comply at the Closing Date with any Legal
Requirement, upon receipt of notice from the Buyer at any time.
5.8. Certain Environmental Matters. The Seller and the Shareholders
shall, within 45 days of the Closing, take or cause to be taken the following
actions: (a) at the Seller's Harrisonburg facility, construct for the Seller's
above-ground storage tanks a concrete containment area of sufficient volume to
meet all applicable Legal Requirements; and (b) modify the wash water
collection systems at the Seller's Waynesboro and Culpeper facilities by
installing dry wells in compliance with all applicable Legal Requirements. The
Seller and the Shareholders shall take such actions at their expense. Nothing
in this Section 5.8 shall relieve the Seller or any Shareholder from any
obligation or Liability under Section 7 of this Agreement, obligate the Buyer
to take any action or impose any Liability on the Buyer.
5.9. Repurchase of Unpaid Receivables. The Seller and the
Shareholders jointly and severally guarantee that the aggregate amount of the
Closing Accounts Receivable, less $25,000, will be fully paid to the Buyer in
accordance with their terms at their recorded amounts not later than 120 days
from the Closing Date. Upon demand by the Buyer at any time after 120 days
from the Closing Date, the Seller and the Shareholders shall jointly and
severally pay to the Buyer the full amount of any unpaid Closing Accounts
Receivables which are the subject of such demand. Upon such payment to the
Buyer, the Closing Accounts Receivable which are so paid for by the Seller and
the Shareholders shall, without further action of any party, become the
property of the Seller.
5.10. Use of Certain Assets and Services.
(a) The Seller shall, during the period from Closing until the
third anniversary of the Closing, provide vehicle repair service at Location 7
to the Buyer at no charge to the Buyer, except that the Buyer shall reimburse
the Seller for the Seller's actual cost of all vehicle parts used in so
- 15 -
<PAGE> 20
repairing the Buyer's vehicles and the labor services so provided by the Seller
shall not exceed the equivalent of one full-time mechanic per day.
(b) During the period from the Closing until the second
anniversary of the Closing, the Buyer shall be entitled to occupy, at no charge
to the Buyer, the administrative space presently occupied by the Seller for its
headquarters operation at Location 7.
5.11. Location 7.
(a) At the expiration of 18 months from the Closing, the Buyer
and the Seller shall meet to determine their relative interests in a
transaction involving the purchase by the Buyer of the Location 7 Assets.
(b) If the Seller receives an offer, letter of intent or term
sheet (the "Offer") for all or substantially all of the Location 7 Assets at
any time prior to the expiration of the period ending 36 months after the
Closing, and the Seller desires to accept such Offer, the Seller shall give
written notice (the "Notice") to the Buyer within ten days after receipt of
such Offer. The Notice shall include a copy of the Offer signed by the Seller
and the proposed purchaser and shall describe in reasonable detail the proposed
sale, including without limitation, (i) the Seller's bona fide intention to
sell such assets, (ii) the basic terms and conditions of the sale, which shall
include all of the Seller's right, title and interest in and to such assets,
(iii) the price, which shall be a cash price only, for which the Seller
proposes to sell such assets, (iv) the proposed closing date of the sale, and
(v) the name and address of the proposed purchaser. The Buyer may elect to
purchase such assets at the cash price specified in the Notice and upon such
terms and conditions, including such representations and warranties, covenants,
and closing conditions as are customary in a transaction of this nature, by
giving written notice to the Seller within 10 business days of receipt of the
Notice. If the Buyer exercises such right of first refusal, it must conclude
the purchase of the assets upon the later of (i) the closing date set forth in
the Notice, or (ii) the date all necessary consents for such purchase have been
obtained and all other closing conditions included in the definitive purchase
and sale agreement have been satisfied or waived. If the Buyer does not
exercise its right of first refusal pursuant to this Section 5.11(b), then the
Seller may sell such assets to the purchaser named in the Notice at the price
and on substantially the terms specified in the Notice, provided that such sale
is consummated within 120 days of the date of the Notice. If the sale of such
assets is not consummated within such 120-day period, any further sale of such
assets shall again be subject to the provisions of the right of first refusal
set forth in this Section 5.11(b). Any proposed transfer of such assets on
terms and conditions substantially different from those set forth in the Notice
shall again be subject to the Buyer's rights under this Section 5.11(b) and
shall require compliance with the procedures described in this Section 5.11(b).
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the purchase of the Acquired Assets and the consummation of
the other transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Seller's and each Shareholder's representations and
warranties shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to the Buyer pursuant to Section 4.5
and the subject matter thereof shall be satisfactory to the Buyer;
- 16 -
<PAGE> 21
(b) the Seller and the Shareholders shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) the Seller and the Shareholders shall have given all
notices and procured all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets or to conduct the
acquired business, and no such Order shall be in effect;
(e) there shall have been no adverse change in the Acquired
Assets or the Seller's business between the date of execution of this Agreement
and the Closing;
(f) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in Sections 6.1(a)
through (e) is satisfied in all respects and as to the adoption of resolutions
by the board of directors and shareholders of the Seller authorizing the
execution, delivery and performance of this Agreement and the Other Seller
Agreements and the consummation of the transactions contemplated hereby and
thereby;
(g) the Buyer shall have completed its due diligence with
respect to the Seller, the Seller's business and the Acquired Assets with
results satisfactory to the Buyer.
(h) the Other Seller Agreements and documentation necessary to
accomplish the conveyance of the specific ownership tax and fee payments made
by the Seller prior to the Closing in respect of vehicles and mobile equipment
included in the Acquired Assets shall have been executed and delivered by the
Seller and the Shareholders, as applicable;
(i) the Shareholder Leases shall have been executed and
delivered by the parties thereto and the owners of the real property underlying
the Shareholder Leases, and each Person having an Encumbrance on any such
property, shall have executed and delivered estoppel, nondisturbance and
landlord waiver agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the Seller
and the Shareholders an opinion in form and substance as set forth in Exhibit
6.1(j) addressed to the Buyer and its debt and equity financing sources and
dated as of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) a "Phase I" environmental study of the Premises, and such
additional environmental testing as the Buyer shall request, shall have been
completed at the Seller's expense and supplied to the Buyer, and the contents
and results thereof shall be satisfactory to the Buyer;
- 17 -
<PAGE> 22
(m) the Seller shall have delivered to the Buyer possession
and control of the Acquired Assets;
(n) the Seller and the Shareholders shall have executed and
delivered to the Buyer (i) appropriate documentation to transfer to the Buyer
record ownership of the trade name "Central Virginia Rental" and all other
registered Intellectual Property and applications therefor and (ii) an
amendment to the Seller's articles of incorporation for the purpose of changing
its name to a name that does not include the term "Central Virginia Rental" or
any derivation thereof; and
(o) the Seller and the Shareholders shall have delivered, or
caused the Seller to deliver, to the Buyer such other instruments, certificates
and documents as are reasonably requested by the Buyer in order to consummate
the transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Seller and the Shareholders. The
obligation of the Seller and the Shareholders to consummate the sale of the
Acquired Assets is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Sections 6.2(a)
and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed and
delivered by the Buyer;
(e) the Seller and the Shareholders shall have received from
counsel to the Buyer an opinion in form and substance as set forth in Exhibit
6.2(e), addressed to the Seller and the Shareholders and dated as of the
Closing; and
(f) the Buyer shall have paid and deposited the purchase price
for the Acquired Assets pursuant to Section 2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
- 18 -
<PAGE> 23
(a) If the Seller or any Shareholder breaches (or if any
Person other than the Buyer alleges facts that, if true, would mean the Seller
or any Shareholder has breached) any of the representations or warranties of
the Seller or any Shareholder contained herein and the Buyer gives notice
thereof to the Shareholders' Agent within the Survival Period, or if the Seller
or any Shareholder breaches (or if any Person other than the Buyer alleges
facts that, if true, would mean the Seller or any Shareholder has breached) any
covenants of the Seller or any Shareholder contained herein or any
representations, warranties or covenants of the Seller or any Shareholder
contained in any Other Seller Agreement and the Buyer gives notice thereof to
the Shareholders' Agent, then the Seller and the Shareholders agree to jointly
and severally indemnify and hold harmless the Buyer from and against any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to or caused by any of the foregoing regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In determining
whether there has been a breach of any representation or warranty contained in
Section 3.1 and in determining for purposes of the preceding sentence the
amount of Adverse Consequences suffered by the Buyer, such representations and
warranties shall not be qualified (other than by (A) the reference to
"knowledge" set forth in the last sentence of Section 3.1(o) and (B) the
references to "material" set forth in Section 3.1(t)) by "material,"
"materiality," "in all material respects," "best knowledge," "best of
knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. The Seller and the Shareholders also agree to jointly
and severally indemnify and hold harmless the Buyer from and against any
Adverse Consequences the Buyer may suffer which result from, arise out of,
relate to or are caused by (i) any Liability of the Seller or any Shareholder
not included in the Assumed Liabilities (including, without limitation, those
concerning Hazardous Materials or the failure of the Seller, any Shareholder or
any predecessor to comply with any Environmental Obligation or other Legal
Requirement), (ii) any act or omission of the Seller, any Shareholder or any
predecessor with respect to, or any event or circumstance related to, the
Seller's, any Shareholder's or any predecessor's ownership, occupation, use or
operation of any of the Acquired Assets, the Excluded Assets or any other
assets or properties or the conduct of its or their business, regardless, in
the case of clause (i) or (ii), of whether or not such Liability, act,
omission, event or circumstance occurred or existed prior to or at the Closing
Date, of whether a claim with respect to such matter was asserted before or is
asserted after the Closing Date and of whether or not such Liability, act,
omission or matter was known or disclosed to the Buyer, was disclosed on any
Exhibit hereto or is a matter with respect to which the Seller or any
Shareholder did or did not have knowledge, and (iii) any Liability resulting
from any failure of the parties to comply with any applicable bulk sales or
transfer Legal Requirement in connection with the transactions contemplated by
this Agreement. If any dispute arises concerning whether any indemnification
is owing which cannot be resolved by negotiation among the parties within 30
days of notice of claim for indemnification from the party claiming
indemnification to the party against whom such claim is asserted, the dispute
will be resolved by arbitration pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against the Seller or any Shareholder during the
Escrow Period will be paid to the Buyer first out of the funds escrowed
pursuant to the Escrow Agreement, along with interest from the date of the
Closing at the rate applicable to the escrowed funds. The Seller and the
Shareholders will have joint and several Liability for any additional amounts
needed to cover such claims, which amounts will be paid directly to the Buyer.
At the end of the Escrow Period amounts that may be needed to cover pending
indemnification claims made by the Buyer (such amounts to be determined by the
Buyer based upon the reasonable exercise of its business judgment) will be
retained in the Escrow Account until such claims are resolved, and any excess
on deposit therein, including any accrued interest, will be paid
- 19 -
<PAGE> 24
to the Seller. Nothing in this Section 7.1(b) will be construed to limit the
Buyer's right to indemnification to amounts on deposit in the Escrow Account.
The Buyer and the Shareholders' Agent shall jointly give instructions to the
Escrow Agent to carry out the intent of this Section 7.1(b). Any disputes
concerning the escrowed funds will be settled by arbitration as provided in
this Agreement. The Buyer, on the one hand, and the Seller and the
Shareholders jointly and severally, on the other hand, shall each be
responsible for one-half of the fees, charges and expenses payable to the
Escrow Agent pursuant to paragraph a. of Article 2 of the Escrow Agreement and,
except as otherwise determined pursuant to Section 9.11 of this Agreement, one-
half of any amounts payable pursuant to paragraph b. of such Article 2.
7.2. Indemnification Provisions for Benefit of the Seller and the
Shareholders. If the Buyer breaches (or if any Person other than the Seller or
a Shareholder alleges facts that, if true, would mean the Buyer has breached)
any of its representations or warranties contained herein and the Shareholders'
Agent gives notice of a claim for indemnification against the Buyer within the
Survival Period, or if the Buyer breaches (or if any Person other than the
Seller or a Shareholder alleges facts that, if true, would mean the Buyer has
breached) any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other Buyer Agreement and the
Shareholders' Agent gives notice thereof to the Buyer, then the Buyer agrees to
indemnify and hold harmless the Seller and the Shareholders from and against
any Adverse Consequences the Seller and the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Buyer for purposes of this
Section, such representations and warranties shall not be qualified by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including,
without limitation, any Governmental Authority) notifies any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party
- 20 -
<PAGE> 25
Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to the Seller, any Shareholder or any
relative or affiliate of the Seller or any Shareholder at or after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
- 21 -
<PAGE> 26
(b) the Buyer may terminate this Agreement by giving written
notice to the Shareholders' Agent at any time prior to the Closing (i) in the
event the Seller or any Shareholder has breached any representation, warranty
or covenant contained in this Agreement in any material way, the Buyer has
notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before April 1, 1997 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (i) if the
Buyer has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Shareholders' Agent has notified the Buyer
of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before April 1,
1997 because of the failure of any condition precedent to the Seller's and the
Shareholders' obligations to consummate the Closing (unless the failure results
primarily from the Seller or any Shareholder breaching any representation,
warranty or covenant contained in this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party
will treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Seller nor any Shareholder may assign this
Agreement or any of their rights, interests or obligations hereunder without
the prior written approval of the Buyer. The Buyer may assign its rights and
obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same
- 22 -
<PAGE> 27
instrument. The execution of a counterpart of the signature page to this
Agreement will be deemed the execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
If to the Seller or
the Shareholders: Copy to:
Addressed to the Franklin, Franklin, Denney & Ward
Shareholders' Agent at: 129 N. Wayne Avenue
Norman C. Kiser P.O. Box Drawer 1140
2075 West Main Waynesboro, Virginia 22980
Waynesboro, Virginia 22980 Attn: Humes J. Franklin, Jr., Esq.
Telecopy: (540) 943-2127 Telecopy: (540) 946-4417
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Richard M. Tyler Attn: B. Scott Pullara
Telecopy: (303) 620-9016 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
- 23 -
<PAGE> 28
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Seller and the Shareholders will bear all costs and expenses
(including, without limitation, all legal, accounting and tax related fees and
expenses, all fees, commissions, expenses and other amounts payable to any
broker, finder or agent and the costs of any environmental study and additional
environmental testing contemplated by Section 6.1) incurred by the Seller or
any Shareholder either before or after the date of this Agreement in connection
with this Agreement or the transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Shareholders' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE
WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
- 24 -
<PAGE> 29
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Seller's and Shareholders' Agent. The Seller and each
Shareholder hereby authorizes and appoints the Shareholders' Agent to act as
its, his or her exclusive agent and attorney-in-fact to act on behalf of each
of them with respect to all matters which are the subject of this Agreement,
including, without limitation, (a) receiving or giving all notices,
instructions, other communications, consents or agreements that may be
necessary, required or given hereunder and (b) asserting, settling,
compromising, or defending, or determining not to assert, settle, compromise or
defend, (i) any claims which the Seller or any Shareholder may assert, or have
the right to assert, against the Buyer, or (ii) any claims which the Buyer may
assert, or have the right to assert, against the Seller or any Shareholder.
The Shareholders' Agent hereby accepts such authorization and appointment.
Upon the receipt of written evidence satisfactory to the Buyer to the effect
that the Shareholders' Agent has been substituted as agent of the Seller and
the Shareholders by reason of his death, disability or resignation, the Buyer
shall be entitled to rely on such substituted agent to the same extent as they
were theretofore entitled to rely upon the Shareholders' Agent with respect to
the matters covered by this Section 9.14. Neither the Seller nor any
Shareholder shall act with respect to any of the matters which are the subject
of this Agreement except through the Shareholders' Agent. The Seller and the
Shareholders acknowledge and agree that the Buyer may deal exclusively with the
Shareholders' Agent in respect of such matters, that the enforceability of this
Section 9.14 is material to the Buyer, and that the Buyer has relied upon the
enforceability of this Section 9.14 in entering into this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 25 -
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By:/s/ RICHARD M. TYLER
----------------------------------
Name: Richard M. Tyler
--------------------------------
Title: Vice President
-------------------------------
SELLER:
CVR, INC.
By:/s/ NORMAN C. KISER
----------------------------------
Name: Norman C. Kiser
--------------------------------
Title: President
-------------------------------
SHAREHOLDERS:
/s/ NORMAN C. KISER
-------------------------------------
Norman C. Kiser
/s/ RICHARD H. BALDWIN
-------------------------------------
Richard H. Baldwin
/s/ DANIEL C. SHOWALTER
-------------------------------------
Daniel C. Showalter
/s/ TRACY C. SMITH
-------------------------------------
Tracy C. Smith
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT.]
- 26 -
<PAGE> 1
EXHIBIT 10.14
================================================================================
PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
THE
SHAREHOLDERS
OF
SCOTTY RENTS, INC. AND
JEFFREY A. EIDE
AS OF APRIL 21, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . 1
2.2. Purchase Price; Payment . . . . . . . . . . . . . . . . . . 1
2.3. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . 2
2.4. Closing; Closing Date . . . . . . . . . . . . . . . . . . . 2
2.5. Deliveries at the Closing . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties and Agreements. . . . . . . . . . . . 2
3.1. Representations and Warranties of the Shareholders
and Eide . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Representations and Warranties of the Buyer . . . . . . . . 14
3.3. Survival of Representations . . . . . . . . . . . . . . . . 15
3.4. Representations as to Knowledge . . . . . . . . . . . . . . 15
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 15
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2. Operation and Preservation of Business . . . . . . . . . . . 15
4.3. Acquisitions and Dispositions of Rental Equipment . . . . . 15
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . 16
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7. Conveyance of Shareholder Property . . . . . . . . . . . . . 16
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . . . 16
4.9. Closing Date Liabilities and Distribution. . . . . . . . . . 17
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . 17
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 18
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . 18
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 18
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . 18
5.8. Certain Environmental Matters . . . . . . . . . . . . . . . 18
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . 18
5.10. Termination of Obligations . . . . . . . . . . . . . . . . . 18
5.11. Use of Proprietary Software . . . . . . . . . . . . . . . . 19
5.12. Medical Benefits . . . . . . . . . . . . . . . . . . . . . . 19
5.13. Use of Certain Assets . . . . . . . . . . . . . . . . . . . 19
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . 19
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . 19
6.2. Conditions to Obligation of the Shareholders and Eide . . . 21
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . 22
7.1. Indemnification Provisions for Benefit of the Buyer and the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2. Indemnification Provisions for Benefit of the Shareholders
and Eide . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . 23
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . 24
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . 24
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . 25
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 25
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . 25
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 25
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . 25
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 26
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . 26
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . 26
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 27
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . 27
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . 27
9.14. Shareholders' Agent. . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
(ii)
<PAGE> 4
Exhibits:
Exhibit 1.1(a)
Exhibit 1.1(b)
Exhibit 1.1(c)
Exhibit 1.1(d)
Exhibit 1.1(e)
Exhibit 1.1(f)
Exhibit 1.1(g)
Exhibit 1.1(h)
Exhibit 1.1(i)
Exhibit 1.1(j)
Exhibit 3.1(a)(i)
Exhibit 3.1(a)(ii)
Exhibit 3.1(b)
Exhibit 3.1(c)(i)
Exhibit 3.1(c)(ii)
Exhibit 3.1(d)(i)(A)
Exhibit 3.1(d)(i)(B)
Exhibit 3.1(d)(i)(C)
Exhibit 3.1(e)(i)
Exhibit 3.1(e)(ii)
Exhibit 3.1(f)(iv)
Exhibit 3.1(f)(vii)
Exhibit 3.1(g)(i)(A)
Exhibit 3.1(g)(i)(B)
Exhibit 3.1(g)(ii)
Exhibit 3.1(h)(i)
Exhibit 3.1(h)(ii)
Exhibit 3.1(i)(i)
Exhibit 3.1(i)(ii)
Exhibit 3.1(k)
Exhibit 3.1(l)
Exhibit 3.1(m)
Exhibit 3.1(o)(i)
Exhibit 3.1(o)(ii)
Exhibit 3.1(r)(ii)
Exhibit 3.1(r)(iii)
Exhibit 4.3
Exhibit 6.1(j)
Exhibit 6.1(k)
Exhibit 6.2(e)
(iii)
<PAGE> 5
This Purchase Agreement is entered into as of April 21, 1997
among RentX Industries, Inc., a Delaware corporation (the "Buyer"), and Irwin
R. Scott and Carol J. Scott (individually, a "Shareholder" and collectively,
the "Shareholders") and Jeffrey A. Eide ("Eide").
Recitals
Prior to the date hereof the Shareholders and Eide owned all of
the issued and outstanding capital stock of Scotty Rents, Inc., a California
corporation (the "Company"). The Shareholders have purchased all of the
capital stock of the Company owned by Eide with proceeds from their anticipated
sale of the capital stock of the Company hereunder and Eide will indirectly
receive benefits and other consideration from the purchase by the Buyer of the
outstanding capital stock of the Company and the other transactions
contemplated hereby. Following their acquisition of the capital stock of the
Company owned by Eide, the Shareholders desire to sell, and the Buyer desires
to purchase, all of the issued and outstanding capital stock of the Company as
provided in this Agreement, and the Buyer and Eide desire to enter into the
Employment Agreement and the other agreements and covenants as provided in this
Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth
in this Agreement, the Buyer agrees to purchase from the Shareholders, and the
Shareholders agree to sell to the Buyer, all the Shares free and clear of any
Encumbrance or Tax, for the consideration specified in Section 2.2. The Buyer
will have no obligation under this Agreement to purchase less than all of the
Shares.
2.2. Purchase Price; Payment.
(a) The purchase price for the Shares is $3,750,000, increased
or decreased as applicable for the Net Rental Equipment Adjustment. At the
Closing, the Buyer will, by wire transfer or other delivery of immediately
available funds, (i) pay to the Shareholders (subject to Section 2.2(b)),
$3,350,000, subject to increase or decrease as applicable for the Net Rental
Equipment Adjustment, plus $810.60 representing the Personal Property Tax
Amount, and (ii) deposit $400,000 into the Escrow Account (and the amounts paid
and deposited to and in respect of the Shareholders will constitute the full
purchase price for the Shares). The amount deposited in the Escrow Account
will belong to the Shareholders, subject to the Shareholders' indemnification
obligations set forth in this Agreement, and will be held, invested,
administered and disbursed according to Section 7.1(b) hereof and the Escrow
Agreement. The purchase price will be payable to the Shareholders in the
following percentage:
<TABLE>
<CAPTION>
Percentage of
Shareholder No of Shares Owned Purchase Price
----------- ------------------ --------------
<S> <C> <C>
Irwin R. Scott and 62,707 100%
Carol J. Scott, jointly
</TABLE>
(b) At the Closing, the Buyer will deposit into a demand
deposit account in the name of the Buyer and the Shareholders' Agent, from the
amount otherwise payable to the Shareholders pursuant to Section 2.2(a)(i), an
amount equal to the Reserve Amount, and such funds shall initially constitute
the Liabilities Reserve. The funds on deposit in the Closing Date Liabilities
Reserve will belong to the Shareholders, subject to the provisions of this
Section 2.2(b). Following the Closing, the Closing Date Liabilities Reserve
will be applied to the payment of Reserved Liabilities, by disbursements from
that account by the Buyer or the Shareholders' Agent, as the Reserved
Liabilities are ascertained. To the extent that the Buyer receives a bill or
invoice representing, or is otherwise aware of, any Reserved Liabilities, the
Buyer may cause funds to be disbursed from the Reserve Amount to satisfy such
Reserved Liabilities. Reserved Liabilities representing accrued vacation and
other accrued employee benefits with respect to those persons who are employees
of the Company as of immediately prior to the Closing Date and who become
employees of the Buyer effective as of the Closing
<PAGE> 6
will be satisfied by payment of the amount thereof to the Buyer as the Buyer
provides such benefits or makes cash payments in lieu thereof to employees.
The Shareholders' Agent will take all actions necessary to cause the
Liabilities Reserve to be applied to satisfy Reserved Liabilities and, if the
Liabilities Reserve has been exhausted, the Shareholders and Eide will provide
additional funds as required to satisfy Reserved Liabilities. Nothing in this
Agreement will be deemed to limit the joint and several obligations of the
Shareholders and Eide to pay the Reserved Liabilities in full. After all
Reserved Liabilities have been satisfied, any excess Liabilities Reserve on
deposit in the account created pursuant to this Section 2.2(b) will be paid to
the Shareholders. Any disputes concerning the Liabilities Reserve will be
settled by arbitration as provided in this Agreement.
2.3. Sales Taxes, Etc. The Shareholders and Eide will pay all sales,
use, transfer, licensing, recording, stamp and other Taxes, fees and charges
payable in respect of or as a result of the sale and transfer of the Shares to
the Buyer pursuant to this Agreement and of the merger of the Company into the
Buyer as contemplated by this Agreement.
2.4. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
April 21, 1997 (but in any event on or before May 31, 1997), commencing at 8:00
a.m. local time in Denver, Colorado, at the offices of Sherman & Howard L.L.C.,
and all transactions contemplated by this Agreement will be effective at 12:00
a.m. local time in Pleasant Hill, California on the day of the Closing (such
effective time being the "Closing Date").
2.5. Deliveries at the Closing. At the Closing, (a) the Shareholders
will deliver, or cause to be delivered, to the Buyer the certificates,
instruments and documents referred to in Section 6.1, (b) the Buyer will
deliver to the Shareholders the certificates, instruments and documents
referred to in Section 6.2, (c) the Shareholders will deliver to the Buyer
stock certificates representing all the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, free and clear of any
Encumbrances or Taxes and (d) the Buyer will pay and deposit the purchase price
in accordance with Section 2.2.
3. Representations and Warranties and Agreements.
3.1. Representations and Warranties of the Shareholders and Eide. The
Shareholders and Eide jointly and severally represent and warrant to the Buyer
that the statements contained in this Section 3.1 are correct and complete as
of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were then
substituted for the date of this Agreement throughout this Section 3.1).
Accordingly, the Shareholders and Eide each represent, warrant and agree:
(a) Organization, Good Standing, Etc. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, and is not required to be qualified or
authorized to do business as a foreign corporation in any jurisdiction. The
Company has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
The copies of the articles of incorporation (certified by the Secretary of
State of California) and the bylaws of the Company, both as amended to date,
which have been delivered to the Buyer by the Shareholders and are attached as
Exhibits 3.1(a)(i) and 3.1(a)(ii), respectively, are complete and correct, and
the Company is not in default under or in violation of any provision of its
articles of incorporation or bylaws. The minute books (which contain the
records of all meetings of or actions by the shareholders, the board of
directors, and any committees of the board of directors) and the stock
certificate books and the stock record books of the Company, copies of which
have been delivered to the Buyer by the Shareholders, are correct and complete.
(b) Ownership and Capitalization. Each Shareholder owns,
beneficially and of record, free and clear of any Encumbrance or Tax, the
number of shares of the capital stock, $1.00 par value, of the Company set
forth opposite such Shareholder's name in Section 2.2(a), which constitutes all
of the issued and outstanding capital stock of the Company. The authorized
capital stock of the Company consists of 250,000 shares of one class of stock
designated as capital stock, $1.00 par value. All of the issued and
outstanding shares of the Company's capital stock have been duly authorized and
validly issued, and are fully paid and nonassessable, with no personal
Liability attaching to the ownership thereof. There are no authorized or
outstanding stock or securities convertible into or exchangeable for, or any
authorized or outstanding option, warrant or other right to subscribe for or to
purchase, or convert any obligation into, any unissued shares of its
- 2 -
<PAGE> 7
capital stock, and the Company has not agreed to issue securities so
convertible or exchangeable or any such option, warrant or other right. There
are no authorized or outstanding stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company. There are no
voting trusts, voting agreements, proxies or other agreements or understanding
with respect to any capital stock of the Company. Except as set forth on
Exhibit 3.1(b), all of which the Shareholders shall cause to be terminated
prior to the Closing, there are no existing rights of first refusal, buy-sell
arrangements, options, warrants, rights, calls, or other commitments or
restrictions of any character relating to any of the Shares, except those
restrictions on transfer imposed by the Securities Act of 1933, as amended, and
applicable state securities laws. The Company has no subsidiaries and no
interest in any other corporation, partnership, limited partnership, limited
liability company, association or joint venture.
(c) Authority; No Violation. (i) Each Shareholder, Eide and
each relative or affiliate of the Company or of a Shareholder who is party to
any Other Seller Agreement has full and absolute right, power, authority and
legal capacity to execute, deliver and perform this Agreement and all Other
Seller Agreements to which such Person is a party, and this Agreement
constitutes, and the Other Seller Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of, and shall be
enforceable in accordance with their respective terms against, each such Person
who is a party thereto. The execution, delivery and performance of this
Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (A) violate any Legal
Requirement to which the Company, any Shareholder, Eide or any relative or
affiliate of the Company, Eide or of any Shareholder who is a party to any
Other Seller Agreement is subject or any provision of the articles of
incorporation or bylaws of the Company or of any such affiliate, or (B)
violate, with or without the giving of notice or the lapse of time or both, or
conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any Person the right to accelerate any
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of the Company, of any Shareholder, of Eide or
of any such relative or affiliate pursuant to, any indenture, mortgage, deed of
trust, lien, lease, license, Permit, agreement, instrument or other arrangement
to which the Company, any Shareholder, Eide or any such relative or affiliate
is a party or by which the Company, any Shareholder, Eide or any such relative
or affiliate or any of their respective assets and properties is bound or
subject. Except for notices that will be given and consents that will be
obtained by the Shareholders or Eide prior to the Closing (which are set forth
in Exhibit 3.1(c)(i)), neither the Company, any Shareholder, Eide, nor any such
relative or affiliate need give any notice to, make any filing with or obtain
any authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement and the Other Seller Agreements.
(ii) The merger immediately following the Closing of
the Company into the Buyer will not violate, with or without the giving of
notice or the lapse of time or both, or conflict with or result in the breach
or termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Buyer or the
Company pursuant to, any indenture, mortgage, deed of trust, lien, lease,
license, agreement, instrument or other arrangement to which the Company is a
party immediately prior to the transfer of the Shares to the Buyer pursuant to
this Agreement or by which the Company or any of its assets and properties is
bound or subject immediately prior to the transfer of the Shares to the Buyer
pursuant to this Agreement (collectively, the "Specified Agreements"). Except
for notices that will be given and consents that will be obtained by the
Shareholders or Eide prior to the Closing (which are set forth on Exhibit
3.1(c)(ii)), the Company, in connection with such merger, does not need to give
any notice to or obtain any consent from any Person in connection with any
Specified Agreement.
(d) Financial Statements; Absence of Liabilities. (i) The
unaudited balance sheets of the Company as of December 31, 1993, December 31,
1994, December 31, 1995 and December 31, 1996, the related statements of
income, shareholders' equity and cash flows for the fiscal years then ended,
the unaudited balance sheet of the Company as of February 28, 1997 (the latter
being referred to as the "Latest Balance Sheet"), and the related statement of
income, shareholders' equity and cash flows for the two-month period then
ended, have been prepared in accordance with good accounting practices and on a
basis consistent with those of prior years, are in accordance with the books
and records of the Company (which books and records are complete and correct),
are accurate and fairly present the financial position and results of
operations of the Company as of such dates and for each of the periods
indicated, do not list book values for the assets that are in excess of their
fair market values, and, except as set forth on Exhibit 3.1(d)(i)(A), make full
and adequate provision for all Liabilities to which the Company is subject.
Copies of the financial statements described in the first sentence in this
Section are attached as Exhibit 3.1(d)(i)(B). The expenses itemized on Exhibit
3.1(d)(i)(C) and reflected
- 3 -
<PAGE> 8
in the Company's financial performance for the 12-month period ended December
31, 1996 will not be realized on an on-going basis, and information sufficient
to determine such financial performance for such 12-month period has been
provided by the Shareholders and Eide to the Buyer prior to the date of this
Agreement.
(ii) Since the date of the Latest Balance Sheet, the
Company has not incurred or become subject to any Liability other than
Liabilities incurred in the ordinary course of business. As of the Closing,
the Company will have no Liability (and there is no basis for the assertion of
any Liability), except for the Retained Liabilities.
(e) Absence of Certain Leases, Changes or Events. The Company
is not, except as set forth on Exhibit 3.1(e)(i), a party to or otherwise bound
by any contract or agreement that has a term of three or more months pursuant
to which the Company is obligated to furnish any equipment, products or
services, and no such contract or agreement has been prepaid with respect to
any period after the Closing Date. Since December 1, 1996, the Company has not
(i) incurred any debt, indebtedness or other Liability, except current
Liabilities incurred in the ordinary course of business; (ii) delayed or
postponed the payment of accounts payable or other Liabilities or accelerated
the collection of any receivable beyond stated, normal terms; (iii) except as
set forth on Exhibit 3.1(e)(ii), sold (except as set forth on Exhibit 4.3 with
respect to the period between December 1, 1996 and the date of this Agreement
and as permitted by Section 4.3 with respect to the period after the date of
this Agreement and before the Closing Date) or otherwise transferred any of its
equipment or other assets or properties; (iv) cancelled, compromised, settled,
released, waived, written-off or expensed any account or note receivable,
right, debt or claim involving more than $10,000 in the aggregate; (v) changed
in any significant manner the way in which it conducts its business; (vi)
except as set forth on Exhibit 3.1(e)(ii), made or granted any individual wage
or salary increase in excess of 10% or $1.00 per hour, any general wage or
salary increase, or any additional benefits of any kind or nature; (vii) except
as otherwise expressly permitted by this Section 3.1(e), (A) except as set
forth on Exhibit 3.1(e)(ii), entered into any contracts or agreements, or made
any commitments, involving more than $10,000 individually or in the aggregate
or (B) accelerated, terminated, delayed, modified or cancelled any agreement,
contract, lease or license (or series of related agreements, contracts, leases
and licenses) involving more than $10,000 individually or in the aggregate;
(viii) suffered any adverse fact or change, including, without limitation, to
or in its business, assets, financial condition, prospects or customer or
supplier relationships; (ix) except as set forth on Exhibit 3.1(e)(ii), made
any payment or transfer to or for the benefit of any shareholder, officer or
director or any relative or affiliate thereof or permitted any Person,
including, without limitation, any shareholder, officer, director or employee
or any relative or affiliate thereof, to withdraw assets from the Company
(other than cash and other Excluded Assets distributed to the Shareholders or
Eide as set forth on Exhibit 3.1(e)(ii) and other than the payment to the
Shareholders or Eide of the proportionate monthly amount of their respective
normal annualized salaries due and payable during such period); (x) failed to
make purchases of new or used equipment necessary to maintain its rental/lease
inventory at the level which is reasonably necessary to maintain the revenue
base experienced by the Company during the 12 months preceding such date; (xi)
decreased its lease rate with respect to any equipment by 10% or more from the
applicable lease rate in effect on December 1, 1996 or rented or leased any
equipment or sold or otherwise transferred any inventory, equipment or services
at below-normal rental or lease rates or margins; (xii) suffered any other
significant occurrence, event, incident, action, failure to act or transaction
outside the ordinary course of business; or (xiii) agreed to incur, take, enter
into, make or permit any of the matters described in clauses (i) through (xii).
(f) Tax Matters.
(i) There has been duly and timely filed in proper
form by or on behalf of the Company, or a filing extension from the appropriate
Governmental Authorities has been obtained with respect to, all Tax Returns
required to be filed by applicable Legal Requirement on or prior to the date of
this Agreement. All assessments, Taxes, fees or other charges imposed on the
Company, any of its properties or any of its prior or present shareholders
(pursuant to the Company's "S" corporation election, if any such election has
been made) in respect of the periods covered by such Tax Returns have been
paid, or adequate reserves have been provided for (however, no representation
is made with respect to reserves by shareholders) with respect to the payment
of all Taxes (whether or not disputed) payable in respect of periods through
the date of this Agreement and all prior periods, and, to the best knowledge of
the Shareholders and Eide, all Tax Liabilities arising out of transactions
entered into or states of fact existing prior to the date of this Agreement.
There is no unpaid interest, penalty or addition to any Tax due or claimed to
be due from the Company (or any of its prior or present shareholders pursuant
to the Company's "S" corporation election, if any such election has been made),
or any Tax deficiency, determination or assessment outstanding against the
Company (or any of its prior or present shareholders
- 4 -
<PAGE> 9
pursuant to the Company's "S" corporation election, if any such election has
been made). No audit of any Tax Returns of the Company is pending or, to the
best knowledge of the Shareholders and Eide, has been threatened, and the
Company has not given any waiver of any statute of limitations relating to the
assessment or payment of Taxes, which waiver has not yet expired. All Tax
Returns, or extensions thereof required to be filed, and all Taxes required to
be paid, on or prior to the Closing Date by or on behalf of the Company, of any
nature whatsoever, shall have been so filed or paid prior to the Closing Date.
Following the Closing, the Shareholders and Eide (but not the Company) will pay
all Taxes attributable to the Company or its business and activities through
the Closing Date, including all Taxes attributable to the transactions
contemplated by this Agreement, such payment to be made on or before the due
date of such Tax Returns.
(ii) The Company has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any Tax
Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Encumbrances on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(iii) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or other
third party.
(iv) To the best knowledge of the Shareholders and
Eide, there is no basis for any authority to assess any additional Taxes for
any period for which Tax Returns have been filed. There is no dispute or claim
concerning any Tax Liability of the Company either (A) claimed or raised by any
authority in writing or (B) as to which any of the Shareholders or Eide have
knowledge. Exhibit 3.1(f)(iv) lists all federal, state, local and foreign
income Tax Returns filed with respect to the Company for taxable periods ended
on or after January 1,1990, indicates those Tax Returns that have been audited
and indicates those Tax Returns that currently are the subject of audit. The
Shareholders and Eide have delivered to Buyer correct and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies filed or assessed against or agreed to by the Company since
January 1, 1990.
(v) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(vi) Neither the Company nor any of its shareholders
has ever filed (A) an election pursuant to Section 1362 of the Code that the
Company be taxed as an "S" corporation or (B) a consent pursuant to Section
341(f) of the Code relating to collapsible corporations. The Company has not
made any payments, is not obligated to make any payments and is not a party to
any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. The Company has
not been a United States real property holding corporation within the meaning
of Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). The Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
the Company) and has no Liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract or
otherwise. The total adjusted basis of the Acquired Assets exceeds the sum of
the Company's Liabilities plus the amount of Liabilities to which the Acquired
Assets are subject.
(vii) Exhibit 3.1(f)(vii) sets forth the following
information with respect to the Company as of the most recent practicable date
(as well as on an estimated pro forma basis as of the Closing giving effect to
the consummation of the transactions contemplated hereby): (A) the basis of
the Company in its assets; and (B) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax credit or
excess charitable contribution allocable to the Company.
- 5 -
<PAGE> 10
(g) Assets and Properties.
(i) As of the date of this Agreement, the Company
owns all of the Acquired Assets (other than certain items of Shareholder
Property), free and clear of all Encumbrances (except for those Encumbrances
which the Company shall cause to be terminated as of the Closing). As of the
Closing, all of the Acquired Assets (including all of the Shareholder Property)
will be owned by the Company, free and clear of all Encumbrances, and the
Company will have good and marketable title to (or, in the case of Acquired
Assets that are leased, valid leasehold interests in) all the Acquired Assets.
The Acquired Assets consist of (A) the tangible and intangible assets of the
Company (exclusive of the Excluded Assets) in existence as of December 1, 1996
(except as set forth on Exhibit 3.1(e)(ii) with respect to cash and other
Excluded Assets which was distributed to its shareholders and except for such
changes in inventory and in accounts receivable in the ordinary course of
business as are not in violation of Section 3.1(e)(ii) or Section 4.3),
decreased by Current Rental Equipment disposed of from and after the date of
this Agreement in compliance with Section 4.3, and decreased by Current Rental
Equipment sold or otherwise transferred on or after December 1, 1996 but before
the date of this Agreement as set forth on Exhibit 4.3 and (B) all tangible and
intangible assets, including, without limitation, all improvements, fixtures
and fittings, owned by any Shareholder, Eide or any relative or affiliate
thereof or of the Company which have been used in its business at any time on
or after December 1, 1996 (the "Shareholder Property"), including, without
limitation, the tangible and intangible assets set forth on Exhibit
3.1(g)(i)(A) owned by any Shareholder, Eide or any relative or affiliate
thereof. Between December 1, 1996 and the day before the date of this
Agreement, the Company has sold, for cash only, the Current Rental Equipment
described in Exhibit 4.3, but has not otherwise sold, traded, transferred or
otherwise disposed of any Current Rental Equipment. The Acquired Assets are
all of the tangible and intangible assets (other than the Excluded Assets) used
by the Company in, or necessary for the conduct of, its business. The
Acquired Assets and the equipment leased by the Company from third parties who
are not relatives or affiliates of the Company, Eide or any Shareholder for
lease by the Company to its customers (the "Third-Party Equipment") encompass
all equipment used by the Company to generate the income reflected in the
financial statements attached as Exhibit 3.1(d)(i)(B), and the total cost to
the Company to lease such Third- Party Equipment during the fiscal year ended
December 31, 1996 and the two- month period ended February 28, 1997 did not
exceed $2,500 and $-0-, respectively. Exhibit 3.1(g)(i)(B) lists all Third
Party Equipment leased by the Company as of the date hereof. The Company does
not lease any equipment from any Shareholder, Eide or any relative or affiliate
of the Company, any Shareholder or Eide. Except for items rented or leased to
customers, all of the tangible Acquired Assets are located on the Premises.
(ii) The Premises constitute all of the real property,
buildings and improvements used by the Company in its business. The Premises
are supplied with utilities and other services necessary for the operation
thereof. Except as set forth on Exhibit 3.1(g)(ii), the Premises are free from
defects, have been maintained in accordance with normal industry practice, are
in good operating condition and repair and are suitable for the purposes for
which they presently are used. To the best knowledge of the Shareholders and
Eide, the Premises have received all approvals of Governmental Authorities
(including Permits) required in connection with the occupation and operation
thereof and have been occupied, operated and maintained in accordance with
applicable Legal Requirements. The Company has not received notice of
violation of any Legal Requirement or Permit relating to its operations or its
owned or leased properties.
(iii) No party to any lease with respect to any
Premises has repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data. Attached
as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the items
identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Company nor any other party thereto is in
breach or default in performance of any of its respective obligations under,
and no event exists which, with the giving of notice or lapse of time or both,
would constitute a breach, default or event of default on the part of a party
to, any of the foregoing that is continuing unremedied.
- 6 -
<PAGE> 11
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor,
except as set forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or threatened against, the Company, its properties or its business or
relating to the transactions contemplated by this Agreement, nor is there any
basis for any such action.
(ii) To the best knowledge of the Shareholders and
Eide, except as set forth on Exhibit 3.1(i)(ii), neither the Company nor the
Company's assets (including its Premises, facilities, machinery and equipment)
are in violation of any applicable Legal Requirement or Right. The Company has
not received notice from any Governmental Authority or other Person of any
violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or threatened
against the Company alleging any such violation.
(j) Accounts Receivable. The accounts receivable of the
Company reflected on its Latest Balance Sheet, and all accounts receivable
arising prior to the Closing Date, arose and will arise from bona fide
transactions by the Company in the ordinary course of business, are valid
receivables with trade customers subject to no setoffs or counterclaims, and
are current and collectible.
(k) Product Quality, Warranty and Liability. All products and
services sold, rented, leased, provided or delivered by the Company to
customers on or prior to the Closing Date conform to applicable contractual
commitments, express and implied warranties, product and service specifications
and quality standards, and the Company has no Liability and there is no basis
for any Liability for replacement or repair thereof or other damages in
connection therewith. No product or service sold, rented, leased, provided or
delivered by the Company to customers on or prior to the Closing is subject to
any guaranty, warranty or other indemnity beyond the applicable standard terms
and conditions of sale, rent or lease. The Company has no Liability and there
is no basis for any Liability arising out of any injury to a Person or property
as a result of the ownership, possession, provision or use of any product or
service sold, rented, leased, provided or delivered by the Company on or prior
to the Closing Date. All product or service liability claims that have been
asserted against the Company since January 1, 1992, whether covered by
insurance or not and whether litigation has resulted or not, other than those
listed and summarized on Exhibit 3.1(i)(i), are listed and summarized on
Exhibit 3.1(k).
(l) Insurance. The Company has policies of insurance (i)
covering risk of loss on its Acquired Assets, (ii) covering products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption, all, to the
best knowledge of the Shareholders and Eide, with responsible and financially
sound insurance carriers in adequate amounts and in compliance with
governmental requirements and in accordance with good industry practice. All
such insurance policies are valid, in full force and effect and enforceable in
accordance with their respective terms and no party has repudiated any
provision thereof. All such policies will remain in full force and effect
until the Closing Date. Neither the Company nor any other party to any such
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving
of notice or the lapse of time or both, would constitute a breach, default or
event of default, or permit termination, modification or acceleration under any
such policy. There are no claims, actions, proceedings or suits arising out of
or based upon any of such policies nor, to the best knowledge of the
Shareholders and Eide, does any basis for any such claim, action, suit or
proceeding exist. All premiums have been paid on such policies as of the date
of this Agreement and will be paid on such policies through the Closing Date.
The Company has been covered during the five years prior to the date of this
Agreement by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. All
claims made during such five-year period with respect to any insurance coverage
of the Company, other than those described on Exhibit 3.1(k), are set forth on
Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters.
(i) Exhibit 3.1(m) lists each Employee Benefit Plan
that: (A) is subject to any provision of ERISA; (B) is maintained,
administered or contributed to by the Company; (C) covers any employee or
former employee of the Company; or (D) under which the Company has any
liability to make contributions or pay benefits. Copies of all
- 7 -
<PAGE> 12
such plans, summary plan descriptions, annual reports, summary annual reports,
plan administrative records and financial records, correspondence and, if
applicable, related trust agreements, and all amendments and written
interpretations of such plans have been delivered by the Shareholders and Eide
to the Buyer and attached hereto as part of Exhibit 3.1(m), together with the
three most recent annual reports (Form 5500 including Schedule B if applicable)
prepared in connection with each such plan required to file an annual report.
Such plans are hereinafter referred to collectively as the "Company Employee
Benefit Plans."
(ii) Each Company Employee Benefit Plan has been
maintained and administered in substantial compliance with its terms and with
the requirements prescribed by any and all Legal Requirements that are
applicable to such Company Employee Benefit Plan.
(iii) The only Company Employee Benefit Plans that
individually or collectively would constitute Employee Pension Benefit Plans
(the "Retirement Plans") are identified in Exhibit 3.1(m) as the "Retirement
Plans."
(iv) Exhibit 3.1(m) lists each employment, severance
or other similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, deferred
compensation, profit sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation, reduced interest or interest free
loans, mortgages, relocation assistance or post-retirement insurance,
compensation or other benefits that: (A) is not an Employee Benefit Plan; (B)
is entered into, maintained or contributed to, by the Company; and (C) covers
any employee or former employee of the Company. Such contracts, plans and
arrangements as are described in this Section 3.1(m)(ix), are hereinafter
referred to collectively as the "Benefit Arrangements." Copies and
descriptions (including descriptions of the number and employment
classifications of employees covered by each such Benefit Arrangement) have
been delivered by the Shareholders and Eide to the Buyer and attached hereto as
part of Exhibit 3.1(m). Each Benefit Arrangement has been maintained and
administered in substantial compliance with its terms and with the requirements
prescribed by any and all Legal Requirements that are applicable to each such
Benefit Arrangement.
(v) Except as set forth in any Employee Benefit Plan
or Benefit Arrangement identified in Exhibit 3.1(m) and except as provided by
Legal Requirement or any collective bargaining agreement or any employment
contract identified on Exhibit 3.1(m), the employment of all persons presently
employed or retained by the Company is terminable at will.
(vi) No Company Employee Benefit Plan is maintained in
connection with any trust described in Section 501(c)(9) of the Code. Any
assets of any Company Employee Benefit Plan that are subject to the trust
requirement of ERISA Section 403 are held in trust in compliance with ERISA
Section 403.
(vii) Each Retirement Plan that is intended to be
Qualified within the meaning of Section 401(a) of the Code ("Qualified") is so
Qualified, has been so Qualified during the period from its adoption to date,
has been administered in a manner that would not adversely affect its Qualified
status and has received a currently effective determination letter from the
Internal Revenue Service that the Plan is (or continues to be) currently
Qualified for federal income tax purposes and shall be terminated by action of
the Board of the Company on or before the Closing Date. The Shareholders and
Eide have delivered to the Buyer copies of such determination letters and
termination Resolutions, and copies thereof have been attached hereto as part
of Exhibit 3.1(m). Each trust in which Retirement Plan assets are held is
exempt from tax pursuant to Section 501(a) of the Code.
(viii) There have been no prohibited transactions with
respect to any such Company Employee Benefit Plan. No "Fiduciary" (as defined
in Section 3(21) of ERISA) has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the administration or
investment of the assets of any such Company Employee Benefit Plan. No action,
suit, proceeding, hearing or investigation with respect to the administration
or the investment of the assets of any such Company Employee Benefit Plan
(other than routine claims for benefits) is pending or, to the best knowledge
of the Shareholders and Eide is threatened. None of the Shareholders or Eide
has any knowledge of any basis for any such action, suit, proceeding, hearing
or investigation.
- 8 -
<PAGE> 13
(ix) No condition exists that would prevent the
Company from amending or terminating any Company Employee Benefit Plan or
Benefit Arrangement providing health or medical benefits in respect of any
active or retired employees of the Company.
(x) Each Company Employee Benefit Plan and Benefit
Arrangement has been maintained and administered in compliance with its terms
and with the requirements prescribed by any and all Legal Requirements,
including but not limited to ERISA and the Code, that are applicable to such
Plans. Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection with any Company Employee Benefit Plan or Benefit
Arrangement has or will make the Company or any officer or director of the
Company subject to any Liability under Title I of ERISA or any Liability for
any Tax under Section 4972 or Section 4975 through 4980B, inclusive, of the
Code.
(xi) Any Company Employee Benefit Plan that is a
"group health plan" (as defined in Code Section 5000(b)(l)) has been
administered in accordance with the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and nothing done or omitted to be done
in connection with maintenance or administration of any Company Employee
Benefit Plan that is a "group health plan" has or will make the Company subject
to any liability under Title I of ERISA, excise Tax Liability under Code
Section 4980B or has or will result in any loss of income exclusion for a
participant under Code Sections 105(h) or 106.
(xii) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G or 162(a)(l) of
the Code.
(xiii) The Company has made, before the date of this
Agreement, all required contributions and premium payments under each Company
Employee Benefit Plan and Benefit Arrangement for all completed payroll
periods. The employer and employee contributions to any Retirement Plan for
any payroll period completed on or before the Closing Date will have been made
on or before the Closing Date.
(xiv) Except as disclosed in Exhibit 3.1(m), there has
not been with respect to the Company's active or retired employees, nor will
be, as of the Closing Date, any amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change in
employee participation or coverage under, any Company Employee Benefit Plan or
Benefit Arrangement that would increase the expense of maintaining or funding
benefits under such Company Employee Benefit Plan or Benefit Arrangement above
the level of the expense incurred in respect thereof for the fiscal year ended
on December 31, 1996.
(xv) The Buyer will have no obligation to employ any
employee of the Company or to continue any Company Employee Benefit Plan, and
will have no Liability under any plan or arrangement maintained by the Company
for the benefit of any employee other than the Company's group health plan.
The Company will terminate all Company Employee Benefit Plans and any
Retirement Plan prior to the Closing Date other than the Company's group health
insurance plan, group life insurance plan, group dental insurance plan and
group vision service plan.
(n) Employees and Labor. The Company has not received any
notice, nor, to the best knowledge of the Shareholders and Eide, is there any
reason to believe that any executive or key employee of the Company or any
group of employees of the Company has any plans to terminate his, her or its
employment with the Company. No executive or key employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Company prior to the Closing Date and, if such
person becomes an employee of the Buyer, to the affairs of the Buyer after the
Closing Date. The Company will not be required to give any notice under the
Worker Adjustment and Retraining Notification Act, as amended, or any similar
Legal Requirement as a result of this Agreement, the Other Seller Agreements or
the transactions contemplated hereby or thereby. The Company does not have any
labor relations problems or disputes, nor has the Company experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Company's facilities, and no union organization effort has been threatened,
initiated or is in progress with respect to any employees of the Company.
- 9 -
<PAGE> 14
(o) Customer and Supplier Relationships. Exhibit 3.1(o)(i)
lists each customer that individually or with its affiliates accounted for 5%
or more of the Company's sales, rental or lease revenues during either the
fiscal year ended December 31, 1996 or the two-month period ended February 28,
1997 (the "Principal Customers"). Exhibit 3.1(o)(ii) lists each supplier that
individually or with its affiliates accounted for 5% or more of the Company's
purchases of inventory or supplies during either the fiscal year ended December
31, 1996 or the two-month period ended February 28, 1997 (the "Principal
Suppliers"). The Company has good commercial working relationships with its
Principal Customers and Principal Suppliers and since January 1, 1996, no
Principal Customer or Principal Supplier has cancelled or otherwise terminated
its relationship with the Company, materially decreased or limited its
purchases, rentals or leases from, or inventory or supplies supplied to, the
Company, or threatened to take any such action. Neither the Shareholders nor
Eide have any basis to anticipate any problems with the Company's customer,
supplier or business relationships. To the best knowledge of the Shareholders
and Eide, no Principal Customer or Principal Supplier has any plans to reduce
its purchases, rentals or leases from, or inventory or supplies supplied to,
the Company below levels prevailing since December 31, 1996, and the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not adversely affect the relationship of the Company
with any Principal Customer or Principal Supplier prior to the Closing Date or
of the Buyer with any Principal Customer or Principal Supplier after the
Closing Date.
(p) Resale Inventory. The resale inventory of the Company
consists of goods which, in the aggregate, are merchantable, are fit for the
purposes for which they were procured and are held by the Company, are usable
in the ordinary course of the Company's business and are not obsolete.
(q) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Company consists of machinery, equipment and
other tangible personal property which are merchantable, are fit and suitable
for the purpose for which they were procured and are held by the Company,
useable in the ordinary course of the Company's business and are not obsolete.
All of the machinery, equipment and other tangible personal property included
in the Acquired Assets (including that held for rental, lease or sale) has been
well maintained and is in good repair and good operating condition. None of
the machinery, equipment or other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) is damaged or
defective, normal wear and tear excepted, the Company has not experienced
material problems or deficiencies with respect to its machinery, equipment and
other tangible personal property, and, to the best knowledge of the
Shareholders and Eide, there is no basis to anticipate any such problems or
deficiencies.
(r) Environmental Matters.
(i) The Company is conducting and at all times has
conducted its business and operations, and has occupied, used and operated the
Premises and all other real property and facilities presently or previously
owned, occupied, used or operated by the Company, in compliance with all
Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on the Company's business or
activities. Neither the Shareholders nor Eide have any knowledge of pending or
proposed changes to any Environmental Obligations which would require any
changes in any of the Company's Premises, facilities, equipment, operations or
procedures or affect the Company's business or its cost of conducting its
business as now conducted.
(ii) No conditions, circumstances or activities have
existed or currently exist, and neither the Company, Eide nor any Shareholder
has engaged in any acts or omissions, with respect to the Premises or any other
real properties, facilities or business presently or previously owned,
occupied, used or operated by the Company or any predecessor (including,
without limitation, off-site disposal or treatment of Hazardous Materials)
which could give rise to any Liability pursuant to any Environmental
Obligation. Exhibit 3.1(r)(ii) identifies all real properties and facilities,
including the addresses thereof, which have been owned, occupied, used or
operated by the Company or its predecessors at any time on or prior to the date
of this Agreement. There are no outstanding, pending or threatened Orders
against the Company, Eide or any Shareholder, nor are there any current,
pending or threatened investigations of any kind against the Company, Eide or
any Shareholder, concerning any Environmental Obligations. There are no
actions, suits or administrative, arbitral or other proceedings alleged,
claimed, threatened, pending against or affecting the Company, Eide or any
Shareholder at law or in equity with respect to any Environmental Obligations,
and no Shareholder or Eide has any knowledge of any existing grounds on which
any such action, suit or proceedings might be commenced.
- 10 -
<PAGE> 15
(iii) Any chemicals and chemical compounds and mixtures
which are included among the assets of the Company are integral to and required
for the conduct of the Company's business, have not been and are not intended
to be discarded or abandoned, and are not waste or waste materials. Except as
set forth in the environmental studies attached as Exhibit 3.1(r)(iii)
(collectively, the "Environmental Study"), the Company has not generated,
handled, used, transported or disposed of Hazardous Materials. All waste
materials which are generated as part of the business of the Company are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental Study,
no underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any facilities presently or previously
owned, occupied, used or operated by the Company or any predecessor. Except as
set forth in the Environmental Study, neither any of the Premises nor any other
real properties or facilities presently or previously owned, occupied, used or
operated by the Company or any predecessor has been used at any time as a
gasoline service station or any facility for storing, pumping, dispensing or
producing gasoline or any other petroleum products (other than such storage,
pumping and dispensing of fuels and lubricants as is incidental to the
Company's equipment rental/leasing business) or Hazardous Materials. No
building or other structure on any of the Premises contains asbestos-containing
materials. There are not nor have there been any incinerators, septic tanks,
leach fields, cesspools or wells (including without limitation dry, drinking,
industrial, agricultural and monitoring wells) on any of the Premises, except
as set forth in the Environmental Study.
(s) Intellectual Property. The Company owns or has the legal
right to use and to transfer to the Buyer each item of Intellectual Property
required to be identified on Exhibit 3.1(h)(ii). The continued operation of
the business of the Company as currently conducted will not interfere with,
infringe upon, misappropriate or conflict with any Intellectual Property rights
of another Person. To the best knowledge of the Shareholders and Eide, no
other Person has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property rights of the Company or any
Intellectual Property included in the Shareholder Property. Neither the
Company nor any owner of any Intellectual Property included in the Shareholder
Property has granted any license, sublicense or permission with respect to any
Intellectual Property owned or used in the Company's business.
(t) Disclosure. None of the documents or information provided
to the Buyer by the Company, any Shareholder, Eide or any agent or employee
thereof in the course of the Buyer's due diligence investigation and the
negotiation of this Agreement and Section 3.1 of this Agreement and the
disclosure Exhibits referred to therein, including the financial statements
referred to above in Section 3.1, contain any untrue statement of any material
fact or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact which materially
adversely affects the business, prospects, condition, affairs or operations of
the Company or any of its properties or assets which has not been set forth in
this Agreement or such Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Shareholders and Eide acknowledge and agree that the
fact that they have made disclosures pursuant to Section 3.1 or otherwise of
matters, or did not have knowledge of matters, which result in Adverse
Consequences to the Buyer shall not relieve the Shareholders and Eide of their
obligation pursuant to Article 7 to indemnify and hold the Buyer harmless from
all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Shareholders and Eide that the statements contained in this
Section 3.2 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other Buyer Agreements
and the transactions contemplated hereby and thereby have been duly approved by
all requisite corporate action. The Buyer
- 11 -
<PAGE> 16
has full corporate power and authority to execute, deliver and perform this
Agreement and the Other Buyer Agreements, and this Agreement constitutes, and
the Other Buyer Agreements will when executed and delivered constitute, the
legal, valid and binding obligations of the Buyer, and shall be enforceable in
accordance with their respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery
and performance of this Agreement and the Other Buyer Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Buyer is subject or any provision of
the certificate of incorporation or bylaws of the Buyer or (ii) violate, with
or without the giving of notice or the lapse of time or both, or conflict with
or result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Buyer pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Buyer is a party or which the Buyer or any of its assets and properties is
bound or subject. Except for notices and consents that will be given or
obtained by the Buyer prior to the Closing, the Buyer does not need to give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that the Liabilities of the
Shareholders and Eide with respect to the representations and warranties set
forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(d)(ii), 3.1(f), 3.1(g), 3.1(m),
3.1(r), 3.1(s) and 3.1(t), and the Liabilities of the Buyer with respect to the
representations and warranties set forth in Sections 3.2(a) and 3.2(b), shall
survive without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation (including, in the case of the
Shareholders, inquiry of the applicable employees of the Company), with due
diligence, to the best efforts of such party and be exercised always in a
reasonable manner and within reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to take
all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders and Eide will, and will cause the Company to, give
any notices, make any filings and obtain any consents, authorizations or
approvals needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Shareholders will not
cause or permit the Company to engage in any practice, take any action or enter
into any transaction outside its ordinary course of business; provided,
however, that in no event will any action be taken or fail to be taken or any
transaction be entered into which would result in a breach of any
representation, warranty or covenant of Eide or any Shareholder. The
Shareholders will cause the Company to keep its business and properties,
including its current operations, physical facilities, working conditions, and
relationships with customers, suppliers, lessors, licensors and employees,
intact and, in connection therewith, to continue to purchase new or used
equipment necessary to maintain its rental/lease inventory at the level
specified in Section 3.1(e)(x).
4.3. Acquisitions and Dispositions of Rental Equipment. From the date
of this Agreement through the Closing Date, the Company may purchase new or
used rental or lease equipment for use in the growth and expansion of its
business ("New Rental Equipment;" provided, however, that the term New Rental
Equipment shall not include any new or used rental or lease equipment acquired
to maintain the Seller's business) or may sell (but only for cash) rental or
lease
- 12 -
<PAGE> 17
equipment owned by the Company on or after January 1, 1997 ("Current Rental
Equipment"), but may not otherwise sell, trade, transfer or dispose of any
Current Rental Equipment; provided, however, that between the date of this
Agreement and the Closing Date, no New Rental Equipment shall be purchased and
no Current Rental Equipment shall be sold without the express prior written
approval of an officer of the Buyer and without the Shareholders' Agent and an
officer of the Buyer expressly agreeing on the amount by which the purchase
price payable pursuant to Section 2.2(a) shall be increased in respect of such
New Rental Equipment purchases ("New Rental Equipment Increases") and the
amount by which the purchase price payable pursuant to Section 2.2(a) shall be
decreased in respect of such Current Rental Equipment sales ("Current Rental
Equipment Decreases"). Exhibit 4.3 sets forth (a) New Rental Equipment
Increases with respect to New Rental Equipment purchased between February 6,
1997 and the date of this Agreement and (b) Current Rental Equipment Decreases
with respect to Current Rental Equipment sold between January 1, 1997 and the
date of this Agreement, as agreed by the Shareholders' Agent and an officer of
the Buyer. If any New Rental Equipment purchases or Current Rental Equipment
sales occur after the date hereof and before the Closing Date, Exhibit 4.3
shall be amended to reflect any agreed upon New Rental Equipment Increases and
Current Rental Equipment Decreases relating thereto.
4.4. Full Access. The Shareholders will cause the Company to permit
the Buyer and its agents to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of the
Company, to all premises, properties, personnel, books, records (including Tax
records), contracts and documents of or pertaining to the Company.
4.5. Notice of Developments. The Shareholders and Eide will give
prompt written notice to the Buyer of any material development which occurs
after the date of this Agreement and affects the business, assets, Liabilities,
financial condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Company.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.6. Exclusivity. Neither the Shareholders nor Eide will, and the
Shareholders will not cause or permit the Company to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any portion
of the assets of, the Company (including any acquisition structured as a
merger, consolidation or share exchange) or (b) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Neither Eide nor any Shareholder
will vote shares of the Company's stock in favor of any such transaction. The
Shareholders and Eide will notify the Buyer immediately if the Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
4.7. Conveyance of Shareholder Property. Prior to the Closing Date,
the Shareholders and Eide shall convey, and shall cause each relative or
affiliate of the Company, Eide or of any Shareholder to convey, to the Company,
free and clear of any Encumbrance or Tax, all of each Shareholder's, Eide's and
each such relative's or affiliate's right, title and interest to the
Shareholder Property.
4.8. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
4.9. Closing Date Liabilities and Distribution. (a) Prior to the
Closing Date or concurrently with the Closing, the Shareholders and Eide shall
pay, or shall cause the Company to pay prior to the Closing Date as permitted
by Section 9.10, in full all known Closing Date Liabilities, the amount of
which is then ascertainable (including Seller Transaction Expenses as permitted
pursuant to Section 9.10). Following the Closing, the Shareholders and Eide
shall promptly pay in full all other Closing Date Liabilities. Effective as of
immediately prior to the Closing Date, the Shareholders and Eide hereby jointly
and severally assume all Closing Date Liabilities without further action by the
Company or any other Person.
(b) Prior to the Closing Date, the Shareholders shall cause
the Company to distribute to the Shareholders or other appropriate Person the
Excluded Assets (the "Pre-Closing Date Distribution"). Any and all Taxes
attributable to such distribution of Excluded Assets and to any prior
distribution or dividend of assets, including, without limitation, any
recognition by the Company of taxable income or gain with respect to the
distribution or dividend of the
- 13 -
<PAGE> 18
Excluded Assets or any prior distribution or dividend of assets, shall be paid
in full by the Shareholders and Eide and neither the Company nor the Buyer
shall not have any Liability with respect thereto.
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Each of the Shareholders and Eide will assist with
the transition of the Company's business to the Buyer during the first six
months following the Closing at no cost to the Buyer, provided however that
Irwin R. Scott shall be permitted to use the administrative offices and
personnel of the Company to assist with such transition during such six-month
period to the extent such use is reasonable and does not interfere with Buyer's
operations. Neither Eide nor any Shareholder will take any action at any time
that is designed or intended to have the effect of discouraging any customer,
supplier, lessor, licensor or other business associate of the Company from
establishing or continuing a business relationship with the Buyer after the
Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Company's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7). The Buyer shall give prior notice
to the Shareholders and Eide of its intent to destroy any records of the
Company relating to matters existing prior to Closing. If the Shareholders or
Eide notify the Company within five days of receipt of the Company's notice
that they request delivery of such records, the Company will deliver such
records to the requesting party.
5.4. Confidentiality. The Shareholders and Eide will treat and hold as
confidential all Confidential Information concerning the Buyer, the Company's
business or the Acquired Assets, refrain from using any such Confidential
Information and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all of such Confidential Information in its or their
possession.
5.5. Post-Closing Announcements. Following the Closing, neither Eide
nor any Shareholder will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer.
5.6. Financial Statements. The Seller, Eide and the Shareholders will,
upon request of the Buyer, cooperate with the Buyer to produce such historical
and on-going financial statements and audits as the Buyer may request, all at
the sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities. Promptly following the Closing, the
Shareholders and Eide will pay and perform all Closing Date Liabilities, all
Taxes attributable to the transactions contemplated by this Agreement and all
accrued vacation and other accrued employee benefits; provided, however, that
accrued vacation and other accrued employee benefits with respect to those
persons who are employees of the Company as of immediately prior to the Closing
Date and who become employees of the Buyer effective as of the Closing will be
satisfied as set forth in Section 2.2(b). In addition, the Buyer will pay an
amount equal to the portion of the personal property taxes of the Company
attributable to the period from the Closing Date to June 30, 1997 (the
"Personal Property Tax Amount"). The Personal Property Tax Amount payable by
the Buyer will be determined by prorating personal property taxes of the
Company for the year beginning July 1, 1996 in proportion to the number of days
in that year prior to the Closing Date compared to the number of days in the
year remaining after the date on which the Closing occurs. Further, the
Shareholders and Eide, at their expense, promptly will take or cause to be
taken any action necessary to remedy any failure of the Premises or the
acquired
- 14 -
<PAGE> 19
business to comply at the Closing Date with any Legal Requirement, upon receipt
of notice from the Buyer at any time. The Buyer will pay and perform, as and
when due (except to the extent the validity thereof or the liability therefor
is being contested by the Buyer), the Retained Liabilities.
5.8. Certain Environmental Matters. Within 120 days of the Closing
Date, the Buyer will purchase and install wash water filtration systems at each
of the four store locations acquired by the Buyer from the Company. The cost
of such purchase and installation shall be paid as follows: 50% by the Buyer
and 50% by the Shareholders and Eide collectively. Prior to commencing such
installation the Buyer will provide the plans for such installation to the
Shareholders and Eide. Nothing in this Section 5.8 shall relieve any
Shareholder or Eide from any obligation or Liability under Section 7 of this
Agreement, obligate the Buyer to take any action or impose any Liability on the
Buyer.
5.9. Repurchase of Unpaid Receivables. The Shareholders and Eide
jointly and severally guarantee that 91.5% of the Closing Accounts Receivable
will be fully paid to the Buyer in accordance with their terms at their
recorded amounts not later than 120 days from the Closing Date. Upon demand by
the Buyer at any time after 120 days from the Closing Date, the Shareholders
and Eide shall jointly and severally pay to the Buyer the full amount of any
unpaid Closing Accounts Receivables which are the subject of such demand. Upon
such payment to the Buyer, the Closing Accounts Receivable which are so paid
for by the Shareholders or Eide shall, without further action of any party,
become the property of the Shareholders and Eide.
5.10. Termination of Obligations. Effective as of the Closing Date,
neither the Company nor the Buyer shall have any Liability to any Shareholder,
Eide or any relative or affiliate thereof or of the Company, except as
otherwise provided in this Agreement, the Employment Agreement, the Escrow
Agreement, the Noncompetition Agreement and the Shareholder Leases. Effective
as of the Closing Date, neither the Shareholders nor Eide shall have any
Liability to the Company or the Buyer, except as otherwise provided in this
Agreement, the Employment Agreement, the Escrow Agreement, the Noncompetition
Agreement and the Shareholder Leases.
5.11. Use of Proprietary Software. Effective as of the Closing Date,
the Shareholders hereby grant the Buyer a perpetual license to use the
Proprietary Software in connection with the Buyer's business. The Buyer shall
not be required to pay any amount to the Shareholders in respect of such
license.
5.12. Medical Benefits. For the period beginning on the Closing Date
and ending on the date which is five years after the Closing Date, the Buyer
shall provide medical coverage to each of Irwin R. Scott and Carol J. Scott
pursuant to the medical coverage plans in effect from time to time for
employees of the Buyer (the "Medical Plans"), to the extent the terms of such
Medical Plans so permit and provided that Irwin R. Scott and Carol J. Scott (i)
have requested continuous coverage pursuant to such plans and (ii) promptly
reimburse the Buyer in full for the total cost incurred by the Buyer in
providing such coverage. If the Medical Plans do not permit the Buyer to
provide such medical coverage to any of the above-referenced persons, the Buyer
shall not have any obligation to provide medical coverage to such person.
Further, the obligations of the Buyer pursuant to this Section 5.12 shall not
require the Buyer to "self-insure" or have any particular medical coverage
plan. The term "total cost" as used in this Section shall include all costs
and expenses incurred by the Buyer in providing such coverage, including,
without limitation, any increase in insurance premiums and costs associated
with the impact that inclusion of any of the above-referenced persons may have
on the Buyer's "risk pool" or "experience rating."
5.13. Use of Certain Assets. Until the fifth anniversary of the Closing
Date, Irwin R. Scott may use the Buyer's rental equipment located at its
equipment rental stores formerly operated by the Company for his personal use
at his home in Concord, California, to the extent the rental equipment
requested by Mr. Scott is not needed by the Buyer for rental to its customers.
Such use by Mr. Scott will be subject to the Buyer's standard rental terms and
conditions, except that Mr. Scott will not be charged any rental fee or
required to make any security deposit.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions contemplated by this Agreement is subject
to satisfaction of the following conditions:
- 15 -
<PAGE> 20
(a) the representations and warranties of each Shareholder and
Eide shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to the Buyer pursuant to Section 4.5
and the subject matter thereof shall be satisfactory to the Buyer;
(b) the Shareholders and Eide shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) the Shareholders and Eide shall have given, or shall have
caused the Company to give, all notices and procured, or shall have caused the
Company to procure, all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement (including the merger described in Section 3.1(c)(ii)), all in form
and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Shares or the Acquired Assets and
conduct the business represented by the Acquired Assets, and no such Order
shall be in effect;
(e) there shall have been no adverse change in the Company,
the Acquired Assets or the Company's business between the date of execution of
this Agreement and the Closing;
(f) the Shareholders and Eide shall have delivered to the
Buyer (i) a certificate to the effect that each of the conditions specified
above in Sections 6.1(a) through (e) is satisfied in all respects, (ii) a good
standing certificate, dated within 10 days of the Closing, from the Secretary
of State of the State of the Company's jurisdiction of incorporation and each
other state in which the Company is qualified or authorized to do business as a
foreign corporation and (iii) a Tax Clearance Certificate issued to the Company
by the State of California for use by the Buyer in connection with the merger
immediately following the Closing of the Company into the Buyer;
(g) the Buyer shall have completed its due diligence with
respect to the Company, the Company's business and the Acquired Assets with
results satisfactory to the Buyer.
(h) the Other Seller Agreements shall have been executed and
delivered by the Shareholders and Eide, as applicable;
(i) the Premises Leases shall have been executed and delivered
by the parties thereto and the owners of the real property underlying the
Premises Leases, and each Person having an Encumbrance on such property, shall
have executed and delivered estoppel, nondisturbance and landlord waiver
agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the
Shareholders an opinion in form and substance as set forth in Exhibit 6.1(j)
addressed to the Buyer and its debt and equity financing sources and dated as
of the Closing;
(k) the Buyer shall have received from counsel to Eide an
opinion in form and substance as set forth in Exhibit 6.1(k) addressed to the
Buyer and its debt and equity financing sources and dated as of the Closing;
(l) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(m) a "Phase I" environmental study of each of the properties
comprising the Premises, and such additional environmental testing as the Buyer
shall request, shall have been completed at the Shareholders' and Eide's
expense and supplied to the Buyer, and the contents and results thereof shall
be satisfactory to the Buyer;
(n) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Company;
- 16 -
<PAGE> 21
(o) stock certificates representing the Shares, duly endorsed
in blank or accompanied by stock powers duly executed in blank, shall have been
delivered by the Shareholders to the Buyer;
(p) the Shareholders and Eide shall have delivered to the
Buyer possession and control of the Company and the Acquired Assets, including,
without limitation, all stock certificate books, minute books, corporate seals,
and all other corporate and financial records of the Company;
(q) the Buy and Sell Agreement entered into between Irwin R.
Scott and Jeffrey A. Eide on December 12, 1986, as amended, shall have been
terminated and evidence of such termination shall have been delivered to the
Buyer;
(r) the Shareholders and Eide shall have delivered, or caused
the Company to deliver, to the Buyer such other instruments, certificates and
documents as are reasonably requested by the Buyer in order to consummate the
transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Shareholders and Eide. The
obligation of the Shareholders and Eide to consummate transactions contemplated
by this Agreement is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Shareholders and
Eide a certificate to the effect that each of the conditions specified above in
Sections 6.2(a) and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed and
delivered by the Buyer;
(e) the Shareholders and Eide shall have received from counsel
to the Buyer an opinion in form and substance as set forth in Exhibit 6.2(e),
addressed to the Shareholders and Eide and dated as of the Closing; and
(f) the Buyer shall have paid and deposited the purchase price
for the Shares pursuant to Section 2.2.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer and the
Company.
(a) If any Shareholder or Eide breaches (or if any Person
other than the Buyer alleges facts that, if true, would mean any Shareholder or
Eide has breached) any of the representations or warranties of any Shareholder
or Eide contained herein and the Buyer gives notice thereof to the
Shareholders' Agent within the Survival Period, or if any Shareholder or Eide
breaches (or if any Person other than the Buyer alleges facts that, if true,
would mean any Shareholder or Eide has breached) any covenants of any
Shareholder or Eide contained herein or any representations, warranties or
covenants of any Shareholder or Eide contained in any Other Seller Agreement
and the Buyer gives notice thereof to the Shareholders' Agent, then the
Shareholders and Eide agree to jointly and severally indemnify and hold
harmless the Buyer from and against any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to or caused by any of the
foregoing regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.1 and in determining for
purposes of the preceding sentence the amount of Adverse Consequences suffered
by the Buyer, such representations and warranties shall not be qualified (other
than by (A) the reference to "knowledge" set forth in the last sentence of
- 17 -
<PAGE> 22
Section 3.1(o) and (B) the references to "material" set forth in
Section 3.1(t)) by "material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of similar import, or
by any phrase using any such terms or words. The Shareholders and Eide also
agree to jointly and severally indemnify and hold harmless the Buyer from and
against any Adverse Consequences the Buyer may suffer which result from, arise
out of, relate to or are caused by (i) any Liability of the Company, any
Shareholder or Eide not included in the Retained Liabilities (including,
without limitation, those concerning Hazardous Materials or the failure prior
to the Closing Date of the Company, any Shareholder, or Eide or any predecessor
to comply with any Environmental Obligation or other Legal Requirement), (ii)
any condition, circumstance or activity existing prior to the Closing Date on,
in or under any of the Premises which relates to any Environmental Obligation
or any act or omission of the Company, any Shareholder, or Eide or any
predecessor with respect to, or any event or circumstance related to, the
Company's, any Shareholder's, Eide's or any predecessor's ownership,
occupation, use or operation of any of the Acquired Assets, the Excluded
Assets, the Premises or any other assets or properties or the conduct of its or
their business, regardless, in the case of (i) or (ii), of (A) whether or not
such Liability, act, omission, event, circumstance or matter was known or
disclosed to the Buyer, was disclosed on any Exhibit hereto or is a matter with
respect to which any Shareholder or Eide did or did not have knowledge, (B)
when such Liability, act, omission, event, circumstance or matter occurred,
existed, occurs or exists and (C) whether a claim with respect thereto was
asserted before or is asserted after the Closing Date, and (iii) any Liability
resulting from any failure of the parties to comply with any applicable bulk
sales or transfer Legal Requirement in connection with the transactions
contemplated by this Agreement. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against any Shareholder or Eide during the
Escrow Period will be paid to the Buyer first out of the funds escrowed
pursuant to the Escrow Agreement, along with interest from the date of the
Closing at the rate applicable to the escrowed funds. The Shareholders and
Eide will have joint and several Liability for any additional amounts needed to
cover such claims, which amounts will be paid directly to the Buyer. At the
end of the Escrow Period amounts that may be needed to cover pending
indemnification claims made by the Buyer (such amounts to be determined by the
Buyer based upon the reasonable exercise of its business judgment) will be
retained in the Escrow Account until such claims are resolved, and any excess
on deposit therein, including any accrued interest, will be paid to the
Shareholders. Nothing in this Section 7.1(b) will be construed to limit the
Buyer's right to indemnification to amounts on deposit in the Escrow Account.
The Buyer and the Shareholders' Agent shall jointly give instructions to the
Escrow Agent to carry out the intent of this Section 7.1(b). Any disputes
concerning the escrowed funds will be settled by arbitration as provided in
this Agreement. The Buyer, on the one hand, and the Shareholders jointly and
severally, on the other hand, shall each be responsible for one-half of the
fees, charges and expenses payable to the Escrow Agent pursuant to paragraph a.
of Article 2 of the Escrow Agreement and, except as otherwise determined
pursuant to Section 9.11 of this Agreement, one-half of any amounts payable
pursuant to paragraph b. of such Article 2.
7.2. Indemnification Provisions for Benefit of the Shareholders and
Eide. If the Buyer breaches (or if any Person other than a Shareholder or Eide
alleges facts that, if true, would mean the Buyer has breached) any of its
representations or warranties contained herein and the Shareholders' Agent
gives notice of a claim for indemnification against the Buyer within the
Survival Period, or if the Buyer breaches (or if any Person other than a
Shareholder or Eide alleges facts that, if true, would mean the Buyer has
breached) any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other Buyer Agreement and the
Shareholders' Agent gives notice thereof to the Buyer, then the Buyer agrees to
indemnify and hold harmless the Shareholders and Eide from and against any
Adverse Consequences the Shareholders or Eide may suffer which result from,
arise out of, relate to, or are caused by the breach or alleged breach,
regardless of whether the Adverse Consequences are suffered during or after the
Survival Period. In determining whether there has been a breach of any
representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Shareholders and Eide for
purposes of this Section, such representations and warranties shall not be
qualified by "material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of similar import, or
by any phrase using any such terms or words. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the parties within 30 days of notice of claim for indemnification from
the party claiming indemnification to the party against whom such claim is
asserted, the dispute will be resolved by arbitration pursuant to this
Agreement.
- 18 -
<PAGE> 23
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including,
without limitation, any Governmental Authority) notifies any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to any Shareholder, Eide or any
relative or affiliate of Eide or any Shareholder at or after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
- 19 -
<PAGE> 24
(b) the Buyer may terminate this Agreement by giving written
notice to the Shareholders' Agent at any time prior to the Closing (i) in the
event Eide or any Shareholder has breached any representation, warranty or
covenant contained in this Agreement in any material way, the Buyer has
notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before May 31, 1997 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (i) if the
Buyer has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Shareholders' Agent has notified the Buyer
of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before May 31,
1997 because of the failure of any condition precedent to the Shareholders' and
Eide's obligations to consummate the Closing (unless the failure results
primarily from any Shareholder or Eide breaching any representation, warranty
or covenant contained in this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither Eide nor any Shareholder may assign this Agreement
or any of his or her rights, interests or obligations hereunder without the
prior written approval of the Buyer. The Buyer may assign its rights and
obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
- 20 -
<PAGE> 25
If to Eide or any Shareholder: Copy to:
Addressed to the Youngman & Ericsson
Shareholders' Agent at: 1981 North Broadway, Suite 300
P.O. Box 5293
985 Whitman Lane Walnut Creek, California 94596
Concord, California 94518 Attn: Mark S. Ericsson
Telecopy: (510) 825-2077 Telecopy: (510) 934-5377
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Richard M. Tyler Attn: Steven D. Miller
Telecopy: (303) 620-9016 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Shareholders and Eide will bear all costs and expenses
(including, without limitation, all legal, accounting and tax related fees and
expenses, all fees, commissions, expenses and other amounts payable to any
broker, finder or agent and the costs of any environmental study and additional
environmental testing contemplated by Section 6.1) incurred by the Company
prior to the Closing or by Eide or any Shareholder either before or after the
date of this Agreement in connection with this Agreement or the transactions
contemplated hereby (collectively, "Seller Transaction Expenses"); provided,
however, that prior to the Closing Date the Company may use any cash that would
otherwise be an Excluded Asset to pay Seller Transaction Expenses.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS
- 21 -
<PAGE> 26
AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. No claim or claims shall be submitted to arbitration
as provided herein unless (a) the aggregate amount of such claim or claims
equals or exceeds $10,000, including, without limitation, any and all
counterclaims, ancillary claims or additional claims incorporated in such
arbitration proceeding, or (b) the claim is for specific performance or other
equitable relief. The arbitration will be conducted only in Denver, Colorado,
before a single arbitrator selected by the parties or, if they are unable to
agree on an arbitrator, before a panel of three arbitrators, one selected by
the Buyer, one selected by the Shareholders' Agent and the third selected by
the other two arbitrators. The arbitrators shall have full authority to order
specific performance and award damages and other relief available under this
Agreement or applicable law, but shall have no authority to add to, detract
from, change or amend the terms of this Agreement or existing law. All
arbitration proceedings, including settlements and awards, shall be
confidential. The decision of the arbitrators will be final and binding, and
judgment on the award by the arbitrators may be entered in any court of
competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE
SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Shareholders' Agent. Each Shareholder and Eide hereby authorizes
and appoints the Shareholders' Agent to act as its, his or her exclusive agent
and attorney-in-fact to act on behalf of each of them with respect to all
matters which are the subject of this Agreement, including, without limitation,
(a) receiving or giving all notices, instructions, other communications,
consents or agreements that may be necessary, required or given hereunder and
(b) asserting, settling, compromising, or defending, or determining not to
assert, settle, compromise or defend, (i) any claims which any Shareholder or
Eide may assert, or have the right to assert, against the Buyer, or (ii) any
claims which the Buyer may assert, or have the right to assert, against any
Shareholder or Eide. The Shareholders' Agent hereby accepts such authorization
and appointment. Upon the receipt of written evidence satisfactory to the
Buyer to the effect that the Shareholders' Agent has been substituted as agent
of the Shareholders and Eide by reason of his death, disability or resignation,
the Buyer shall be entitled to rely on such substituted agent to the same
extent as they were theretofore entitled to rely upon the Shareholders' Agent
with respect to the matters covered by this Section 9.14. Neither Eide nor any
Shareholder shall act with respect to any of the matters which are the subject
of this Agreement except through the Shareholders' Agent. The Shareholders and
Eide acknowledge and agree that the Buyer may deal exclusively with the
Shareholders' Agent in respect of such matters, that the enforceability of this
Section 9.14 is material to the Buyer, and that the Buyer has relied upon the
enforceability of this Section 9.14 in entering into this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 22 -
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ RICHARD M. TYLER
-------------------------------------
Name: Richard M. Tyler
-------------------------------------
Title: Vice President
-------------------------------------
SHAREHOLDERS:
/s/ IRWIN R. SCOTT
----------------------------------------------
Irwin R. Scott
/S/ CAROL J. SCOTT
----------------------------------------------
Carol J. Scott
EIDE:
/s/ JEFFREY A. EIDE
----------------------------------------------
Jeffrey A. Eide
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT.]
- 23 -
<PAGE> 1
EXHIBIT 10.15
================================================================================
PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.
AND THE
SHAREHOLDERS
OF
NEWMANCO, INC.,
D/B/A A-1 RENTALS
AS OF MAY 22, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4. Closing; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Representations and Warranties of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2. Operation and Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3. Acquisitions and Dispositions of Rental Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7. Conveyance of Shareholder Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9. Closing Date Liabilities and Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10. Certain Pre-Closing Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8. Certain Post-Closing Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10. Termination of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2. Conditions to Obligation of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7.1. Indemnification Provisions for Benefit of the Buyer and the Company . . . . . . . . . . . . . . . . 22
7.2. Indemnification Provisions for Benefit of the Shareholders . . . . . . . . . . . . . . . . . . . . . 23
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.14. Shareholders' Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Exhibits:
<S> <C>
Exhibit 1.1(a)
Exhibit 1.1(b)
Exhibit 1.1(c)
Exhibit 1.1(d)
Exhibit 1.1(e)
Exhibit 1.1(f)
Exhibit 1.1(g)
Exhibit 1.1(h)
Exhibit 1.1(i)
Exhibit 1.1(j)
Exhibit 1.1(k)
Exhibit 1.1(l)
Exhibit 1.1(m)
Exhibit 3.1(a)(i)
Exhibit 3.1(a)(ii)
Exhibit 3.1(b)
Exhibit 3.1(c)(i)
Exhibit 3.1(d)(i)(A)
Exhibit 3.1(d)(i)(B)
Exhibit 3.1(d)(i)(C)
Exhibit 3.1(e)(i)
Exhibit 3.1(e)(ii)
Exhibit 3.1(f)(iii)
Exhibit 3.1(f)(v)
Exhibit 3.1(f)(vi)
Exhibit 3.1(g)(i)(A)
Exhibit 3.1(g)(i)(B)
Exhibit 3.1(g)(ii)
Exhibit 3.1(h)(i)
Exhibit 3.1(h)(ii)
Exhibit 3.1(i)(i)
Exhibit 3.1(i)(ii)
Exhibit 3.1(k)
Exhibit 3.1(l)
Exhibit 3.1(m)
Exhibit 3.1(o)(i)
Exhibit 3.1(o)(ii)
Exhibit 3.1(r)(ii)
Exhibit 3.1(r)(iii)
Exhibit 4.3
Exhibit 6.1(j)
Exhibit 6.2(e)
</TABLE>
(iii)
<PAGE> 5
This Purchase Agreement is entered into as of May 22, 1997
among RentX Industries, Inc., a Delaware corporation (the "Buyer"), and Hershel
A. Manning and Carolyn W. Manning (individually, a "Shareholder" and
collectively, the "Shareholders").
Recitals
Hershel A. Manning owns all of the issued and outstanding
capital stock of Newmanco, Inc., d/b/a A-1 Rental Centers, a New Mexico
corporation (the "Company"). Carolyn W. Manning is Hershel A. Manning's spouse
and, under the community property laws of the State of New Mexico, may be
deemed to own an interest in such capital stock. The Shareholders desire to
sell, and the Buyer desires to purchase, all of the issued and outstanding
capital stock of the Company as provided in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the
meanings designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set
forth in this Agreement, the Buyer agrees to purchase from the Shareholders,
and the Shareholders agree to sell to the Buyer, all the Shares free and clear
of any Encumbrance or Tax, for the consideration specified in Section 2.2. The
Buyer will have no obligation under this Agreement to purchase less than all of
the Shares.
2.2. Purchase Price; Payment.
(a) The purchase price for the Shares is $3,302,000,
increased for the New Rental Equipment Adjustment. At the Closing, the Buyer
will, by wire transfer or other delivery of immediately available funds, (i)
pay to the Shareholders (subject to Section 2.2(b)), $2,972,000, subject to
increase for the New Rental Equipment Adjustment (no deduction will be made at
the Closing for the estimated Pre-Closing Personal Property Tax Amount or for
the amount by which the estimated Pre-Closing Income Tax Amount exceeds the
estimated tax payments made by the Company in respect of the Pre-Closing Income
Tax Amount), and (ii) deposit $330,000 into the Escrow Accounts (and the
amounts paid and deposited to and in respect of the Shareholders will
constitute the full purchase price for the Shares). The amount deposited in
the Escrow Accounts will belong to the Shareholders, subject to the
Shareholders' indemnification obligations set forth in this Agreement, and will
be held, invested, administered and disbursed according to Section 7.1(b)
hereof and the Escrow Agreements. The purchase price will be payable to the
Shareholders in the following percentages:
<TABLE>
<CAPTION>
Percentage of
Shareholder No of Shares Owned Purchase Price
<S> <C> <C>
Hershel A. Manning 10,000 100%
</TABLE>
<PAGE> 6
(b) At the Closing, the Buyer will deposit into a demand
deposit account in the names of the Buyer and the Shareholders' Agent, from the
amount otherwise payable to the Shareholders pursuant to Section 2.2(a)(i), an
amount equal to the Reserve Amount, and such funds shall initially constitute
the Liabilities Reserve. The funds on deposit in the Closing Date Liabilities
Reserve will belong to the Shareholders, subject to the provisions of this
Section 2.2(b). Following the Closing, the Closing Date Liabilities Reserve
will be applied to the payment of Reserved Shareholder Liabilities, by
disbursements from that account upon the joint signatures of a representative
of the Buyer and the Shareholders' Agent, as the Reserved Shareholder
Liabilities are ascertained. To the extent that the Buyer receives a bill or
invoice representing, or is otherwise aware of, any Reserved Shareholder
Liabilities, the Shareholders' Agent shall sign checks drawn on the Liabilities
Reserve to satisfy such Reserved Shareholder Liabilities promptly upon the
request of Buyer. Reserved Shareholder Liabilities representing accrued
vacation and other accrued employee benefits with respect to those persons who
are employees of the Company as of immediately prior to the Closing Date and
who become employees of the Buyer effective as of the Closing will be satisfied
by payment of the amount thereof to the Buyer as the Buyer provides such
benefits or makes cash payments in lieu thereof to employees. The
Shareholders' Agent will take all actions necessary to cause the Liabilities
Reserve to be applied to satisfy Reserved Shareholder Liabilities and, if the
Liabilities Reserve has been exhausted, the Shareholders will provide
additional funds as required to satisfy Reserved Shareholder Liabilities.
Nothing in this Agreement will be deemed to limit the joint and several
obligations of the Shareholders to pay the Reserved Shareholder Liabilities in
full. After all Reserved Shareholder Liabilities have been satisfied, any
excess Liabilities Reserve on deposit in the account created pursuant to this
Section 2.2(b) will be paid to the Shareholders. Any disputes concerning the
Liabilities Reserve will be settled by arbitration as provided in this
Agreement.
2.3. Sales Taxes, Etc. The Shareholders will pay all sales, use,
transfer, licensing, recording, stamp and other Taxes, fees and charges payable
in respect of or as a result of the sale and transfer of the Shares to the
Buyer pursuant to this Agreement.
2.4. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
May 22, 1997 (but in any event on or before June 30, 1997), commencing at 8:00
a.m. local time in Denver, Colorado, at the offices of Sherman & Howard
L.L.C., and all transactions contemplated by this Agreement will be effective
at 12:00 a.m. local time in Las Cruces, New Mexico on the day of the Closing
(such effective time being the "Closing Date").
2.5. Deliveries at the Closing. At the Closing, (a) the
Shareholders will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Shareholders the certificates, instruments and
documents referred to in Section 6.2, (c) the Shareholders will deliver to the
Buyer stock certificates representing all the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, free and clear of any
Encumbrances or Taxes and (d) the Buyer will pay and deposit the purchase price
in accordance with Section 2.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Shareholders. The
Shareholders jointly and severally represent and warrant to the Buyer that the
statements contained in this Section 3.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
-2-
<PAGE> 7
(as though made then and as though the Closing Date were then substituted for
the date of this Agreement throughout this Section 3.1).
(a) Organization, Good Standing, Etc. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New Mexico, and is not required to be qualified or
authorized to do business as a foreign corporation in any jurisdiction. The
Company has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
The copies of the articles of incorporation (certified by the Secretary of
State of New Mexico) and the bylaws of the Company, both as amended to date,
which have been delivered to the Buyer by the Shareholders and are attached as
Exhibits 3.1(a)(i) and 3.1(a)(ii), respectively, are complete and correct, and
the Company is not in default under or in violation of any provision of its
articles of incorporation or bylaws. The minute books (which contain the
records of all meetings of or actions by the shareholders, the board of
directors, and any committees of the board of directors) and the stock
certificate books and the stock record books of the Company, copies of which
have been delivered to the Buyer by the Shareholders, are correct and complete.
(b) Ownership and Capitalization. The authorized capital
stock of the Company consists of 100,000 shares of common stock, $.01 par
value. Mr. Manning owns, beneficially (except for any community property
interest of Mrs. Manning) and of record, free and clear of any Encumbrance or
Tax, the number of shares of the common stock, $.01 par value, of the Company
set forth opposite his name in Section 2.2(a), and the shares reflected in
Section 2.2(a) constitute all of the issued and outstanding capital stock of
the Company. All of the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued, and are fully paid and
nonassessable, with no personal Liability attaching to the ownership thereof.
There is no authorized or outstanding stock or security convertible into or
exchangeable for, or any authorized or outstanding option, warrant or other
right to subscribe for or to purchase, or convert any obligation into, any
unissued shares of the Company's capital stock or any treasury stock, and the
Company has not agreed to issue any security so convertible or exchangeable or
any such option, warrant or other right. There are no authorized or
outstanding stock appreciation, phantom stock, profit participation or similar
rights with respect to the Company. There are no voting trusts, voting
agreements, proxies or other agreements or understanding with respect to any
capital stock of the Company. Except as set forth on Exhibit 3.1(b), all of
which the Shareholders shall cause to be terminated prior to the Closing, there
are no existing rights of first refusal, buy- sell arrangements, options,
warrants, rights, calls, or other commitments or restrictions of any character
relating to any of the Shares, except those restrictions on transfer imposed by
the Securities Act of 1993, as amended, and applicable state securities laws.
The Company has no subsidiaries and no interest in any other corporation,
partnership, limited partnership, limited liability company, association or
joint venture.
(c) Authority; No Violation. Each Shareholder and each
relative or affiliate of the Company or of a Shareholder who is party to any
Other Seller Agreement has full and absolute right, power, authority and legal
capacity to execute, deliver and perform this Agreement and all Other Seller
Agreements to which such Shareholder, relative or affiliate is a party, and
this Agreement constitutes, and the Other Seller Agreements will when executed
and delivered constitute, the legal, valid and binding obligations of, and
shall be enforceable in accordance with their respective terms against, each
such Shareholder, relative or affiliate who is a party thereto. The execution,
delivery and performance of this Agreement and the Other Seller Agreements and
the consummation of the transactions
-3-
<PAGE> 8
contemplated hereby and thereby will not (A) violate any Legal Requirement to
which the Company, any Shareholder, or any relative or affiliate of the Company
or of any Shareholder who is a party to any Other Seller Agreement is subject
or any provision of the articles of incorporation or bylaws of the Company or
of any such affiliate, or (B) violate, with or without the giving of notice or
the lapse of time or both, or conflict with or result in the breach or
termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Company, of
any Shareholder, or of any such relative or affiliate pursuant to, any
indenture, mortgage, deed of trust, lien, lease, license, Permit, agreement,
instrument or other arrangement to which the Company, any Shareholder or any
such relative or affiliate is a party or by which the Company, any Shareholder,
or any such relative or affiliate or any of their respective assets and
properties is bound or subject. Except for notices that will be given and
consents that will be obtained by the Shareholders prior to the Closing (which
are set forth in Exhibit 3.1(c)(i)), neither the Company, any Shareholder, nor
any such relative or affiliate need give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental Authority or
other Person in order for the parties to consummate the transactions
contemplated by this Agreement and the Other Seller Agreements.
(d) Financial Statements; Absence of Liabilities. (i)
The unaudited balance sheets of the Company as of September 30, 1994, 1995 and
1996, the related statements of income, shareholders' equity and cash flows for
the fiscal years then ended, the unaudited balance sheet of the Company as of
March 31, 1997(the latter being referred to as the "Latest Balance Sheet"), and
the related statements of income, shareholders' equity and cash flows for the
six-month period then ended, have been prepared in accordance with good
accounting practices and on a consistent basis, are in accordance with the
books and records of the Company (which books and records are complete and
correct), are accurate and fairly present the financial position and results of
operations of the Company as of such dates and for each of the periods
indicated, do not list book values for the assets that are in excess of their
fair market values, and, except as set forth on Exhibit 3.1(d)(i)(A), make full
and adequate provision for all Liabilities to which the Company is subject.
Copies of the financial statements described in the first sentence in this
Section are attached as Exhibit 3.1(d)(i)(B). The expenses itemized on Exhibit
3.1(d)(i)(C) and reflected in the Company's financial performance for the
12-month period ended September 30, 1996 will not be realized on an on-going
basis, and information sufficient to determine such financial performance for
such 12-month period has been provided by the Shareholders to the Buyer prior
to the date of this Agreement.
(ii) Since the date of the Latest Balance Sheet,
the Company has not incurred or become subject to any Liability other than
Liabilities incurred in the ordinary course of business. As of the Closing,
the Company will have no Liability (and there is no basis for the assertion of
any Liability), except for the Retained Liabilities.
(e) Absence of Certain Leases, Changes or Events. The
Company is not, except as set forth on Exhibit 3.1(e)(i), a party to or
otherwise bound by any contract or agreement that has a term of three or more
months pursuant to which the Company is obligated to furnish any equipment,
products or services, and no such contract or agreement has been prepaid with
respect to any period after the Closing Date. Since September 30, 1996, the
Company has not (i) incurred any debt, indebtedness or other Liability, except
current Liabilities incurred in the ordinary course of business; (ii) delayed
or postponed the payment of accounts payable or other Liabilities or
accelerated the collection of any receivable beyond stated, normal terms; (iii)
except as set forth on Exhibit 3.1(e)(ii),
-4-
<PAGE> 9
sold or otherwise transferred any of its equipment or other assets or
properties; (iv) cancelled, compromised, settled, released, waived, written-off
or expensed any account or note receivable, right, debt or claim involving more
than $5,000 in the aggregate; (v) changed in any significant manner the way in
which it conducts its business; (vi) except as set forth on Exhibit 3.1(e)(ii),
made or granted any individual wage or salary increase in excess of 10% or
$1.00 per hour, any general wage or salary increase, or any additional benefits
of any kind or nature; (vii) except as otherwise expressly permitted by this
Section 3.1(e), (A) entered into any contracts or agreements, or made any
commitments, involving more than $5,000 individually or in the aggregate or (B)
accelerated, terminated, delayed, modified or cancelled any agreement,
contract, lease or license (or series of related agreements, contracts, leases
and licenses) involving more than $5,000 individually or in the aggregate;
(viii) except as set forth on Exhibit 3.1(e)(ii), suffered any adverse fact or
change, including, without limitation, to or in its business, assets, financial
condition, prospects or customer or supplier relationships; (ix) made any
payment or transfer to or for the benefit of any shareholder, officer or
director or any relative or affiliate thereof or permitted any Person,
including, without limitation, any shareholder, officer, director or employee
or any relative or affiliate thereof, to withdraw assets from the Company
(other than cash and other Excluded Assets distributed to the Shareholders as
set forth on Exhibit 3.1(e)(ii) and other than the payment to the Shareholders
of the proportionate monthly amount of their respective normal annualized
salaries due and payable during such period); (x) failed to make purchases of
new or used equipment necessary to maintain its rental/lease inventory at the
level which is reasonably necessary to maintain the revenue base experienced by
the Company during the 12 months preceding such date; (xi) decreased its lease
rate with respect to any equipment by 10% or more from the applicable lease
rate in effect on September 30, 1996 or rented or leased any equipment or sold
or otherwise transferred any inventory, equipment or services at below-normal
rental or lease rates or margins; (xii) suffered any other significant
occurrence, event, incident, action, failure to act or transaction outside the
ordinary course of business; or (xiii) agreed to incur, take, enter into, make
or permit any of the matters described in clauses (i) through (xii).
(f) Tax Matters.
(i) The Company has filed all Tax Returns that it
was required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any Tax
Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Encumbrances on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or other
third party.
(iii) To the best knowledge of the Shareholders,
there is no basis for any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no pending or
threatened dispute or claim concerning any Tax Liability of the Company.
Exhibit 3.1(f)(iii) lists all federal, state, local and foreign income Tax
Returns filed with respect to the Company for taxable periods ended on or after
September 30, 1990, indicates those Tax Returns that have been audited and
indicates those Tax Returns that currently are the subject of audit. The
-5-
<PAGE> 10
Shareholders have delivered to Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies filed
or assessed against or agreed to by the Company since September 30, 1990.
(iv) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Neither the Company nor any of its
shareholders has ever filed (A) an election pursuant to Section 1362 of the
Code that the Company be taxed as an "S" corporation, except as set forth on
Exhibit 3.1(f)(v), or (B) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Company has not made any payments,
is not obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will
not be deductible under Code Section 280G. The Company has not been a United
States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Company has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
the Company) and has no Liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract or
otherwise. The total adjusted basis of the Acquired Assets exceeds the sum of
the Company's Liabilities plus the amount of Liabilities to which the Acquired
Assets are subject.
(vi) Exhibit 3.1(f)(vi) sets forth the following
information with respect to the Company as of the most recent practicable date
(as well as on an estimated pro forma basis as of the Closing giving effect to
the consummation of the transactions contemplated hereby): (A) the basis of
the Company in its assets; and (B) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax credit or
excess charitable contribution allocable to the Company.
(vii) If the Company has ever filed an election to
be taxed as an "S" corporation, all Taxes payable by all present and former
shareholders of the Company in respect of their shares of the Company's taxable
income have been paid.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Company
owns all of the Acquired Assets (other than certain items of Shareholder
Property), free and clear of all Encumbrances (except for those Encumbrances
which the Company shall cause to be terminated as of the Closing and except for
Encumbrances securing Retained Liabilities arising under the agreements
described in items (j), (k), and (l) of Exhibit 1.1(j)). As of the Closing,
all of the Acquired Assets (including all of the Shareholder Property) will be
owned by the Company, free and clear of all Encumbrances (except for
Encumbrances securing Retained Liabilities arising under the agreements
described in items (j), (k) and (l) of Exhibit 1.1(j), provided that: (i) such
Retained Liabilities shall not exceed the cost to the Company (without
interest) of the items of equipment in the Company's inventory of new equipment
-6-
<PAGE> 11
held for sale as of the Closing Date that were purchased pursuant to such
agreements; (ii) such Retained Liabilities shall not exceed in the aggregate
$29,914.00; and (iii) such Encumbrances shall not extend to any Acquired Assets
other than the items of equipment described in clause (i) of this proviso), and
the Company will have good and marketable title to all the Acquired Assets.
The Acquired Assets consist of (A) the tangible and intangible assets of the
Company (exclusive of the Excluded Assets) in existence as of June 30, 1996
(except as set forth on Exhibit 3.1(e)(ii) with respect to cash and other
Excluded Assets which were distributed to its shareholders and except for such
changes in merchandise inventory and in accounts receivable in the ordinary
course of business as are not in violation of Section 3.1(e) or Section 4.3),
increased by the New Rental Equipment acquired after June 30, 1996, and (B) all
tangible and intangible assets, including, without limitation, all
improvements, fixtures and fittings, owned by any Shareholder or relative or
affiliate thereof or of the Company which have been used in its business at any
time on or after June 30, 1996 (the "Shareholder Property"), including, without
limitation, the tangible and intangible assets set forth on Exhibit
3.1(g)(i)(A) owned by any Shareholder or relative or affiliate thereof.
Between June 30, 1996 and the day before the date of this Agreement, the
Company has purchased certain of the New Rental Equipment but has not otherwise
purchased, sold, traded, transferred or otherwise acquired or disposed of any
rental equipment (except as set forth on Exhibit 3.1(e)(ii)). In the case of
Acquired Assets consisting of the Company's rights under an arrangement with
the owner of equipment who makes such equipment available for rental by the
Company under a split rental or similar arrangement ("Consigned Equipment"),
such arrangement is in full force and effect and the owner of the Consigned
Equipment is not a relative or affiliate of the Company or any Shareholder.
The Acquired Assets are all of the tangible and intangible assets (other than
the Excluded Assets and the Premises) used by the Company in, or necessary for
the conduct of, its business. The Acquired Assets and the Consigned Equipment
encompass all equipment used by the Company to generate the income reflected in
the financial statements attached as Exhibit 3.1(d)(i)(B), other than Re-Rented
Equipment. The Company had no Consigned Equipment during the fiscal year ended
September 30, 1996. The total amount paid by the Company to use the Consigned
Equipment as part of its rental inventory during the six-month period ended
March 31, 1997, was $6,265.71, and the Company's share of the rentals from
Consigned Equipment during that six-month period was $1,787.55. Exhibit
3.1(g)(i)(B) lists all Consigned Equipment as of the date of this Agreement.
Since June 30, 1996, there has been no change in the amount or composition of
the Consigned Equipment, except as described on Exhibit 4.3. Except for items
rented or leased to customers, all of the tangible Acquired Assets and the
Consigned Equipment are located on the Premises. During the fiscal year ended
September 30, 1996 and the six-month period ended March 31, 1997, the Company's
total revenues from the rental of Re-Rented Equipment were $32,525.43 and
$25,226.06, respectively, and the total cost to the Company of renting
Re-Rented Equipment was $27,437.86 and $21,021.72, respectively.
(ii) The Premises constitute all of the real
property, buildings and improvements used by the Company in its business. The
Premises are supplied with utilities and other services necessary for the
operation thereof. Except as set forth on Exhibit 3.1(g)(ii), the Premises are
free from defects, have been maintained in accordance with normal industry
practice, are in good operating condition and repair and are suitable for the
purposes for which they presently are used. To the best knowledge of the
Shareholders, the Premises have received all approvals of Governmental
Authorities (including Permits) required in connection with the occupation and
operation thereof and have been occupied, operated and maintained in accordance
with applicable Legal Requirements. The Company has not received notice of
violation of any Legal Requirement or Permit relating to its operations or its
owned or leased properties.
-7-
<PAGE> 12
(iii) No party to any lease with respect to any
Premises has repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data.
Attached as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the
items identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Company nor any other party thereto is in
breach or default in performance of any of its respective obligations under,
and no event exists which, with the giving of notice or lapse of time or both,
would constitute a breach, default or event of default on the part of a party
to, any of the foregoing that is continuing unremedied.
-8-
<PAGE> 13
(i) Litigation; Compliance with Applicable Laws and
Rights.
(i) There is no outstanding Order against, nor,
except as set forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or threatened against, the Company, its properties or its business or
relating to the transactions contemplated by this Agreement, nor is there any
basis for any such action.
(ii) To the best knowledge of the Shareholders,
except as set forth on Exhibit 3.1(i)(ii), neither the Company nor the
Company's assets (including its Premises, facilities, machinery and equipment)
are in violation of any applicable Legal Requirement or Right. The Company has
not received notice from any Governmental Authority or other Person of any
violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or threatened
against the Company alleging any such violation.
(j) Accounts Receivable. The accounts receivable of the
Company reflected on its Latest Balance Sheet, and all accounts receivable
arising prior to the Closing Date, arose and will arise from bona fide
transactions by the Company in the ordinary course of business, are valid
receivables with trade customers subject to no setoffs or counterclaims, and
are current and collectible.
(k) Product Quality, Warranty and Liability. All
products and services sold, rented, leased, provided or delivered by the
Company to customers on or prior to the Closing Date conform to applicable
contractual commitments, express and implied warranties, product and service
specifications and quality standards, and the Company has no Liability and
there is no basis for any Liability for replacement or repair thereof or other
damages in connection therewith. No product or service sold, rented, leased,
provided or delivered by the Company to customers on or prior to the Closing is
subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale, rent or lease. The Company has no
Liability and there is no basis for any Liability arising out of any injury to
a Person or property as a result of the ownership, possession, provision or use
of any product or service sold, rented, leased, provided or delivered by the
Company on or prior to the Closing Date. All product or service liability
claims that have been asserted against the Company since January 1, 1992,
whether covered by insurance or not and whether litigation has resulted or not,
other than those listed and summarized on Exhibit 3.1(i)(i), are listed and
summarized on Exhibit 3.1(k).
(l) Insurance. The Company has policies of insurance (i)
covering risk of loss on the Acquired Assets and Consigned Equipment, (ii)
covering products and services liability and liability for fire, property
damage, personal injury and workers' compensation coverage and (iii) for
business interruption, all, to the best knowledge of the Shareholders, with
responsible and financially sound insurance carriers in adequate amounts and in
compliance with governmental requirements and in accordance with good industry
practice. All such insurance policies are valid, in full force and effect and
enforceable in accordance with their respective terms and no party has
repudiated any provision thereof. All such policies will remain in full force
and effect until the Closing Date. Neither the Company nor any other party to
any such policy is in breach or default (including with respect to the payment
of premiums or the giving of notices) in the performance of any of their
respective obligations thereunder, and no event exists which, with the giving
of notice or the lapse of time or both, would
-9-
<PAGE> 14
constitute a breach, default or event of default, or permit termination,
modification or acceleration under any such policy. There are no claims,
actions, proceedings or suits arising out of or based upon any of such policies
nor, to the best knowledge of the Shareholders, does any basis for any such
claim, action, suit or proceeding exist. All premiums have been paid on such
policies as of the date of this Agreement and will be paid on such policies
through the Closing Date. The Company has been covered during the five years
prior to the date of this Agreement by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period. All claims made during such five-year period with
respect to any insurance coverage of the Company, other than those described on
Exhibit 3.1(k), are set forth on Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters.
(i) Exhibit 3.1(m) lists each Employee Benefit
Plan that: (A) is subject to any provision of ERISA; (B) is maintained,
administered or contributed to by the Company; (C) covers any employee or
former employee of the Company; or (D) under which the Company has any
liability to make contributions or pay benefits. Copies of all such plans,
summary plan descriptions, annual reports, summary annual reports, PBGC-1s,
plan administrative records and financial records, correspondence and, if
applicable, related trust agreements, and all amendments and written
interpretations of such plans have been delivered by the Shareholders to the
Buyer and attached hereto as part of 3.1(m), together with the three most
recent annual reports (Form 5500 including Schedule B if applicable) prepared
in connection with each such plan required to file an annual report, and the
most recent actuarial valuation report prepared in connection with each such
plan for which an actuarial valuation report is required to be or has been
prepared, each of which is also attached hereto as part of 3.1(m). Such plans
are hereinafter referred to collectively as the "Company Employee Benefit
Plans."
(ii) Each Company Employee Benefit Plan has been
maintained and administered in substantial compliance with its terms and with
all Legal Requirements that are applicable to such Employee Benefit Plan.
(iii) The only Company Employee Benefit Plans that
individually or collectively would constitute Employee Pension Benefit Plans
are identified in Exhibit 3.1(m) as the "Retirement Plans."
(iv) The Retirement Plans that are subject to the
Plan Termination Insurance provisions of Title IV of ERISA are identified in
Exhibit 3.1(m) as the "Pension Plans". The Shareholders have provided the
Buyer with complete age, salary, service, employment status and related data as
of February 28, 1997 for employees and former employees covered under the
Pension Plans, and a copy of such information is attached hereto as part of
Exhibit 3.1(m).
(v) As of the most recent valuation date, the
fair market value of the assets of each Pension Plan (including for these
purposes any accrued but unpaid contributions) exceeded the present value of
all Benefit Liabilities as defined in ERISA Section 4001(a)(16) under each
Pension Plan determined on a termination basis using the assumptions that would
be applied by the PBGC for a plan terminating as of the Closing Date.
-10-
<PAGE> 15
(vi) No "accumulated funding deficiency" (as
defined in Section 412 of the Code), has been incurred with respect to any
Pension Plan whether or not waived. Quarterly contributions under Code Section
412(m) have been made as required for each Pension Plan and no notice to the
PBGC has been required under Code 412(n).
(vii) None of the Shareholders nor any director or
officer (or employee responsible for employee benefit matters) of the Company
has knowledge of any "reportable event" (as defined in Section 4043 of ERISA),
and no event described in Section 4062, 4063 or 4041 of ERISA has occurred in
connection with any Pension Plan, other than a "reportable event" for which the
30-day notice requirement has been waived under regulations published by the
PBGC.
(viii) No condition exists and no event has occurred
that could constitute grounds for termination of any Pension Plan under Section
4042 of ERISA. The Company has not incurred any Liability under Title IV of
ERISA arising in connection with the termination of any plan covered or
previously covered by Title IV of ERISA.
(ix) Exhibit 3.1(m) lists each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation, reduced interest
or interest free loans, mortgages, relocation assistance or post- retirement
insurance, compensation or other benefits that: (A) is not an Employee Benefit
Plan; (B) is entered into, maintained or contributed to, by the Company; and
(C) covers any employee or former employee of the Company or any relative
thereof. Such contracts, plans and arrangements as are described in this
Section 3.1(m)(ix), are hereinafter referred to collectively as the "Benefit
Arrangements." Copies and descriptions (including descriptions of the number
and employment classifications of employees covered by each such Benefit
Arrangement) have been delivered by the Shareholders to the Buyer and attached
hereto as part of Exhibit 3.1(m). Each Benefit Arrangement has been maintained
and administered in substantial compliance with its terms and with the
requirements prescribed by any and all Legal Requirements that are applicable
to each such Benefit Arrangement.
(x) Except as set forth in any Company Employee
Benefit Plan or Benefit Arrangement identified in Exhibit 3.1(m) and except as
provided by Legal Requirement or any collective bargaining agreement or any
employment contract identified on Exhibit 3.1(m), the employment of all persons
presently employed or retained by the Company is terminable at will.
(xi) Except as expressly so identified in Exhibit
3.1(m), no Company Employee Benefit Plan is a "Multiemployer Plan."
(xii) No Company Employee Benefit Plan is
maintained in connection with any trust described in Section 501(c)(9) of the
Code. Any assets of any Employee Benefit Plan that are subject to the trust
requirement of ERISA Section 403 are held in trust in compliance with ERISA
Section 403.
(xiii) Each Retirement Plan that is intended to be
qualified within the meaning of Section 401(a) of the Code ("Qualified") is so
Qualified, has been so Qualified during the period
-11-
<PAGE> 16
from its adoption to date, has been administered in a manner that would not
adversely affect its Qualified status and has receive a currently effective
determination letter (or a determination letter has been timely requested) from
the Internal Revenue Service that the Plan is (or continues to be) currently
Qualified for federal income tax purposes. The Shareholders have delivered to
the Buyer copies of such determination letters and any pending applications,
and copies thereof have been attached hereto as part of Exhibit 3.1(m). Each
trust in which Retirement Plan assets are held is exempt from tax pursuant to
Section 501(a) of the Code. The Company shall terminate its SARSEP prior to
the Closing Date.
(xiv) There have been no prohibited transactions
with respect to any Company Employee Benefit Plan. No "Fiduciary" (as defined
in Section 3(21) of ERISA) has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing or investigation with respect to the administration or the
investment of the assets of any Company Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the best knowledge of the
Shareholders is threatened. None of the Shareholders has any knowledge of any
basis for any such action, suit, proceeding, hearing or investigation.
(xv) The Company does not maintain and has never
maintained nor contributes, or ever has contributed, or ever has been required
to contribute, to any Company Employee Benefit Plan providing health or medical
benefits for current or future retired or terminated employees, their spouses
or their dependents (other than in accordance with Code Section 4980B). No
condition exists that would prevent the Company from amending or terminating
any Company Employee Benefit Plan or Benefit Arrangement providing health or
medical benefits in respect of any active or retired employees of the Company.
(xvi) Each Company Employee Benefit Plan and
Benefit Arrangement has been maintained and administered in compliance with its
terms and with the requirements prescribed by any and all Legal Requirements,
including but not limited to ERISA and the Code, that are applicable to such
Plans. Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection with any Company Employee Benefit Plan or Benefit
Arrangement has made or will make the Company or any officer or director of the
Company subject to any Liability under Title I of ERISA or any Liability for
any Tax under Section 4972 or Section 4975 through 4980B, inclusive, of the
Code.
(xvii) Any Company Employee Benefit Plan that is a
"group health plan" (as defined in Code Section 5000(b)(l)) has been
administered in accordance with the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and nothing done or omitted to be done
in connection with maintenance or administration of any Company Employee
Benefit Plan that is a "group health plan" has made or will make the Company
subject to any liability under Title I of ERISA, excise Tax Liability under
Code Section 4980B or has resulted or will result in any loss of income
exclusion for a participant under Code Sections 105(h) or 106.
(xviii) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G or 162(a)(l) of
the Code.
-12-
<PAGE> 17
(xix) The Company has made, before the date of this
Agreement, all required contributions and premium payments under each
Retirement Plan, Company Employee Benefit Plan and Benefit Arrangement for all
completed fiscal years including contributions that may not by law have
otherwise been required to be made until the due date for filing the Tax Return
for any completed fiscal year. All contributions and payments accrued under
the Retirement Plans, determined in accordance with funding and accrual
practices in effect for the preceding plan year and as adjusted to the extent
required to include proportional accruals for service for the period ending on
the Closing Date will be discharged and paid on or prior to the Closing Date.
The employer and employee contributions to any Retirement Plan that is not a
Pension Plan for any payroll period completed on or before the Closing Date
will have been made on or before the Closing Date.
(xx) Except as disclosed in Exhibit 3.1(m), there
has not been with respect to the Company's active or retired employees, nor
will be, as of the Closing Date, any amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change in
employee participation or coverage under, any Company Employee Benefit Plan or
Benefit Arrangement that would increase the expense of maintaining or funding
benefits under such Company Employee Benefit Plan or Benefit Arrangement above
the level of the expense incurred in respect thereof for the fiscal year ended
on December 31, 1996.
(xxi) The Buyer will have no obligation to employ
any employee of the Company or to continue any Company Employee Benefit Plan,
and will have no Liability under any plan or arrangement maintained by the
Company for the benefit of any employee. No condition exists that would
prevent the Company from terminating any Company Employee Benefit Plan, any
Retirement Plan or any Pension Plan prior to the Closing Date.
(xxii) Exhibit 3.1(m) sets forth the names of all
retired employees, if any, of the Company who are receiving or are entitled to
receive any payments which are not fully covered by any Employee Pension
Benefit Plan of the Company which is Qualified under Code Section 401(a), their
ages and the annual funded and unfunded benefits.
(n) Employees and Labor. The Company has not received
any notice, nor, to the best knowledge of the Shareholders, is there any reason
to believe that any executive or key employee of the Company or any group of
employees of the Company has any plans to terminate his, her or its employment
with the Company. No executive or key employee is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Company prior to the Closing Date and, if such person becomes an
employee of the Buyer, to the affairs of the Buyer after the Closing Date. The
Company will not be required to give any notice under the Worker Adjustment and
Retraining Notification Act, as amended, or any similar Legal Requirement as a
result of this Agreement, the Other Seller Agreements or the transactions
contemplated hereby or thereby. The Company does not have any labor relations
problems or disputes, nor has the Company experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Company is not a party to or bound by any collective bargaining agreement,
there is no union or collective bargaining unit at the Company's facilities,
and no union organization effort has been threatened, initiated or is in
progress with respect to any employees of the Company.
-13-
<PAGE> 18
(o) Customer and Supplier Relationships. Exhibit
3.1(o)(i) lists each customer that individually or with its affiliates
accounted for 2% or more of the Company's sales, rental or lease revenues
during either the fiscal year ended September 30, 1996 or the six-month period
ended March 31, 1997 (the "Principal Customers"). Exhibit 3.1(o)(ii) lists
each supplier that individually or with its affiliates accounted for 2% or more
of the Company's purchases of inventory or supplies during either the fiscal
year ended September 30, 1996 or the six-month period ended March 31, 1997 (the
"Principal Suppliers"). The Company has good commercial working relationships
with its Principal Customers and Principal Suppliers and since October 1, 1995,
no Principal Customer or Principal Supplier has cancelled or otherwise
terminated its relationship with the Company, materially decreased or limited
its purchases, rentals or leases from, or inventory or supplies supplied to,
the Company, or threatened to take any such action. The Shareholders have no
basis to anticipate any problems with the Company's customer, supplier or
business relationships. To the best knowledge of the Shareholders, no
Principal Customer or Principal Supplier has any plans to reduce its purchases,
rentals or leases from, or inventory or supplies supplied to, the Company below
levels prevailing during the fiscal year and six-month period specified above,
and the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not adversely affect the relationship of
the Company with any Principal Customer or Principal Supplier prior to the
Closing Date or of the Buyer with any Principal Customer or Principal Supplier
after the Closing Date.
(p) Resale Inventory. The resale inventory of the
Company consists of goods which, in the aggregate, are merchantable, are fit
for the purposes for which they were procured and are held by the Company, are
usable in the ordinary course of the Company's business and are not obsolete.
(q) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Company consists of machinery, equipment and
other tangible personal property which are merchantable, are fit and suitable
for the purpose for which they were procured and are held by the Company,
useable in the ordinary course of the Company's business and are not obsolete.
All of the machinery, equipment and other tangible personal property included
in the Acquired Assets (including that held for rental, lease or sale), the
Consigned Equipment has been well maintained and is in good repair and good
operating condition. None of the machinery, equipment or other tangible
personal property included in the Acquired Assets (including that held for
rental, lease or sale), the Consigned Equipment is damaged or defective, the
Company has not experienced material problems or deficiencies with respect to
such machinery, equipment and other tangible personal property, and, to the
best knowledge of the Shareholders, there is no basis to anticipate any such
problems or deficiencies.
(r) Environmental Matters.
(i) The Company is conducting and at all times
has conducted its business and operations, and has occupied, used and operated
the Premises and all other real property and facilities presently or previously
owned, occupied, used or operated by the Company, in compliance with all
Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on the Company's business or
activities. The Shareholders do not have any knowledge of pending or proposed
changes to any Environmental Obligations which would require any changes in any
of the Company's Premises, facilities, equipment, operations or procedures or
affect the Company's business or its cost of conducting its business as now
conducted.
-14-
<PAGE> 19
(ii) No conditions, circumstances or activities
have existed or currently exist, and neither the Company nor any Shareholder
has engaged in any acts or omissions, with respect to the Premises or any other
real properties, facilities or business presently or previously owned,
occupied, used or operated by the Company or any predecessor (including,
without limitation, off-site disposal or treatment of Hazardous Materials)
which could give rise to any Liability pursuant to any Environmental
Obligation. Exhibit 3.1(r)(ii) identifies all real properties and facilities,
including the addresses thereof, which have been owned, occupied, used or
operated by the Company or its predecessors at any time on or prior to the date
of this Agreement. There are no outstanding, pending or threatened Orders
against the Company or any Shareholder, nor are there any current, pending or
threatened investigations of any kind against the Company or any Shareholder,
concerning any Environmental Obligations. There are no actions, suits or
administrative, arbitral or other proceedings alleged, claimed, threatened,
pending against or affecting the Company or any Shareholder at law or in equity
with respect to any Environmental Obligations, and no Shareholder has any
knowledge of any existing grounds on which any such action, suit or proceedings
might be commenced.
(iii) Any chemicals and chemical compounds and
mixtures which are included among the assets of the Company are integral to and
required for the conduct of the Company's business, have not been and are not
intended to be discarded or abandoned, and are not waste or waste materials.
Except as set forth in the environmental studies attached as Exhibit
3.1(r)(iii) (collectively, the "Environmental Study"), the Company has not
generated, handled, used, transported or disposed of Hazardous Materials. All
waste materials which are generated as part of the business of the Company are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental
Study, no underground or above ground storage tanks are or have been located on
the Premises or any other real properties or any facilities presently or
previously owned, occupied, used or operated by the Company or any predecessor.
Except as set forth in the Environmental Study, neither any of the Premises nor
any other real properties or facilities presently or previously owned,
occupied, used or operated by the Company or any predecessor has been used at
any time as a gasoline service station or any facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products (other than
such storage, pumping and dispensing of fuels and lubricants as is incidental
to the Company's equipment rental/leasing business) or Hazardous Materials. No
building or other structure on any of the Premises contains asbestos-containing
materials. Except as set forth in the Environmental Study, there are not nor
have there been any incinerators, septic tanks, leach fields, cesspools or
wells (including without limitation dry, drinking, industrial, agricultural and
monitoring wells) on any of the Premises.
(s) Intellectual Property. The Company owns or has the
legal right to use and to transfer to the Buyer each item of Intellectual
Property required to be identified on Exhibit 3.1(h)(ii). The continued
operation of the business of the Company as currently conducted will not
interfere with, infringe upon, misappropriate or conflict with any Intellectual
Property rights of another Person. To the best knowledge of the Shareholders,
no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of the
Company or any Intellectual Property included in the Shareholder Property.
Neither the Company nor any owner of any Intellectual Property included in the
Shareholder Property has granted any license, sublicense or permission with
respect to any Intellectual Property owned or used in the Company's business.
-15-
<PAGE> 20
(t) Disclosure. None of the documents or information
provided to the Buyer by the Company, any Shareholder or any agent or employee
thereof in the course of the Buyer's due diligence investigation and the
negotiation of this Agreement and Section 3.1 of this Agreement and the
disclosure Exhibits referred to therein, including the financial statements
referred to above in Section 3.1, contain any untrue statement of any material
fact or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact which materially
adversely affects the business, prospects, condition, affairs or operations of
the Company or any of its properties or assets which has not been set forth in
this Agreement or such Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Shareholders acknowledge and agree that the fact that
they have made disclosures pursuant to Section 3.1 or otherwise of matters, or
did not have knowledge of matters, which result in Adverse Consequences to the
Buyer shall not relieve the Shareholders of their obligation pursuant to
Article 7 to indemnify and hold the Buyer harmless from all Adverse
Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Shareholders that the statements contained in
this Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. This Agreement and the Other Buyer
Agreements and the transactions contemplated hereby and thereby have been duly
approved by all requisite corporate action. The Buyer has full corporate power
and authority to execute, deliver and perform this Agreement and the Other
Buyer Agreements, and this Agreement constitutes, and the Other Buyer
Agreements will when executed and delivered constitute, the legal, valid and
binding obligations of the Buyer, and shall be enforceable in accordance with
their respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution,
delivery and performance of this Agreement and the Other Buyer Agreements, and
the consummation of the transactions contemplated hereby and thereby will not
(i) violate any Legal Requirement to which the Buyer is subject or any
provision of the certificate of incorporation or bylaws of the Buyer or (ii)
violate, with or without the giving of notice or the lapse of time or both, or
conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any Person the right to accelerate any
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of the Buyer pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, agreement, instrument or other
arrangement to which the Buyer is a party or which the Buyer or any
-16-
<PAGE> 21
of its assets and properties is bound or subject. Except for notices and
consents that will be given or obtained by the Buyer prior to the Closing, the
Buyer does not need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement.
3.3. Survival of Representations. The representations and
warranties contained in Sections 3.1 and 3.2 and the Liabilities of the parties
with respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that the Liabilities of the
Shareholders with respect to the representations and warranties set forth in
Sections 3.1(a), 3.1(b), 3.1(c), 3.1(d)(ii), 3.1(f), 3.1(g), 3.1(m), 3.1(r),
3.1(s) and 3.1(t), and the Liabilities of the Buyer with respect to the
representations and warranties set forth in Sections 3.2(a) and 3.2(b), shall
survive without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation (including, in the case of the
Shareholders, inquiry of the applicable employees of the Company), with due
diligence, to the best efforts of such party and be exercised always in a
reasonable manner and within reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to
take all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will, and will cause the Company to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Shareholders will
not cause or permit the Company to engage in any practice, take any action or
enter into any transaction outside its ordinary course of business; provided,
however, that in no event will any action be taken or fail to be taken or any
transaction be entered into which would result in a breach of any
representation, warranty or covenant of any Shareholder. The Shareholders will
cause the Company to keep its business and properties, including its current
operations, physical facilities, working conditions and relationships with
customers, suppliers, lessors, licensors and employees, intact and, in
connection therewith, to continue to purchase new or used equipment necessary
to maintain its rental/lease inventory at the level specified in Section
3.1(e)(x).
4.3. Acquisitions and Dispositions of Rental Equipment. Exhibit
4.3 sets forth (a) all new rental equipment purchased or ordered by the Company
since July 15, 1996 (the "New Rental Equipment"), (b) all Consigned Equipment
added to the Company's rental inventory since June 30, 1996, and (c) all
Consigned Equipment removed from the Company's rental inventory since June 30,
1996. From the date of this Agreement through the Closing Date, the Company
may purchase New
-17-
<PAGE> 22
Rental Equipment that has been ordered but not delivered as of the date of this
Agreement, but may not otherwise purchase, sell, trade, transfer, acquire or
dispose of any rental equipment, or change the amount or composition of the
Consigned Equipment, without the express prior written approval of an officer
of the Buyer.
4.4. Full Access. The Shareholders will cause the Company to
permit the Buyer and its agents to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company, to all premises, properties, personnel, books, records (including
Tax records), contracts and documents of or pertaining to the Company.
4.5. Notice of Developments. The Shareholders will give prompt
written notice to the Buyer of any material development which occurs after the
date of this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Company.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.6. Exclusivity. No Shareholder will, and the Shareholders will
not cause or permit the Company to, (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any portion of the assets
of, the Company (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
the Company's stock in favor of any such transaction. The Shareholders will
notify the Buyer immediately if the Person makes any proposal, offer, inquiry
or contact with respect to any of the foregoing.
4.7. Conveyance of Shareholder Property. Prior to the Closing
Date, the Shareholders shall convey, and shall cause each relative or affiliate
of the Company or of any Shareholder to convey, to the Company, free and clear
of any Encumbrance or Tax, all of each Shareholder's and each such relative's
or affiliate's right, title and interest to the Shareholder Property.
4.8. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
4.9. Closing Date Liabilities and Distribution. (a) Prior to the
Closing Date or concurrently with the Closing, the Shareholders shall pay, or
shall cause the Company to pay prior to the Closing Date as permitted by
Section 9.10, in full all known Closing Date Liabilities, the amount of which
is then ascertainable (including Seller Transaction Expenses as permitted
pursuant to Section 9.10). Following the Closing, the Shareholders shall
promptly pay in full all other Closing Date Liabilities. Effective as of
immediately prior to the Closing Date, the Shareholders hereby jointly and
severally assume all Closing Date Liabilities without further action by the
Shareholders, the Company or any other Person.
(b) Prior to the Closing Date, the Shareholders shall
cause the Company to distribute to the Shareholders the Excluded Assets (the
"Pre-Closing Date Distribution"). Any and all Taxes
-18-
<PAGE> 23
attributable to such distribution of Excluded Assets and to any prior
distribution or dividend of assets, including, without limitation, any
recognition by the Company of taxable income or gain with respect to the
distribution or dividend of the Excluded Assets or any prior distribution or
dividend of assets, shall be paid in full by the Shareholders and neither the
Company nor the Buyer shall have any Liability with respect thereto.
5. Post-Closing Covenants. The parties agree as follows with respect to
the period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. No Shareholder will take any action at any time
that is designed or intended to have the effect of discouraging any customer,
supplier, lessor, licensor or other business associate of the Company from
establishing or continuing a business relationship with the Buyer after the
Closing.
5.3. Cooperation. In the event and for so long as any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(a) any transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Company's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
5.4. Confidentiality. The Shareholders will treat and hold as
confidential all Confidential Information concerning the Buyer, the Company's
business or the Acquired Assets, refrain from using any such Confidential
Information and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all of such Confidential Information in its or their
possession.
5.5. Post-Closing Announcements. Following the Closing, no
Shareholder will issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the Buyer.
5.6. Financial Statements. The Seller and the Shareholders will,
upon request of the Buyer, cooperate with the Buyer to produce such historical
and on-going financial statements and audits as the Buyer may request, all at
the sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities.
-19-
<PAGE> 24
(a) Promptly following the Closing, the Shareholders will
pay and perform all Closing Date Liabilities (to the extent not paid at or
prior to the Closing Date), all Taxes attributable to the transactions
contemplated by this Agreement and all accrued vacation and other accrued
employee benefits; provided, however, that accrued vacation and other accrued
employee benefits with respect to those persons who are employees of the
Company as of immediately prior to the Closing Date and who become employees of
the Buyer effective as of the Closing will be satisfied as set forth in Section
2.2(b).
(b) The Shareholders will pay to the Buyer an amount
equal to the portion of the personal property taxes of the Company attributable
to the period from January 1, 1997, to the Closing Date (the "Pre-Closing
Personal Property Tax Amount"). The Pre-Closing Personal Property Tax Amount
payable by the Shareholders will be determined by prorating personal property
taxes of the Company for 1997 in proportion to the number of days in the year
prior to the Closing Date compared to the number of days in the year remaining
after the date on which the Closing occurs. If the actual Pre-Closing Personal
Property Tax Amount exceeds the estimated Pre-Closing Personal Property Tax
Amount used for purposes of Section 2.2(a), the Shareholders shall pay such
excess amount to the Buyer within five days after their receipt of notice from
the Buyer stating the amount payable by them and a copy of the invoices from
Governmental Authorities relating thereto. If the estimated Pre-Closing
Personal Property Tax Amount used for purposes of Section 2.2(a) exceeds the
actual Pre-Closing Personal Property Tax Amount, the Buyer shall pay such
excess amount to the Shareholders within five days of receipt of the invoices
from Governmental Authorities relating thereto.
(c) The Shareholders, at their expense, promptly will
take or cause to be taken any action necessary to remedy any failure of the
Premises or the acquired business to comply at the Closing Date with any Legal
Requirement, upon receipt of notice from the Buyer at any time.
(d) The Shareholders shall pay to the Buyer an amount
equal to the federal and state income taxes of the Company relating to all
periods from the end of the last tax year for which the Company's federal and
state income Tax Returns have been filed to the Closing Date (the "Pre-Closing
Income Tax Amount"), to the extent that the Pre-Closing Income Tax Amount
exceeds the aggregate estimated tax payments made by the Company on or before
the Closing Date that would be applicable to the Taxes included in the
Pre-Closing Income Tax Amount. The Pre-Closing Income Tax Amount will be
determined by the Buyer in accordance with generally accepted accounting
principles but without regard to any net operating loss carryforward. If the
actual Pre-Closing Income Tax Amount exceeds the estimated Pre-Closing Income
Tax Amount used for purposes of Section 2.2(a), the Shareholders shall pay such
excess amount to the Buyer within five days after their receipt of notice from
the Buyer stating the amount payable, accompanied by a schedule reflecting the
calculation of the amount due. If the estimated Pre-Closing Income Tax Amount
used for purposes of Section 2.2(a) exceeds the actual Pre-Closing Income Tax
Amount, the Buyer shall pay such excess amount to the Shareholders within five
days after the Buyer and the Shareholders' Agent agree in writing on the amount
of such excess.
(e) The Buyer will pay and perform, as and when due
(except to the extent the validity thereof or the liability therefor is being
contested by the Buyer), the Retained Liabilities.
5.8. Certain Post-Closing Environmental Matters. The Shareholders
shall, within 60 days of the Closing, take or cause to be taken, in compliance
with applicable Environmental Obligations, the
-20-
<PAGE> 25
following actions: (a) all contaminated soil around and under the site upon
which the two underground storage tanks were formerly located at the
Alamogordo, New Mexico Premises, as noted in the Environmental Study, shall be
removed and disposed of and replaced with clean soil, all to the satisfaction
of the Buyer; (b) the equipment washing area located at the Alamogordo, New
Mexico Premises, as noted in the Environmental Study, shall be upgraded and
connected to the city sewer system, all to the satisfaction of the Buyer; and
(c) all sediment from the equipment washing sump which has been disposed of on
the Silver City, New Mexico Premises, as noted in the Environmental Study,
shall be removed and disposed of, all to the satisfaction of the Buyer. The
Shareholders shall take such actions at their expense. Nothing in this Section
5.8 shall relieve any Shareholder from any obligation or Liability under
Section 7 of this Agreement, obligate the Buyer to take any action or impose
any Liability on the Buyer.
5.9. Repurchase of Unpaid Receivables. The Shareholders jointly
and severally guarantee that all Closing Accounts Receivable which are less
than 90 days old on the Closing Date will be fully paid to the Buyer in
accordance with their terms at their recorded amounts not later than 120 days
from the Closing Date. Upon demand by the Buyer at any time after 120 days
from the Closing Date, the Shareholders shall jointly and severally pay to the
Buyer the full amount of any unpaid Closing Accounts Receivables which are the
subject of such demand. Upon such payment to the Buyer, the Closing Accounts
Receivable which are so paid for by the Shareholders shall, without further
action of any party, become the property of the Shareholders, without recourse
to the Company.
5.10. Termination of Obligations. Effective as of the Closing Date,
neither the Company nor the Buyer shall have any Liability to any Shareholder
or any relative or affiliate thereof or of the Company, except as otherwise
provided in this Agreement, and the Other Buyer Agreements. Effective as of
the Closing Date, the Shareholders shall not have any Liability to the Company
or the Buyer, except as otherwise provided in this Agreement, and the Other
Seller Agreements.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions contemplated by this Agreement is subject
to satisfaction of the following conditions:
(a) each Shareholder's representations and warranties
shall be correct and complete at and as of the Closing Date and the Closing and
any written notices delivered to the Buyer pursuant to Section 4.5 and the
subject matter thereof shall be satisfactory to the Buyer;
(b) the Shareholders shall have performed and complied
with all of their covenants hereunder through the Closing;
(c) the Shareholders shall have given, or shall have
caused the Company to give, all notices and procured, or shall have caused the
Company to procure, all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the
-21-
<PAGE> 26
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own the Shares
or the Acquired Assets and conduct the business represented by the Acquired
Assets, and no such Order shall be in effect;
(e) there shall have been no adverse change in the
Company, the Acquired Assets or the Company's business between the date of
execution of this Agreement and the Closing;
(f) the Shareholders shall have delivered to the Buyer
(i) a certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, and (ii) a good
standing certificate, dated within 10 days of the Closing, from the Secretary
of State of the State of the Company's jurisdiction of incorporation and each
other state in which the Company is qualified or authorized to do business as a
foreign corporation.
(g) the Buyer shall have completed its due diligence with
respect to the Company, the Company's business and the Acquired Assets with
results satisfactory to the Buyer.
(h) the Other Seller Agreements shall have been executed
and delivered by the Shareholders, as applicable;
(i) the Premises Leases shall have been executed and
delivered by the parties thereto and the owners of the real property underlying
the Premises Leases, and each Person having an Encumbrance on such property,
shall have executed and delivered estoppel, nondisturbance and landlord waiver
agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the
Shareholders an opinion in form and substance as set forth in Exhibit 6.1(j)
addressed to the Buyer and its debt and equity financing sources and dated as
of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) a "Phase I" environmental study of each of the
properties comprising the Premises, and such additional environmental testing
as the Buyer shall request, shall have been completed at the Shareholders'
expense and supplied to the Buyer, and the contents and results thereof shall
be satisfactory to the Buyer;
(m) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company;
(n) stock certificates representing the Shares, duly
endorsed in blank or accompanied by stock powers duly executed in blank, shall
have been delivered by the Shareholders to the Buyer;
(o) the Shareholders shall have delivered to the Buyer
possession and control of the Company and the Acquired Assets, including,
without limitation, all stock certificate books, minute books, corporate seals,
and all other corporate and financial records of the Company;
-22-
<PAGE> 27
(p) the Shareholders shall have delivered, or caused the
Company to deliver, to the Buyer such other instruments, certificates and
documents as are reasonably requested by the Buyer in order to consummate the
transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Shareholders. The obligation
of the Shareholders to consummate the transactions contemplated by this
Agreement is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all
of its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Shareholders a
certificate to the effect that each of the conditions specified above in
Sections 6.2(a) and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed
and delivered by the Buyer;
(e) the Shareholders shall have received from counsel to
the Buyer an opinion in form and substance as set forth in Exhibit 6.2(e),
addressed to the Shareholders and dated as of the Closing; and
(f) the Buyer shall have paid and deposited the purchase
price for the Shares pursuant to Section 2.2.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer and the
Company.
(a) If any Shareholder breaches (or if any Person other
than the Buyer alleges facts that, if true, would mean any Shareholder has
breached) any of the representations or warranties of any Shareholder contained
herein and the Buyer gives notice thereof to the Shareholders' Agent within the
Survival Period, or if any Shareholder breaches (or if any Person other than
the Buyer alleges facts that, if true, would mean any Shareholder has breached)
any covenants of any Shareholder contained herein or any representations,
warranties or covenants of any Shareholder contained in any Other Seller
Agreement and the Buyer gives notice thereof to the Shareholders' Agent, then
the Shareholders agree to jointly and severally indemnify and hold harmless the
Buyer from and against any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to or caused by any of the foregoing regardless
of whether the Adverse Consequences are suffered during or after the Survival
-23-
<PAGE> 28
Period. In determining whether there has been a breach of any representation
or warranty contained in Section 3.1 and in determining for purposes of the
preceding sentence the amount of Adverse Consequences suffered by the Buyer,
such representations and warranties shall not be qualified (other than by (A)
the reference to "knowledge" set forth in the last sentence of Section 3.1(o)
and (B) the references to "material" set forth in Section 3.1(t)) by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. The Shareholders also agree to jointly and severally
indemnify and hold harmless the Buyer from and against any Adverse Consequences
the Buyer may suffer which result from, arise out of, relate to or are caused
by (i) any Liability of the Company or any Shareholder not included in the
Retained Liabilities (including, without limitation, those concerning Hazardous
Materials or the failure prior to the Closing Date of the Company, any
Shareholder or any predecessor to comply with any Environmental Obligation or
other Legal Requirement), (ii) any condition, circumstance or activity existing
prior to the Closing Date on, in or under any of the Premises which relates to
any Environmental Obligation or any act or omission of the Company, any
Shareholder or any predecessor with respect to, or any event or circumstance
related to, the Company's, any Shareholder's or any predecessor's ownership,
occupation, use or operation of any of the Acquired Assets, the Excluded
Assets, the Premises or any other assets or properties or the conduct of its or
their business, regardless, in the case of (i) or (ii), of (A) whether or not
such Liability, act, omission, event, circumstance or matter was known or
disclosed to the Buyer, was disclosed on any Exhibit hereto or is a matter with
respect to which any Shareholder did or did not have knowledge, (B) when such
Liability, act, omission, event, circumstance or matter occurred, existed,
occurs or exists and (C) whether a claim with respect thereto was asserted
before or is asserted after the Closing Date, and (iii) any Liability resulting
from any failure of the parties to comply with any applicable bulk sales or
transfer Legal Requirement in connection with the transactions contemplated by
this Agreement. If any dispute arises concerning whether any indemnification
is owing which cannot be resolved by negotiation among the parties within 30
days of notice of claim for indemnification from the party claiming
indemnification to the party against whom such claim is asserted, the dispute
will be resolved by arbitration pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against any Shareholder during the Escrow Period
will be paid to the Buyer first out of the funds escrowed pursuant to the
Escrow Agreements, along with interest from the date of the Closing at the rate
applicable to the escrowed funds. The Shareholders will have joint and several
Liability for any additional amounts needed to cover such claims, which amounts
will be paid directly to the Buyer. At the end of the Escrow Period amounts
that may be needed to cover pending indemnification claims made by the Buyer
(such amounts to be determined by the Buyer based upon the reasonable exercise
of its business judgment) will be retained in the Escrow Accounts until such
claims are resolved, and any excess on deposit therein, including any accrued
interest, will be paid to the Shareholders. Nothing in this Section 7.1(b)
will be construed to limit the Buyer's right to indemnification to amounts on
deposit in the Escrow Account. The Buyer and the Shareholders' Agent shall
jointly give instructions to the Escrow Agents to carry out the intent of this
Section 7.1(b). Any disputes concerning the escrowed funds will be settled by
arbitration as provided in this Agreement. The Buyer, on the one hand, and the
Shareholders jointly and severally, on the other hand, shall each be
responsible for one-half of the fees, charges and expenses payable to the
Escrow Agents pursuant to paragraph a. of Article 2 of the Escrow Agreements
and, except as otherwise determined pursuant to Section 9.11 of this Agreement,
one- half of any amounts payable pursuant to paragraph b. of such Article 2.
Buyer shall have complete discretion to determine the Escrow Agreement under
which any claim is made.
-24-
<PAGE> 29
7.2. Indemnification Provisions for Benefit of the Shareholders.
If the Buyer breaches (or if any Person other than a Shareholder alleges facts
that, if true, would mean the Buyer has breached) any of its representations or
warranties contained herein and the Shareholders' Agent gives notice of a claim
for indemnification against the Buyer within the Survival Period, or if the
Buyer breaches (or if any Person other than a Shareholder alleges facts that,
if true, would mean the Buyer has breached) any of its covenants contained
herein or any of its representations, warranties or covenants contained in any
Other Buyer Agreement and the Shareholders' Agent gives notice thereof to the
Buyer, then the Buyer agrees to indemnify and hold harmless the Shareholders
from and against any Adverse Consequences the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Shareholders for purposes of
this Section, such representations and warranties shall not be qualified by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement
(including, without limitation, any Governmental Authority) notifies any party
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its
sole cost and expense, to defend the Indemnified Party against the Third Party
Claim with counsel of its choice satisfactory to the Indemnified Party so long
as (i) the Indemnifying Party notifies the Indemnified Party in writing within
10 days after the Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
-25-
<PAGE> 30
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b)
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to any Shareholder or any relative or
affiliate of any Shareholder at or after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are
in addition to, and not in derogation of, any statutory, equitable or common
law remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate
this Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving
written notice to the Shareholders' Agent at any time prior to the Closing (i)
in the event any Shareholder has breached any representation, warranty or
covenant contained in this Agreement in any material way, the Buyer has
notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before June 30, 1997 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement
by giving written notice to the Buyer at any time prior to the Closing (i) if
the Buyer has breached any representation, warranty or covenant contained in
this Agreement in any material way, the Shareholders' Agent has notified the
-26-
<PAGE> 31
Buyer of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before June 30,
1997 because of the failure of any condition precedent to the Shareholders'
obligations to consummate the Closing (unless the failure results primarily
from any Shareholder breaching any representation, warranty or covenant
contained in this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party
will treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer
any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. No Shareholder may assign this Agreement or any of his
or her rights, interests or obligations hereunder without the prior written
approval of the Buyer. The Buyer may assign its rights and obligations
hereunder as permitted by law, including, without limitation, to any debt or
equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement
are inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
-27-
<PAGE> 32
<TABLE>
<S> <C>
If to the
Shareholders: Copy to:
Addressed to the
Shareholders' Agent at:
Hershel A. Manning John A. Darden III, Esq.
421 Mesilla Street Modrall, Sperling, Roehl, Harris & Sisk
Las Cruces, New Mexico 88005 277 E. Amador Avenue, Suite 304
Telecopy: (505) 524-4882 Las Cruces, New Mexico 88004-0578
Telecopy: (505) 526-6656
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
1522 Blake Street 633 Seventeenth Street, Suite 3000
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Richard M. Tyler Attn: Andrew L. Blair, Jr.
Telecopy: (303) 620-9016 Telecopy: (303) 298-0940
</TABLE>
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and
construed in accordance with the domestic laws of the State of Colorado without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Colorado or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a)
the Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
-28-
<PAGE> 33
hereby and (b) the Shareholders will bear all costs and expenses (including,
without limitation, all legal, accounting and tax related fees and expenses,
all fees, commissions, expenses and other amounts payable to any broker, finder
or agent and the costs of any environmental study and additional environmental
testing contemplated by Section 6.1) incurred by the Company prior to the
Closing or by any Shareholder either before or after the date of this Agreement
in connection with this Agreement or the transactions contemplated hereby
(collectively, "Seller Transaction Expenses"); provided, however, that prior to
the Closing Date the Company may use any cash that would otherwise be an
Excluded Asset to pay Seller Transaction Expenses.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Shareholders' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE
WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Shareholders' Agent. Each Shareholder hereby authorizes and
appoints the Shareholders' Agent as its, his or her exclusive agent and
attorney-in-fact to act on behalf of each of them with respect to all matters
which are the subject of this Agreement, including, without limitation, (a)
receiving or giving all notices, instructions, other communications, consents
or agreements that may
-29-
<PAGE> 34
be necessary, required or given hereunder and (b) asserting, settling,
compromising, or defending, or determining not to assert, settle, compromise or
defend, (i) any claims which any Shareholder may assert, or have the right to
assert, against the Buyer, or (ii) any claims which the Buyer may assert, or
have the right to assert, against any Shareholder. The Shareholders' Agent
hereby accepts such authorization and appointment. Upon the receipt of written
evidence satisfactory to the Buyer to the effect that the Shareholders' Agent
has been substituted as agent of the Shareholders by reason of his death,
disability or resignation, the Buyer shall be entitled to rely on such
substituted agent to the same extent as they were theretofore entitled to rely
upon the Shareholders' Agent with respect to the matters covered by this
Section 9.14. No Shareholder shall act with respect to any of the matters
which are the subject of this Agreement except through the Shareholders' Agent.
The Shareholders acknowledge and agree that the Buyer may deal exclusively with
the Shareholders' Agent in respect of such matters, that the enforceability of
this Section 9.14 is material to the Buyer, and that the Buyer has relied upon
the enforceability of this Section 9.14 in entering into this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-30-
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By:/s/ RICHARD M. TYLER
------------------------------------
Name: Richard M. Tyler
----------------------------------
Title: Vice President
---------------------------------
SHAREHOLDERS:
/s/ HERSHEL A. MANNING
---------------------------------------
Hershel A. Manning
/s/ CAROLYN W. MANNING
---------------------------------------
Carolyn W. Manning
[SIGNATURE PAGE TO PURCHASE AGREEMENT.]
-31-
<PAGE> 1
EXHIBIT 10.16
================================================================================
PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.
AND THE
SHAREHOLDERS
OF
TITUS RENTAL SERVICE COMPANIES, INC.
AS OF JUNE 26, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4. Closing; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2. Operation and Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3. Acquisitions and Dispositions of Rental Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7. Conveyance of Shareholder Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.9. Closing Date Liabilities and Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.9. Termination of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10. Section 338 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2. Conditions to Obligation of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1. Indemnification Provisions for Benefit of the Buyer and the Company . . . . . . . . . . . . . . . . 21
7.2. Indemnification Provisions for Benefit of the Shareholders . . . . . . . . . . . . . . . . . . . . . 23
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.14. Shareholders' Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
Exhibits:
Exhibit 1.1(a) Exhibit 3.1(c)(i) Exhibit 3.1(m)
Exhibit 1.1(b) Exhibit 3.1(d)(i)(A) Exhibit 3.1(o)(i)
Exhibit 1.1(c) Exhibit 3.1(d)(i)(B) Exhibit 3.1(o)(ii)
Exhibit 1.1(d) Exhibit 3.1(d)(i)(C) Exhibit 3.1(r)(ii)
Exhibit 1.1(e) Exhibit 3.1(e)(i) Exhibit 3.1(r)(iii)
Exhibit 1.1(f) Exhibit 3.1(e)(ii) Exhibit 4.3
Exhibit 1.1(g) Exhibit 3.1(f) Exhibit 6.1(j)
Exhibit 1.1(h) Exhibit 3.1(f) Exhibit 6.2(e)
Exhibit 1.1(i) Exhibit 3.1(g)(i)(A)
Exhibit 1.1(j) Exhibit 3.1(g)(i)(B)
Exhibit 1.1(k) Exhibit 3.1(g)(ii)
Exhibit 1.1(l) Exhibit 3.1(h)(i)
Exhibit 1.1(m) Exhibit 3.1(h)(ii)
Exhibit 2.2(a) Exhibit 3.1(i)(i)
Exhibit 3.1(a)(i) Exhibit 3.1(i)(ii)
Exhibit 3.1(a)(ii) Exhibit 3.1(k)
Exhibit 3.1(b) Exhibit 3.1(l)
(ii)
<PAGE> 4
This Purchase Agreement is entered into as of June 26, 1997
among RentX Industries, Inc., a Delaware corporation (the "Buyer"), Barbara E.
Titus, Jeffrey W. Titus, Christopher Titus and William V. Titus, Trustee of the
William V. Titus Revocable Living Trust u/t/a dated December 17, 1979 and
William V. Titus, individually (individually, a "Shareholder" and collectively,
the "Shareholders").
Recitals
The Shareholders own, directly or indirectly, all of the
issued and outstanding capital stock of Titus Rental Service Companies, Inc., a
Michigan corporation (the "Company"). Titus is the trustee and sole
beneficiary of the William V. Titus Revocable Living Trust (the "Trust") u/t/a
dated December 17, 1979. The Shareholders desire to sell, and the Buyer
desires to purchase, all of the issued and outstanding capital stock of the
Company as provided in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the
meanings designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set
forth in this Agreement, the Buyer agrees to purchase from the Shareholders,
and the Shareholders agree to sell to the Buyer, all the Shares free and clear
of any Encumbrance or Tax, for the consideration specified in Section 2.2. The
Buyer will have no obligation under this Agreement to purchase less than all of
the Shares.
2.2. Purchase Price; Payment.
(a) The purchase price for the Shares is $4,602,800,
increased for the Leasehold Improvement Adjustment and increased or decreased
as applicable for the Net Rental Equipment Adjustment and the Accounts
Receivable Adjustment. At the Closing, the Buyer will, by wire transfer or
other delivery of immediately available funds, (i) pay to the Shareholders
(subject to Section 2.2(b)), $4,352,800, subject to increase for the Leasehold
Improvement Adjustment and subject to increase or decrease as applicable for
the Net Rental Equipment Adjustment and the Accounts Receivable Adjustment,
plus $6,576.80 representing the Personal Property Tax Amount, and less the
amount by which the estimated Pre-Closing Income Tax Amount exceeds the
estimated tax payments made by the Company in respect of the Pre-Closing
Income Tax Amount and (ii) deposit $250,000 into the Escrow Account (and the
amounts paid and deposited to and in respect of the Shareholders will
constitute the full purchase price for the Shares). The amount deposited in
the Escrow Account (including all interest and dividends earned thereon) will
belong to the Shareholders, subject to the Shareholders' indemnification
obligations set forth in this Agreement, and will be held, invested,
administered and disbursed according to Section 7.1(b) hereof and the Escrow
Agreement. The purchase price will be payable to the Shareholders in the
following percentages:
<PAGE> 5
<TABLE>
<CAPTION>
Percentage of
Shareholder No of Shares Owned Purchase Price
<S> <C> <C>
William V. Titus, Trustee of the
William V. Titus Revocable Living
Trust u/t/a December 17, 1979,
as amended 498 49.8%
Jeffrey W. Titus 2 .2%
Christopher Titus 2 .2%
Barbara E. Titus 498 49.8%
</TABLE>
(b) Reserved Shareholder Liabilities representing accrued vacation and
other accrued employee benefits with respect to those persons who are employees
of the Company as of immediately prior to the Closing Date and who become
employees of the Buyer effective as of the Closing will be satisfied by payment
of the amount thereof by the Shareholders to the Buyer as the Buyer provides
such benefits or makes cash payments in lieu thereof to employees. The
Shareholders will take all actions necessary to cause the balance of the
Reserved Shareholder Liabilities to be satisfied on or prior to Closing and
the Shareholders will provide additional funds as required to satisfy Reserved
Shareholder Liabilities. Nothing in this Agreement will be deemed to limit the
joint and several obligations of the Shareholders to pay the Reserved
Shareholder Liabilities in full. On or before the day before the Closing, the
Buyer and the Shareholders' Agent will determine and set forth on Exhibit
2.2(a) the final amounts of the Leasehold Improvement Adjustment, the Net
Rental Equipment Adjustment, the Accounts Receivable Adjustment, the Personal
Property Tax Amount, the Pre-Closing Income Tax Amount and any other items
which affect the purchase price paid at Closing or constitute other payments by
the Buyer or the Shareholders at Closing. The federal, state and local income
tax liability of the Company will be determined through the Closing Date by an
interim closing of the books, as if the Company's taxable year as a separate C
corporation (for federal income tax purposes) ended with the Closing Date, and
such amount will be treated as an accrued liability of the Company. This tax
liability will be determined by using the accrual method of accounting, except
that no item of deduction (including depreciation) or credit will be taken into
account with respect to the New Rental Equipment.
2.3. Sales Taxes, Etc. The Shareholders will pay all sales, use,
transfer, licensing, recording, stamp and other Taxes, fees and charges payable
in respect of or as a result of the sale and transfer of the Shares to the
Buyer pursuant to this Agreement other than any such Taxes assessed by any
state or local taxing authority in Colorado.
2.4. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
June 26, 1997 (but in any event on or before June 30, 1997), by delivering all
documents, agreements and instruments to the offices of Sherman & Howard
L.L.C., and all transactions contemplated by this Agreement will be effective
at 12:00 a.m. local time in Novi, Michigan on the day of the Closing (such
effective time being the "Closing Date").
2.5. Deliveries at the Closing. At the Closing, (a) the Shareholders
will deliver, or cause to be delivered, to the Buyer the certificates,
instruments and documents referred to in Section 6.1, (b) the Buyer will
deliver to the Shareholders the certificates, instruments and documents
referred to in Section 6.2, (c) the Shareholders will deliver to the Buyer
stock certificates representing all the Shares, duly endorsed in blank
-2-
<PAGE> 6
or accompanied by stock powers duly executed in blank, free and clear of any
Encumbrances or Taxes and (d) the Buyer will pay and deposit the purchase price
in accordance with Section 2.2.
3. Representations and Warranties.
3.1. Representations and Warranties of the Shareholders. The Primary
Shareholders jointly and severally represent and warrant to the Buyer that the
statements contained in this Section 3.1 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were then substituted for
the date of this Agreement throughout this Section 3.1).
(a) Organization, Good Standing, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Michigan, and is not required to be qualified or authorized to do
business as a foreign corporation in any jurisdiction. The Company has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The copies of
the articles of incorporation (certified by the Secretary of State of
Michigan) and the bylaws of the Company, both as amended to date, which have
been delivered to the Buyer by the Shareholders and are attached as Exhibits
3.1(a)(i) and 3.1(a)(ii), respectively, are complete and correct, and the
Company is not in default under or in violation of any provision of its
articles of incorporation or bylaws. The minute books (which contain the
records of all meetings of or actions by the shareholders, the board of
directors, and any committees of the board of directors) and the stock
certificate books and the stock record books of the Company, copies of which
have been delivered to the Buyer by the Shareholders, are correct and complete.
(b) Ownership and Capitalization.
(i) The authorized capital stock of the Company consists of
50,000 shares of Common stock, $1.00 par value. Each Shareholder owns,
beneficially and of record, free and clear of any Encumbrance or Tax, the
number of shares of the Common stock, $1.00 par value, of the Company set forth
opposite such Shareholder's name in Section 2.2(a), and the shares reflected in
Section 2.2(a) constitute all of the issued and outstanding capital stock of
the Company. All of the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued, and are fully paid and
nonassessable, with no personal Liability attaching to the ownership thereof.
There is no authorized or outstanding stock or security convertible into or
exchangeable for, or any authorized or outstanding option, warrant or other
right to subscribe for or to purchase, or convert any obligation into, any
unissued shares of the Company's capital stock or any treasury stock, and the
Company has not agreed to issue any security so convertible or exchangeable or
any such option, warrant or other right. There are no authorized or
outstanding stock appreciation, phantom stock, profit participation or similar
rights with respect to the Company. There are no voting trusts, voting
agreements, proxies or other agreements or understanding with respect to any
capital stock of the Company. Except as set forth on Exhibit 3.1(b), all of
which the Shareholders shall cause to be terminated prior to the Closing, there
are no existing rights of first refusal, buy-sell arrangements, options,
warrants, rights, calls, or other commitments or restrictions of any character
relating to any of the Shares, except those restrictions on transfer imposed by
the Securities Act of 1993, as amended, and applicable state securities laws.
The Company has no subsidiaries and no interest in any other corporation,
partnership, limited partnership, limited liability company, association or
joint venture.
-3-
<PAGE> 7
(c) Authority; No Violation. (i) Each Shareholder and each relative
or affiliate of the Company or of a Shareholder who is party to any Other
Seller Agreement has full and absolute right, power, authority and legal
capacity to execute, deliver and perform this Agreement and all Other Seller
Agreements to which such Shareholder, relative or affiliate is a party, and
this Agreement constitutes, and the Other Seller Agreements will when executed
and delivered constitute, the legal, valid and binding obligations of, and
shall be enforceable in accordance with their respective terms against, each
such Shareholder, relative or affiliate who is a party thereto. The execution,
delivery and performance of this Agreement and the Other Seller Agreements and
the consummation of the transactions contemplated hereby and thereby will not
(A) violate any Legal Requirement to which the Company, any Shareholder, or any
relative or affiliate of the Company or of any Shareholder who is a party to
any Other Seller Agreement is subject or any provision of the articles of
incorporation or bylaws of the Company or of any such affiliate, or (B) except
as set forth in Exhibit 3.1(c)(i), violate, with or without the giving of
notice or the lapse of time or both, or conflict with or result in the breach
or termination of any provision of, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in the creation
of any Encumbrance upon any properties, assets or business of the Company, of
any Shareholder, or of any such relative or affiliate pursuant to, any
indenture, mortgage, deed of trust, lien, lease, license, Permit, agreement,
instrument or other arrangement to which the Company, any Shareholder or any
such relative or affiliate is a party or by which the Company, any Shareholder,
or any such relative or affiliate or any of their respective assets and
properties is bound or subject. Except for notices that will be given and
consents that will be obtained by the Shareholders prior to the Closing (which
are set forth in Exhibit 3.1(c)(i)), neither the Company, any Shareholder, nor
any such relative or affiliate need give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental Authority or
other Person in order for the parties to consummate the transactions
contemplated by this Agreement and the Other Seller Agreements.
(d) Financial Statements; Absence of Liabilities. (i) The unaudited
balance sheets of the Company as of March 31, 1994, March 31, 1995, March 31,
1996 and March 31, 1997, the related statements of income, shareholders' equity
and cash flows for the fiscal years then ended, the unaudited balance sheets
of the Company as of September 30, 1996 and December 31, 1996 (the latter being
referred to as the "Latest Balance Sheet"), and the related statements of
income, shareholders' equity and cash flows for the fiscal quarters then
ended, have been prepared in accordance with good accounting practices and on a
consistent basis, are in accordance with the books and records of the Company
(which books and records are complete and correct in all material respects),
are accurate and fairly present the financial position and results of
operations of the Company as of such dates and for each of the periods
indicated, do not list book values for the assets that are in excess of their
fair market values, and to the best knowledge of the Shareholders, except as
set forth on Exhibit 3.1(d)(i)(A), make full and adequate provision for all
Liabilities to which the Company is currently subject. Copies of the financial
statements described in the first sentence in this Section are attached as
Exhibit 3.1(d)(i)(B). The expenses itemized on Exhibit 3.1(d)(i)(C) and
reflected in the Company's financial performance for the 12-month period ended
March 31, 1997 will not be realized on an on-going basis, and information
sufficient to determine such financial performance for such 12-month period has
been provided by the Shareholders to the Buyer prior to the date of this
Agreement.
(ii) To the best knowledge of the Shareholders, since the date
of the Latest Balance Sheet, the Company has not incurred or become subject to
any Liability other than Liabilities incurred in the ordinary course of
business. To the best knowledge of the Shareholders, as of the Closing (at
12:00 a.m. on the day of Closing), the Company will have no Liability (and
there is no basis for the assertion of any Liability), except for the Retained
Liabilities.
-4-
<PAGE> 8
(e) Absence of Certain Leases, Changes or Events. The Company is not,
except for the Premises Leases and as set forth on Exhibit 3.1(e)(i), a party
to or otherwise bound by any contract or agreement that has a term of three or
more months pursuant to which the Company is obligated to furnish any
equipment, products or services, and no such contract or agreement has been
prepaid with respect to any period after the Closing Date. Except as set forth
on Exhibit 3.1(e)(ii), since December 31, 1996, the Company has not (i)
incurred any debt, indebtedness or other Liability, except current Liabilities
incurred in the ordinary course of business; (ii) delayed or postponed the
payment of accounts payable or other Liabilities or accelerated the collection
of any receivable beyond stated, normal terms; (iii) sold (except (1) as set
forth on Exhibit 4.3 with respect to the period between February 6, 1997 and
the date of this Agreement , (2) with respect to the period from December 31,
1996 to February 6, 1997 and (3) as permitted by Section 4.3 with respect to
the period after the date of this Agreement and before the Closing Date) or
otherwise transferred any of its equipment or other assets or properties; (iv)
cancelled, compromised, settled, released, waived, written-off or expensed any
account or note receivable, right, debt or claim involving more than $10,000 in
the aggregate; (v) changed in any significant manner the way in which it
conducts its business; (vi) made or granted any individual wage or salary
increase in excess of 10% or $1.00 per hour, any general wage or salary
increase, or any additional benefits of any kind or nature; (vii) except as
otherwise expressly permitted by this Section 3.1(e), (A) entered into any
contracts or agreements, or made any commitments, involving more than $10,000
individually or in the aggregate or (B) accelerated, terminated, delayed,
modified or cancelled any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) involving more than $10,000
individually or in the aggregate; (viii) suffered any adverse fact or change,
including, without limitation, to or in its business, assets, financial
condition, prospects or customer or supplier relationships; (ix) made any
payment or transfer to or for the benefit of any shareholder, officer or
director or any relative or affiliate thereof or permitted any Person,
including, without limitation, any shareholder, officer, director or employee
or any relative or affiliate thereof, to withdraw assets from the Company
(other than cash and other Excluded Assets distributed to the Shareholders as
set forth on Exhibit 3.1(e)(ii) and other than the payment to the Shareholders
of the proportionate monthly amount of their respective normal annualized
salaries due and payable during such period); (x) failed to make purchases of
new or used equipment consistent with past practices necessary to maintain its
rental/lease inventory at the level which is reasonably necessary to maintain
the revenue base experienced by the Company during the 12 months preceding such
date; (xi) decreased its lease rate with respect to any equipment by 10% or
more from the applicable lease rate in effect on December 31, 1996 or rented or
leased any equipment or sold or otherwise transferred any inventory, equipment
or services at below-normal rental or lease rates or margins; (xii) suffered
any other significant occurrence, event, incident, action, failure to act or
transaction outside the ordinary course of business; or (xiii) agreed to incur,
take, enter into, make or permit any of the matters described in clauses (i)
through (xii).
(f) Tax Matters.
(i) To the best knowledge of the Shareholders, the Company has
filed all Tax Returns that it was required to file and all such Tax Returns
were correct and complete in all respects. To the best knowledge of the
Shareholders, all Taxes owed by the Company (whether or not shown on any Tax
Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Encumbrances on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
-5-
<PAGE> 9
(ii) To the best knowledge of the Shareholders, the Company
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.
(iii) To the best knowledge of the Shareholders, there is no
basis for any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. To the best knowledge of the Shareholders, there
is no pending or threatened dispute or claim concerning any Tax Liability of
the Company. Exhibit 3.1(f) lists all federal, state, local and foreign income
Tax Returns filed with respect to the Company for taxable periods ended on or
after December 31, 1991, indicates those Tax Returns that have been audited
and indicates those Tax Returns that currently are the subject of audit. The
Shareholders have delivered to Buyer true and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies filed
or assessed against or agreed to by the Company since December 31, 1991.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) Neither the Company nor any of its shareholders has ever filed
(A) an election pursuant to Section 1362 of the Code that either the Company be
taxed as an "S" corporation, except as set forth on Exhibit 3.1(f), or (B) a
consent pursuant to Section 341(f) of the Code relating to collapsible
corporations. The Company has not made any payments, is not obligated to make
any payments and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G. The Company has not been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662. The Company is not a party to any
Tax allocation or sharing agreement. The Company has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) and has no Liability for the
Taxes of any Person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract or otherwise. The total adjusted basis of
the Acquired Assets exceeds the sum of the Company's Liabilities plus the
amount of Liabilities to which the Acquired Assets are subject.
(vi) Exhibit 3.1(f) sets forth the following information with
respect to the Company as of the most recent practicable date (as well as on an
estimated pro forma basis as of the Closing giving effect to the consummation
of the transactions contemplated hereby): (A) the basis of the Company in its
assets; and (B) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax credit, or excess charitable
contribution allocable to the Company.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Company owns all of the
Acquired Assets (other than certain items of Shareholder Property), free and
clear of all Encumbrances (except for those Encumbrances which the Company
shall cause to be terminated as of the Closing). As of the Closing, all of the
Acquired Assets (including all of the Shareholder Property) will be owned by
the Company, free and clear of all Encumbrances, and the Company will have good
and marketable title to all the Acquired Assets. The Acquired Assets consist of
(A) the tangible and intangible assets of the Company (exclusive of the
Excluded
-6-
<PAGE> 10
Assets) in existence as of December 31, 1996 (except as set forth on Exhibit
3.1(e)(ii) with respect to cash and other Excluded Assets which were
distributed to its shareholders and except for such changes in inventory and in
accounts receivable in the ordinary course of business as are not in violation
of Section 3.1(e) or Section 4.3), increased by Current Rental Equipment
acquired on or after December 31, 1996 but before February 6, 1997, and
increased by Current Rental Equipment acquired on and after February 6, 1997
but before the date of this Agreement in compliance with Section 4.3, and
increased by new rental equipment acquired from and after the date of this
Agreement in compliance with Section 4.3, decreased by Current Rental Equipment
disposed of from and after the date of this Agreement in compliance with
Section 4.3, decreased by Current Rental Equipment sold or otherwise
transferred on or after December 31, 1996 but before February 6, 1997 and
decreased by current Rental Equipment sold or otherwise transferred on or after
February 6, 1997 but before the date of this Agreement as set forth on Exhibit
4.3 and (B) all tangible and intangible assets, including, without limitation,
all improvements, fixtures and fittings, owned by any Shareholder or relative
or affiliate thereof or of the Company which have been used in its business at
any time on or after December 31, 1996 (the "Shareholder Property"), including,
without limitation, the tangible and intangible assets set forth on Exhibit
3.1(g)(i)(A) owned by any Shareholder or relative or affiliate thereof.
Between December 31, 1996 and the day before the date of this Agreement, the
Company has purchased the New Rental Equipment and has sold, for cash only,
the Current Rental Equipment described on Exhibit 4.3, but has not otherwise
sold, traded, transferred or otherwise disposed of any Current Rental
Equipment. In the case of Acquired Assets consisting of a leasehold interest
in equipment held by the Company as rental inventory ("Leased Rental
Equipment"), the Company has a valid leasehold interest in the Leased Rental
Equipment and the lessor thereof is not a relative or affiliate of the Company,
or any Shareholder. In the case of Acquired Assets consisting of the Company's
rights under an arrangement with the owner of equipment who makes such
equipment available for rental by the Company under a split rental or similar
arrangement ("Consigned Equipment"), such arrangement is in full force and
effect and the owner of the Consigned Equipment is not a relative or affiliate
of the Company, or any Shareholder. The Acquired Assets are all of the
tangible and intangible assets (other than the Excluded Assets and the
Premises) used by the Company in, or necessary for the conduct of, its
business. The Acquired Assets, the Leased Rental Equipment and the Consigned
Equipment encompass all equipment used by the Company to generate the income
reflected in the financial statements attached as Exhibit 3.1(d)(i)(B). The
total cost to the Company to lease the Leased Rental Equipment during the
fiscal year ended March 31, 1996 and the 9-month period ended December 31, 1996
did not exceed $-0- and $-0-, respectively. The total cost to the Company to
use the Consigned Equipment as part of its rental inventory during the fiscal
year ended March 31, 1996 and the 9-month period ended December 31, 1996, did
not exceed $-0- and $-0-, respectively. Exhibit 3.1(g)(i)(B) lists all Leased
Rental Equipment and Consigned Equipment as of the date of this Agreement.
Except for items rented or leased to customers, all of the tangible Acquired
Assets, the Leased Rental Equipment and the Consigned Equipment are located on
the Premises.
(ii) The Premises constitute all of the real property,
buildings and improvements used by the Company in its business. The Premises
are supplied with utilities and other services necessary for the operation
thereof. Except as set forth on Exhibit 3.1(g)(ii), the Premises are free from
defects, have been maintained in accordance with normal industry practice, are
in good operating condition and repair and are suitable for the purposes for
which they presently are used. To the best knowledge of the Shareholders, the
Premises have received all approvals of Governmental Authorities (including
Permits) required in connection with the occupation and operation thereof and
have been occupied, operated and maintained in accordance with applicable Legal
Requirements. The Company has not received notice of violation of any Legal
Requirement or Permit relating to its operations or its owned or leased
properties.
-7-
<PAGE> 11
(iii) No party to any lease with respect to any Premises has
repudiated any provision thereof, and there are no disputes, oral agreements or
forbearance programs in effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data. Attached as
Exhibit 3.1(h)(ii) is a correct and complete list setting forth the items
identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Company nor, to the best knowledge of the
Shareholders, any other party thereto is in breach or default in performance of
any of its respective obligations under, and no event exists which, with the
giving of notice or lapse of time or both, would constitute a breach, default
or event of default on the part of a party to, any of the foregoing that is
continuing unremedied.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor, except as set
forth on Exhibit 3.1(i)(i), is there any litigation, proceeding, arbitration
or, to the best knowledge of the Shareholders, investigation by any
Governmental Authority or other Person pending or, to the best knowledge of the
Shareholders, threatened against the Company, its properties or business or
relating to the transactions contemplated by this Agreement, nor, to the best
knowledge of the Shareholders, is there any basis for any such action.
(ii) To the best knowledge of the Shareholders, except as set
forth on Exhibit 3.1(i)(ii), neither the Company nor the Company's assets
(including its Premises, facilities, machinery and equipment) are in violation
of any applicable Legal Requirement or Right. The Company has not received
notice from any Governmental Authority or other Person of any violation or
alleged violation of any Legal Requirement or Right, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or, to the best knowledge of the Shareholders, commenced or is
pending or threatened against the Company alleging any such violation.
(j) Accounts Receivable. The accounts receivable of the Company
reflected on the Latest Balance Sheet, and all accounts receivable arising
prior to the Closing Date, arose and will arise from bona fide transactions by
the Company in the ordinary course of business, are valid receivables with
trade customers subject to no setoffs or counterclaims, and, to the best
knowledge of the Shareholders, are current and collectible.
(k) Product Quality, Warranty and Liability. To the best knowledge
of the Shareholders, all products and services sold, rented, leased, provided
or delivered by the Company to customers on or prior to the Closing Date
conform to applicable contractual commitments, express and implied warranties,
product and service specifications and quality standards, and the Company has
no Liability and there is no basis for any Liability for replacement or repair
thereof or other damages in connection therewith. No product or service sold,
rented, leased, provided or delivered by the Company to customers on or prior
to the Closing is subject to any guaranty, warranty or other indemnity beyond
the applicable standard terms and conditions of sale, rent or lease. To the
best knowledge of the Shareholders, the Company has no Liability and there is
no basis for any Liability arising out of any injury to a Person or property as
a result of the ownership, possession, provision or use of any product or
service sold, rented, leased, provided or delivered by the
-8-
<PAGE> 12
Company on or prior to the Closing Date. All product or service liability
claims that have been asserted against the Company since December 31, 1991,
whether covered by insurance or not and whether litigation has resulted or not,
other than those listed and summarized on Exhibit 3.1(i)(i), are listed and
summarized on Exhibit 3.1(k).
(l) Insurance. All policies of insurance which have been disclosed
to the Buyer are valid, in full force and effect and enforceable in accordance
with their respective terms and no party has repudiated any provision thereof.
All such policies will remain in full force and effect until the Closing Date.
Neither the Company nor any other party to any such policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices) in the performance of any of their respective obligations thereunder,
and no event exists which, with the giving of notice or the lapse of time or
both, would constitute a breach, default or event of default, or permit
termination, modification or acceleration under any such policy. There are no
claims, actions, proceedings or suits arising out of or based upon any of such
policies nor, to the best knowledge of the Shareholders, does any basis for any
such claim, action, suit or proceeding exist. All premiums have been paid on
such policies as of the date of this Agreement and will be paid on such
policies through the Closing Date. The Company has been covered during the
five years prior to the date of this Agreement by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. All claims made during such five-year period with
respect to any insurance coverage of the Company, other than those described on
Exhibit 3.1(k), are set forth on Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters.
(i) Exhibit 3.1(m) lists each Employee Benefit Plan that: (A) is
subject to any provision of ERISA; (B) is maintained, administered or
contributed to by the Company, (C) covers any employee or former employee of
the Company; or (D) under which the Company has any liability to make
contributions or pay benefits. Copies of all such plans, summary plan
descriptions, annual reports, summary annual reports, plan administrative
records and financial records, correspondence and, if applicable, related trust
agreements, and all amendments and written interpretations of such plans have
been delivered by the Shareholders to the Buyer and attached hereto as part of
Exhibit 3.1(m), together with the three most recent annual reports (Form 5500
including Schedule B if applicable) prepared in connection with each such plan
required to file an annual report. Such plans are hereinafter referred to
collectively as the "Company Employee Benefit Plans."
(ii) Each Company Employee Benefit Plan has been maintained and
administered in substantial compliance with its terms and with all Legal
Requirements that are applicable to such Company Employee Benefit Plan.
(iii) The Company has no Employee Benefit Plans that
individually or collectively would constitute Employee Pension Benefit Plans.
(iv) Exhibit 3.1(m) lists each employment, severance or other
similar contract, arrangement or policy and each plan or arrangement (written
or oral) providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, deferred
compensation, profit sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation, reduced interest or interest free
loans, mortgages, relocation assistance or post-retirement insurance,
compensation or other benefits that:
-9-
<PAGE> 13
(A) is not an Employee Benefit Plan; (B) is entered into, maintained or
contributed to, by the Company; and (C) covers any employee or former employee
of the Company or any relative thereof. Such contracts, plans and arrangements
as are described in this Section 3.1(m)(iv), are hereinafter referred to
collectively as the "Benefit Arrangements." Copies and descriptions (including
descriptions of the number and employment classifications of employees covered
by each such Benefit Arrangement) have been delivered by the Shareholders to
the Buyer and attached hereto as part of Exhibit 3.1(m). Each Benefit
Arrangement has been maintained and administered in substantial compliance with
its terms and with the requirements prescribed by any and all Legal
Requirements that are applicable to each such Benefit Arrangement.
(v) Except as set forth in any Company Employee Benefit Plan or
Benefit Arrangement identified in Exhibit 3.1(m) and except as provided by
Legal Requirement or any collective bargaining agreement or any employment
contract identified on Exhibit 3.1(m), the employment of all persons presently
employed or retained by the Company is terminable at will.
(vi) No Company Employee Benefit Plan is a "Multiemployer Plan."
(vii) No Company Employee Benefit Plan is maintained in
connection with any trust described in Section 501(c)(9) of the Code. Any
assets of any Employee Benefit Plan that are subject to the trust requirement
of ERISA Section 403 are held in trust in compliance with ERISA Section 403.
(viii) There have been no prohibited transactions with respect to
any Company Employee Benefit Plan. No "Fiduciary" (as defined in Section 3(21)
of ERISA) has any Liability for breach of fiduciary duty or any other failure
to act or comply in connection with the administration or investment of the
assets of any such Employee Benefit Plan. No action, suit, proceeding, hearing
or investigation with respect to the administration or the investment of the
assets of any Company Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the best knowledge of the Shareholders is
threatened. None of the Shareholders has any knowledge of any basis for any
such action, suit, proceeding, hearing or investigation.
(ix) The Company does not maintain and has never maintained nor
contributes, or ever has contributed, or ever has been required to contribute,
to any Company Employee Benefit Plan providing health or medical benefits for
current or future retired or terminated employees, their spouses or their
dependents (other than in accordance with Code Section 4980B). No condition
exists that would prevent the Company from amending or terminating any Employee
Benefit Plan or Benefit Arrangement providing health or medical benefits in
respect of any active or retired employees of the Company.
(x) To the best knowledge of the Shareholders, each Company
Employee Benefit Plan and Benefit Arrangement has been maintained and
administered in compliance with its terms and with the requirements prescribed
by any and all Legal Requirements, including but not limited to ERISA and the
Code, that are applicable to such Plans. To the best knowledge of the
Shareholders, nothing done or omitted to be done and no transaction or holding
of any asset under or in connection with any Company Employee Benefit Plan or
Benefit Arrangement has made or will make the Company, or any officer or
director of the Company subject to any Liability under Title I of ERISA or any
Liability for any Tax under Section 4972 or Section 4975 through 4980B,
inclusive, of the Code.
(xi) Any Company Employee Benefit Plan that is a "group health
plan" (as defined in Code Section 5000(b)(l)) has been administered in
accordance with the requirements of Part 6 of Subtitle
-10-
<PAGE> 14
B of Title I of ERISA and Code Section 4980B and nothing done or omitted to be
done in connection with maintenance or administration of any Company Employee
Benefit Plan that is a "group health plan" has made or will make the Company
subject to any liability under Title I of ERISA, excise Tax Liability under
Code Section 4980B or has resulted or will result in any loss of income
exclusion for a participant under Code Sections 105(h) or 106.
(xii) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G or 162(a)(l) of the Code.
(xiii) The Company has made, before the date of this Agreement,
all required contributions and premium payments under each Company Employee
Benefit Plan and Benefit Arrangement for all completed payroll periods.
(xiv) Except as disclosed in Exhibit 3.1(m), there has not been
with respect to the Company's active or retired employees, nor will be, as of
the Closing Date, any amendment to, written interpretation or announcement
(whether or not written) by the Company relating to, or change in employee
participation or coverage under, any Company Employee Benefit Plan or Benefit
Arrangement that would increase the expense of maintaining or funding benefits
under such Employee Benefit Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the fiscal year ended on December 31,
1996.
(xv) The Buyer will have no obligation to employ any employee
of the Company or to continue any Company Employee Benefit Plan, and will have
no Liability under any plan or arrangement maintained by the Company for the
benefit of any employee. No condition exists that would prevent the Company
from terminating any Company Employee Benefit Plan prior to the Closing Date.
(n) Employees and Labor. The Company has not received any notice,
nor, to the best knowledge of the Shareholders, is there any reason to believe
that any executive or key employee of the Company, or any group of employees of
the Company has any plans to terminate his, her or its employment with the
Company. No executive or key employee is subject to any agreement, obligation,
Order or other legal hindrance that impedes or might impede such executive or
key employee from devoting his or her full business time to the affairs of the
Company prior to the Closing Date and, if such person becomes an employee of
the Buyer, to the affairs of the Buyer after the Closing Date. To the best
knowledge of the Shareholders, the Company will not be required to give any
notice under or in connection with any Legal Requirement as a result of this
Agreement, the Other Seller Agreements or the transactions contemplated hereby
or thereby. The Company does not have any labor relations problems or, to the
best knowledge of the Shareholders, disputes, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Company's facilities, and no union organization effort has been threatened,
initiated or is in progress with respect to any employees of the Company.
(o) Customer and Supplier Relationships. Exhibit 3.1(o)(i) lists
each customer that individually or with its affiliates accounted for 2% or more
of the Company's sales, rental or lease revenues during either the fiscal year
ended March 31, 1996 or the 9-month period ended December 31, 1996 (the
"Principal Customers"). Exhibit 3.1(o)(ii) lists each supplier that
individually or with its affiliates accounted
-11-
<PAGE> 15
for 2% or more of the Company's purchases of inventory or supplies during
either the fiscal year ended March 31, 1996 or the 9-month period ended
December 31, 1996 (the "Principal Suppliers"). To the best knowledge of the
Shareholders, the Company has good commercial working relationships with its
Principal Customers and Principal Suppliers and since December 31, 1996, no
Principal Customer or Principal Supplier has cancelled or otherwise terminated
its relationship with the Company, materially decreased or limited its
purchases, rentals or leases from, or inventory or supplies supplied to, the
Company, or threatened to take any such action. The Shareholders have no basis
to anticipate any problems with the Company's customer, supplier or business
relationships. To the best knowledge of the Shareholders, no Principal
Customer or Principal Supplier has any plans to reduce its purchases, rentals
or leases from, or inventory or supplies supplied to, the Company below levels
prevailing since December 31, 1996, and the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
adversely affect the relationship of the Company with any Principal Customer or
Principal Supplier prior to the Closing Date or of the Buyer with any
Principal Customer or Principal Supplier after the Closing Date.
(p) Resale Inventory. The resale inventory of the Company consists of
goods which, in the aggregate, are merchantable, are fit for the purposes for
which they were procured and are held by the Company, are usable in the
ordinary course of the Company's business and are not obsolete, except for
certain items of paper products which constitute dated material.
(q) Condition, Adequacy and Type of Equipment. The rental/lease
inventory of the Company consists of machinery, equipment and other tangible
personal property which are merchantable, are fit and suitable for the purpose
for which they were procured and are held by the Company, useable in the
ordinary course of the Company's business and are not obsolete. All of the
machinery, equipment and other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale) has been well
maintained and is in good repair and good operating condition (subject to the
last sentence of this Section 3.1(q)). None of the machinery, equipment or
other tangible personal property included in the Acquired Assets (including
that held for rental, lease or sale) is damaged or defective (subject to the
last sentence of this Section 3.1(q)), the Company has not experienced material
problems or deficiencies with respect to its machinery, equipment and other
tangible personal property (subject to the last sentence of this Section
3.1(q)), and, to the best knowledge of the Shareholders, there is no basis to
anticipate any such problems or deficiencies (subject to the last sentence of
this Section 3.1(q)). In the normal course of business certain items which are
held for rental or lease suffer damage in the course of use, and such items are
reparable and are in the process of being repaired by the Company for use in
the Company's rental and leasing business, and the Company has repaired and
shall continue through the Closing Date to repair such items on a basis
consistent with good business practice and the aggregate cost to the Buyer
after the Closing Date to repair all such items which are in need of repair or
are in the process of being repaired as of the Closing Date will not exceed
$25,000.
(r) Environmental Matters.
(i) To the best knowledge of the Shareholders, the Company is
conducting and at all times has conducted its business and operations, and has
occupied, used and operated the Premises and all other real property and
facilities presently or previously owned, occupied, used or operated by it, in
compliance with all Environmental Obligations and so as not to give rise to
Liability under any Environmental Obligations or to any impact on the Company's
business or activities. The Shareholders do not have any knowledge of pending
or proposed changes to any Environmental Obligations which would require any
-12-
<PAGE> 16
changes in any of the Company's Premises, facilities, equipment, operations or
procedures or affect the Company's business or the cost of conducting its
business as now conducted.
(ii) No conditions, circumstances or activities have existed or
currently exist, and, to the best knowledge of the Shareholders, neither the
Company nor any Shareholder has engaged in any acts or omissions, with respect
to the Premises or any other real properties, facilities or business presently
or previously owned, occupied, used or operated by the Company or any
predecessor (including, without limitation, off-site disposal or treatment of
Hazardous Materials) which could give rise to any Liability pursuant to any
Environmental Obligation. Exhibit 3.1(r)(ii) identifies all real properties
and facilities, including the addresses thereof, which have been owned,
occupied, used or operated by the Company or its predecessors at any time on or
prior to the date of this Agreement. There are no outstanding, pending or, to
the best knowledge of the Shareholders, threatened Orders against the Company
or any Shareholder, nor are there any current, pending or, to the best
knowledge of the Shareholders, threatened investigations of any kind against
the Company or any Shareholder, concerning any Environmental Obligations. To
the best knowledge of the Shareholders, there are no actions, suits or
administrative, arbitral or other proceedings alleged, claimed, threatened,
pending against or affecting the Company or any Shareholder at law or in equity
with respect to any Environmental Obligations, and no Shareholder has any
knowledge of any existing grounds on which any such action, suit or proceedings
might be commenced.
(iii) To the best knowledge of the Shareholders, any chemicals
and chemical compounds and mixtures which are included among the assets of the
Company are integral to and required for the conduct of the Company's business,
have not been and are not intended to be discarded or abandoned, and are not
waste or waste materials. Except as set forth in the environmental studies
attached as Exhibit 3.1(r)(iii) (collectively, the "Environmental Study"), the
Company has not generated, handled, used, transported or disposed of Hazardous
Materials. All waste materials which are generated as part of the business of
the Company are, to the best knowledge of the Shareholders, handled, stored,
treated and disposed of in accordance with applicable Legal Requirements and
Environmental Obligations.
(iv) Except as set forth in the Environmental Study, no
underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any facilities presently or previously
owned, occupied, used or operated by the Company or any predecessor. Except as
set forth in the Environmental Study, to the best knowledge of the
Shareholders, neither any of the Premises nor any other real properties or
facilities presently or previously owned, occupied, used or operated by the
Company or any predecessor has been used at any time as a gasoline service
station or any facility for storing, pumping, dispensing or producing gasoline
or any other petroleum products (other than such storage, pumping and
dispensing of fuels and lubricants as is incidental to the Company's equipment
rental/leasing business) or Hazardous Materials. To the best knowledge of the
Shareholders, no building or other structure on any of the Premises contains
asbestos-containing materials. Except as set forth in the Environmental Study,
to the best knowledge of the Shareholders, there are not nor have there been
any incinerators, septic tanks, leach fields, cesspools or wells (including
without limitation dry, drinking, industrial, agricultural and monitoring
wells) on any of the Premises.
(s) Intellectual Property. The Company owns or has the legal right to
use and to transfer to the Buyer each item of Intellectual Property required to
be identified on Exhibit 3.1(h)(ii). To the best knowledge of the Shareholders,
the continued operation of the business of the Company as currently conducted
will not interfere with, infringe upon, misappropriate or conflict with any
Intellectual Property rights of another Person. To the best knowledge of the
Shareholders, no other Person has interfered with,
-13-
<PAGE> 17
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of the Company or any Intellectual Property
included in the Shareholder Property. Neither the Company nor any owner of any
Intellectual Property included in the Shareholder Property has granted any
license, sublicense or permission with respect to any Intellectual Property
owned or used in the Company's business.
(t) Disclosure. None of the documents or information provided to the
Buyer by the Company, any Shareholder or any agent or employee thereof in the
course of the Buyer's due diligence investigation and the negotiation of this
Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, contain any untrue statement of any material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. To the best knowledge of the Shareholders, there is
no fact which materially adversely affects the business, prospects, condition,
affairs or operations of the Company or any of its properties or assets which
has not been set forth in this Agreement or such Exhibits, including such
financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1 shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the applicable disclosure Exhibit identifies the exception with
particularity and describes the relevant facts in reasonable detail. The
Shareholders acknowledge and agree that the fact that they have made
disclosures pursuant to Section 3.1 or otherwise of matters, or did not have
knowledge of matters, which result in Adverse Consequences to the Buyer shall
not relieve the Shareholders of their obligation pursuant to Article 7.
3.2. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Shareholders that the statements contained in this Section
3.2 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout
this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other Buyer Agreements
and the transactions contemplated hereby and thereby have been duly approved by
all requisite corporate action. The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Buyer
Agreements, and this Agreement constitutes, and the Other Buyer Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of the Buyer, and shall be enforceable in accordance with their
respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery and
performance of this Agreement and the Other Buyer Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Buyer is subject or any provision of
the certificate of incorporation or bylaws of the Buyer or (ii) violate, with
or without the giving of notice or the lapse of time or both, or conflict with
or result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Buyer pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Buyer is a party or which the Buyer or any of its assets and properties is
bound or subject. Except for notices and consents that will be given or
obtained by the Buyer prior to the Closing, the Buyer does not need to give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement.
-14-
<PAGE> 18
(c) Litigation. There is no outstanding Order against, nor is there
any litigation, proceeding, arbitration or investigation pending or threatened
against the Buyer relating to the transactions contemplated by this Agreement.
(d) Solvency. The Buyer is solvent and the Buyer does not intend to
incur debts or liabilities beyond its ability to pay such debts or liabilities
as they mature.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for the period ending on the later of four years
after Closing or the expiration of the applicable statute of limitations,
except that the Liabilities of the Shareholders with respect to the
representations and warranties set forth in Sections 3.1(a), 3.1(b), 3.1(c),
3.1(g)(i), 3.1(k) and 3.1(r), and the Liabilities of the Buyer with respect to
the representations and warranties set forth in Sections 3.2(a) and 3.2(b),
shall survive without termination.
3.4. Representations as to Knowledge. With respect to each
representation and warranty made herein where an exercise of discretion is
required, or a statement to the "best knowledge," "best of knowledge" or
"knowledge" is made, by any party to this Agreement such representation or
warranty will be deemed to require that such exercise of discretion or
statement be made in good faith after reasonable investigation (which in the
case of the Primary Shareholders shall mean or require only that they have made
good faith inquiry of the store and area managers of the Company).
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to take
all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will, and will cause the Company to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Shareholders will not
cause or permit the Company to engage in any practice, take any action or enter
into any transaction outside its ordinary course of business; provided,
however, that in no event will any action be taken or fail to be taken or any
transaction be entered into which would result in a breach of any
representation, warranty or covenant of any Shareholder. The Shareholders will
cause the Company to keep its business and properties, including its current
operations, physical facilities, working conditions and relationships with
customers, suppliers, lessors, licensors and employees, intact and, in
connection therewith, to continue to purchase new or used equipment necessary
to maintain its rental/lease inventory at the level specified in Section
3.1(e)(x).
4.3. Acquisitions and Dispositions of Rental Equipment. Exhibit 4.3
sets forth (a) all rental equipment purchased or ordered by the Company since
February 6, 1997 (the "New Rental Equipment"), (b) all Leased Rental Equipment
and Consigned Equipment added to the Company's rental inventory since December
31, 1996 and (c) all Leased Rental Equipment and Consigned Equipment removed
from the Company's rental inventory since February 6, 1997. From February 6,
1997, through the Closing Date, the Company may purchase New Rental Equipment
which constitutes ARA Equipment and the Company may
-15-
<PAGE> 19
sell equipment to the extent that (i) the consideration received for any item
of such equipment does not exceed $5,000 and (ii) the aggregate value of all
consideration received for all such sales does not exceed $15,000, but may not
otherwise purchase, sell, trade, transfer, acquire or dispose of any rental
equipment, or change the amount or composition of the Leased Rental Equipment
or the Consigned Equipment, without the express prior written approval of an
officer of the Buyer.
4.4. Full Access. The Shareholders will cause the Company to permit
the Buyer and its agents to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of the
Company, to all premises, properties, personnel, books, records (including Tax
records), contracts and documents of or pertaining to the Company.
4.5. Notice of Developments. The Shareholders will give prompt written
notice to the Buyer of any material development which occurs after the date of
this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Company.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.6. Exclusivity. No Shareholder will, and the Shareholders will not
cause or permit the Company to, (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any portion of the assets
of, the Company (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
the Company's stock in favor of any such transaction. The Shareholders will
notify the Buyer immediately if a Person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
4.7. Conveyance of Shareholder Property. Prior to the Closing Date,
the Shareholders shall convey, and shall cause each relative or affiliate of
the Company or of any Shareholder to convey, to the Company, free and clear of
any Encumbrance or Tax, all of each Shareholder's and each such relative's or
affiliate's right, title and interest to the Shareholder Property.
4.8. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
4.9. Closing Date Liabilities and Distribution. (a) Prior to the
Closing Date or concurrently with the Closing, the Shareholders shall pay, or
shall cause the Company to pay prior to the Closing Date as permitted by
Section 9.10, in full all known Closing Date Liabilities, the amount of which
is then ascertainable (including Seller Transaction Expenses as permitted
pursuant to Section 9.10). Following the Closing, the Shareholders shall
promptly pay in full all other Closing Date Liabilities. Effective as of
immediately prior to the Closing Date, the Shareholders hereby jointly and
severally assume all Closing Date Liabilities without further action by the
Shareholders, the Company or any other Person.
(b) Prior to the Closing Date, the Shareholders shall cause the
Company to distribute to the Shareholders the Excluded Assets (the "Pre-Closing
Date Distribution"). Any and all Taxes attributable
-16-
<PAGE> 20
to such distribution of Excluded Assets and to any prior distribution or
dividend of assets, including, without limitation, any recognition by the
Company of taxable income or gain with respect to the distribution or dividend
of the Excluded Assets or any prior distribution or dividend of assets, shall
be paid in full by the Shareholders as and when due and neither the Company nor
the Buyer shall have any Liability with respect thereto.
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Each of the Shareholders will use reasonable efforts
to assist with the transition of the Company's business to the Buyer during the
first six months following the Closing at no cost to the Buyer. No Shareholder
will take any action at any time that is designed or intended to have the
effect of discouraging any customer, supplier, lessor, licensor or other
business associate of the Company from establishing or continuing a business
relationship with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Company's business, each of the
other parties will use reasonable efforts to cooperate with such party and its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Section 7).
5.4. Confidentiality. The Shareholders will treat and hold as
confidential all Confidential Information concerning the Buyer, the Company's
business or the Acquired Assets, refrain from using any such Confidential
Information and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all of such Confidential Information in its or their
possession. Each of the Shareholders and the Buyer will treat and hold as
confidential the amount of the purchase price of the acquisition contemplated
by this Agreement except as may be required in connection with any securities
disclosure or to the parties' investors, lenders or any representatives of any
of the foregoing.
5.5. Post-Closing Announcements. Following the Closing, no Shareholder
will issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
Buyer.
5.6. Financial Statements. The Seller and the Shareholders will, upon
request of the Buyer, cooperate with the Buyer to produce such historical and
on-going financial statements and audits as the Buyer may reasonably request,
all at the sole cost and expense of the Buyer.
-17-
<PAGE> 21
5.7. Satisfaction of Liabilities.
(a) Promptly following the Closing, the Shareholders will pay and
perform all Closing Date Liabilities (to the extent not paid at or prior to the
Closing Date), all Taxes attributable to the transactions contemplated by this
Agreement and all accrued vacation and other accrued employee benefits;
provided, however, that accrued vacation and other accrued employee benefits
with respect to those persons who are employees of the Company as of
immediately prior to the Closing Date and who become employees of the Buyer
effective as of the Closing will be satisfied as set forth in Section 2.2(b).
As soon as reasonably possible following the Closing Date, the Shareholders'
Agent and the Buyer will collectively review the allocation or pro-rating of
all accrued expenses, prepaid expenses and other similar items and will use
their best efforts to reach a mutually agreeable settlement of all such items.
(b) The Buyer will pay an amount equal to the portion of the personal
property taxes of the Company paid by the Company for the period from the
Closing Date to December 31, 1997 (the "Personal Property Tax Amount"). The
Personal Property Tax Amount payable by the Buyer will be determined by
prorating personal property taxes of the Company for the year beginning January
1, 1997 in proportion to the number of days in that year prior to the Closing
Date compared to the number of days in that year remaining after the date on
which the Closing occurs.
(c) The Shareholders, at their expense, promptly will take or cause to
be taken any action necessary to remedy any failure of the Premises or the
acquired business to comply at the Closing Date with any Legal Requirement,
upon receipt of notice from the Buyer at any time.
(d) The Shareholders shall pay to the Buyer an amount equal to the
federal and state income taxes of the Company relating to all periods from the
end of the last tax year for which such corporation's federal and state income
Tax Returns have been filed to the Closing Date (the "Pre-Closing Income Tax
Amount"), to the extent that the Pre-Closing Income Tax Amount exceeds the
aggregate estimated tax payments made by the Company on or before the Closing
Date that would be applicable to the Taxes included in the Pre-Closing Income
Tax Amount. The Pre-Closing Income Tax Amount will be determined by the Buyer
in accordance with generally accepted accounting principles but without regard
to any net operating loss carryforward. If the actual Pre-Closing Income Tax
Amount exceeds the estimated Pre-Closing Income Tax Amount used for purposes of
Section 2.2(a), the Shareholders shall pay such excess amount to the Buyer
within five days after their receipt of notice from the Buyer stating the
amount payable, accompanied by a schedule reflecting the calculation of the
amount due; provided, however, that such amount shall not be considered due if
it is being contested in good faith and by appropriate proceedings diligently
conducted. If the estimated Pre-Closing Income Tax Amount used for purposes of
Section 2.2(a) exceeds the actual Pre-Closing Income Tax Amount, the Buyer
shall pay such excess amount to the Shareholders within five days after the
Buyer and the Shareholders' Agent agree in writing on the amount of such
excess.
(e) The Buyer will pay and perform, as and when due (except to the
extent the validity thereof or the liability therefor is being contested by the
Buyer), the Retained Liabilities.
5.8. Repurchase of Unpaid Receivables. The Shareholders jointly and
severally guarantee that an amount equal to 95% of the aggregate amount of the
Closing Accounts Receivable will be fully paid to the Buyer with respect to
such Closing Accounts Receivable in accordance with their terms at their
recorded amounts not later than 120 days from the Closing Date. Upon demand by
the Buyer at any time after 120 days from the Closing Date and to the extent
that an amount equal to 95% of the Closing Accounts
-18-
<PAGE> 22
Receivable have not been paid to the Buyer, the Shareholders shall jointly and
severally pay to the Buyer the full amount of any unpaid Closing Accounts
Receivables which are the subject of such demand. Upon such payment to the
Buyer, the Closing Accounts Receivable which are so paid for by the
Shareholders shall, without further action of any party, become the property of
the Shareholders. From the closing until 120 days after the Closing Date, the
Buyer will apply its standard accounts receivable collection procedures to the
Closing Accounts Receivable; provided, however, the buyer will not be required
to institute suit, utilize third-party collection agencies or other agents or
take other extraordinary collection actions with respect to the Closing
Accounts Receivable; and, provided further, that any failure of any collection
activities of the Buyer or any such collection agency or other agent will not
relieve the Shareholders from their guarantee of the Closing Accounts
Receivable as described in this Section. The Buyer will execute and deliver all
such documents and instruments as are reasonably necessary to effect any such
assignment of Closing Account Receivable to the Shareholders.
5.9. Termination of Obligations. Effective as of the Closing Date,
neither the Company nor the Buyer shall have any Liability to any Shareholder
or any relative or affiliate thereof or of the Company, except as otherwise
provided in this Agreement, the Employment Agreements, the Noncompetition
Agreement, the Escrow Agreement, and the Shareholder Leases. Effective as of
the Closing Date, the Shareholders shall not have any Liability to the Company
or the Buyer, except as otherwise provided in this Agreement, the Employment
Agreements, the Noncompetition Agreement, the Escrow Agreement, and the
Shareholder Leases.
5.10. Section 338 Election. Without the consent of the Shareholders'
Agent, the Buyer shall not make an election under Section 338 of the Code with
respect to its purchase of the Shares or any provision of the Code having the
same effect as Section 338 of the Code.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions contemplated by this Agreement is subject
to satisfaction of the following conditions:
(a) each Shareholder's representations and warranties shall be correct
and complete at and as of the Closing Date and the Closing and any written
notices delivered to the Buyer pursuant to Section 4.5 and the subject matter
thereof shall be satisfactory to the Buyer;
(b) the Shareholders shall have performed and complied with all of
their covenants hereunder through the Closing;
(c) the Shareholders shall have given, or shall have caused the
Company to give, all notices and procured, or shall have caused the Company to
procure, all of the third-party consents, authorizations and approvals required
to consummate the transactions contemplated by this Agreement, all in form and
substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or threatened
before any Governmental Authority or any other Person wherein an unfavorable
Order would (i) prevent consummation of any of the transactions contemplated by
this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or (iii) affect adversely the
right of the Buyer to own the
-19-
<PAGE> 23
Shares or the Acquired Assets and conduct the business represented by the
Acquired Assets, and no such Order shall be in effect;
(e) there shall have been no adverse change in the Company, the
Acquired Assets or the Company's business between the date of execution of this
Agreement and the Closing;
(f) the Shareholders shall have delivered to the Buyer (i) a
certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, and (ii) a good
standing certificate, dated within 30 days of the Closing, from the Secretary
of State of the State of the Company's jurisdiction of incorporation and each
other state in which the Company is qualified or authorized to do business as a
foreign corporation.
(g) the Buyer shall have completed its due diligence with respect to
the Company, the Company's business and the Acquired Assets with results
satisfactory to the Buyer.
(h) the Other Seller Agreements shall have been executed and delivered
by the Shareholders, as applicable;
(i) the Premises Leases shall have been executed and delivered by the
parties thereto, the owners of the real property underlying the Shareholder
Subleases shall have executed and delivered new leases or extensions/amendments
relating to such property satisfactory to the Buyer, and the owners of the
real property underlying the Premises Leases, and each Person having an
Encumbrance on such property, shall have executed and delivered estoppel,
nondisturbance and landlord waiver agreements relating thereto satisfactory to
the Buyer.
(j) the Buyer shall have received from counsel to the Shareholders an
opinion in form and substance as set forth in Exhibit 6.1(j) addressed to the
Buyer and dated as of the Closing;
(k) financing necessary for the consummation of the transactions
contemplated hereby and the operation of the acquired business shall be
available to the Buyer on terms and conditions satisfactory to the Buyer;
(l) a "Phase I" environmental study of each of the properties
comprising the Premises shall have been completed at the Shareholders' expense
to the extent set forth in Section 9.10 and supplied to the Buyer, and the
contents and results thereof shall be satisfactory to the Buyer;
(m) the Buyer shall have received the resignations, effective as of
the Closing, of each director and officer of the Company;
(n) stock certificates representing the Shares, duly endorsed in blank
or accompanied by stock powers duly executed in blank, shall have been
delivered by the Shareholders to the Buyer;
(o) the Shareholders shall have delivered to the Buyer possession and
control of the Company, and the Acquired Assets, including, without limitation,
all stock certificate books, minute books, corporate seals, and all other
corporate and financial records of the Company;
-20-
<PAGE> 24
(p) the Shareholders shall have delivered, or caused the Company to
deliver, to the Buyer such other instruments, certificates and documents as are
reasonably requested by the Buyer in order to consummate the transactions
contemplated by this Agreement, all in form and substance reasonably
satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Shareholders. The obligation of
the Shareholders to consummate the transactions contemplated by this Agreement
is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be correct and
complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all of its
covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Shareholders a certificate
to the effect that each of the conditions specified above in Sections 6.2(a)
and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed and delivered
by the Buyer;
(e) the Shareholders shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit 6.2(e), addressed to the
Shareholders and dated as of the Closing; and
(f) the Buyer shall have paid and deposited the purchase price for the
Shares pursuant to Section 2.2.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer and the
Company.
(a) If any Primary Shareholder breaches any of the representations or
warranties of any Primary Shareholder contained herein and the Buyer gives
notice thereof to the Shareholders' Agent within the Survival Period, or if any
Shareholder breaches any covenants of any Shareholder contained herein or any
representations, warranties or covenants of any Shareholder contained in any
Other Seller Agreement and the Buyer gives notice thereof to the Shareholders'
Agent, then the Primary Shareholders agree to jointly and severally indemnify
and hold harmless the Buyer from and against any Adverse Consequences the Buyer
may suffer resulting from, arising out of, relating to or caused by any of the
foregoing regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. The Primary Shareholders also agree to jointly and
severally indemnify and hold harmless the Buyer from and against any Adverse
Consequences the Buyer may suffer which result from, arise out of, relate to or
are caused by (i) any Liability of the Company or any Shareholder not included
in the Retained Liabilities (including, without limitation, those concerning
Hazardous Materials or the failure prior to the Closing Date of the Company,
any Shareholder or any predecessor to comply with any Environmental Obligation
or other Legal Requirement), (ii) any condition,
-21-
<PAGE> 25
circumstance or activity existing prior to the Closing Date on, in or under any
of the Premises which relates to any Environmental Obligation or any act or
omission of the Company, any Shareholder or any predecessor with respect to, or
any event or circumstance related to, the Company's, any Shareholder's or any
predecessor's ownership, occupation, use or operation of any of the Acquired
Assets, the Excluded Assets, the Premises or any other assets or properties or
the conduct of its or their business, regardless, in the case of (i) or (ii),
of (A) whether or not such Liability, act, omission, event, circumstance or
matter was known or disclosed to the Buyer, was disclosed on any Exhibit hereto
or is a matter with respect to which any Shareholder did or did not have
knowledge, (B) when such Liability, act, omission, event, circumstance or
matter occurred, existed, occurs or exists and (C) whether a claim with respect
thereto was asserted before or is asserted after the Closing Date, provided,
however, that such claim is asserted within the Survival Period, and (iii) any
Liability resulting from any failure of the parties to comply with any
applicable bulk sales or transfer law or any Legal Requirement in connection
with the transactions contemplated by this Agreement. If any dispute arises
concerning whether any indemnification is owing which cannot be resolved by
negotiation among the parties within 30 days of notice of claim for
indemnification from the party claiming indemnification to the party against
whom such claim is asserted, the dispute will be resolved by arbitration
pursuant to this Agreement.
(b) Notwithstanding the foregoing Section 7.1(a), the Primary
Shareholders shall have no obligation to indemnify the Buyer unless and until
the aggregate amount of Adverse Consequences suffered by the Buyer and the
Company from all matters as to which they are entitled to indemnification under
this Agreement (except those matters described in the next sentence) equals or
exceeds $50,000, at which point the Primary Shareholders jointly and severally
shall indemnify the Buyer for all Adverse Consequences suffered by the Buyer or
the Company (including those Adverse Consequences which initially aggregated to
the $50,000 threshold). The Primary Shareholders jointly and severally shall
indemnify the Buyer in full (without regard to the $50,000 amount described in
the preceding sentence) for all Adverse Consequences which arise out of, result
from, relate to or are caused by: (i) any failure by the Shareholders to pay
the full amounts payable by them pursuant to Sections 2.2(b) (with respect to
known Liabilities only), 2.3, 4.9(a) (with respect to the first sentence only),
5.7 (with respect to known Liabilities only), 5.8, 8.2 or 9.10 of this
Agreement; (ii) any breach of the representations and warranties set forth in
Sections 3.1(b), 3.1(g)(i), 3.1(m) or 3.1(r); (iii) any failure by the
Shareholders to convey the Shares to the Buyer free and clear of any
Encumbrance or Tax; (iv) the unenforceability of Section 9.14 against the
Shareholders or any breach of Section 9.14 by any Shareholder; (v) any breach
by any Shareholder of any covenant contained in this Agreement (with respect to
known Liabilities only); or (vi) any breach by any Shareholder (including any
Shareholder who is a lessor under any Shareholder Lease) or Affiliate or
relative thereof of any representation, warranty or covenant set forth in any
Other Seller Agreement (with respect to known Liabilities only). In
determining the amount of Adverse Consequences suffered by the Buyer or the
Company for purposes of Sections 7.1(a) and 7.1(b), such representations and
warranties shall not be qualified (other than references to "material" in
Section 3.1(t)) by "material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of similar import, or
by any phrase using any such term or words.
(c) Amounts needed to cover any indemnification claims resolved in
favor of the Buyer against any Shareholder during the Escrow Period will be
paid to the Buyer first out of the funds escrowed pursuant to the Escrow
Agreement. The Primary Shareholders will have joint and several Liability for
any additional amounts needed to cover such claims, which amounts will be paid
directly to the Buyer. At the end of the Escrow Period amounts that may be
needed to cover pending indemnification claims made by the Buyer (such amounts
to be determined in good faith by mutual agreement of the Buyer and
Shareholders' Agent)
-22-
<PAGE> 26
will be retained in the Escrow Account until such claims are resolved, and any
excess on deposit therein, including any accrued interest, will be paid to the
Shareholders. Buyer shall give notice to Shareholders' Agent of any such claim
prior to the end of the Escrow Period. Nothing in this Section 7.1(c) will be
construed to limit the Buyer's right to indemnification to amounts on deposit
in the Escrow Account. The Buyer and the Shareholders' Agent shall jointly
give instructions to the Escrow Agent to carry out the intent of this Section
7.1(c). Any disputes concerning the escrowed funds will be settled by
arbitration as provided in this Agreement. The Buyer shall be responsible for
the fees, charges and expenses payable to the Escrow Agent pursuant to
paragraph a. of Article 2 of the Escrow Agreement and, except as otherwise
determined pursuant to Section 9.11 of this Agreement, the Buyer, on the one
hand, and the Shareholders jointly and severally, on the other hand, shall each
be responsible for one-half of any amounts payable pursuant to paragraph b. of
such Article 2.
(d) Notwithstanding anything to the contrary in this Agreement, the
maximum aggregate amount payable by the Primary Shareholders to the Buyer in
respect of breaches of the Primary Shareholders' representations or warranties
contained in this Agreement shall not exceed the aggregate purchase price for
the Shares paid to the Shareholders by the Buyer pursuant to Section 2.2.
7.2. Indemnification Provisions for Benefit of the Shareholders. If
the Buyer breaches (or if any Person other than a Shareholder alleges facts
that, if true, would mean the Buyer has breached) any of its representations or
warranties contained herein and the Shareholders' Agent gives notice of a claim
for indemnification against the Buyer within the Survival Period, or if the
Buyer breaches (or if any Person other than a Shareholder alleges facts that,
if true, would mean the Buyer has breached) any of its covenants contained
herein or any of its representations, warranties or covenants contained in any
Other Buyer Agreement and the Shareholders' Agent gives notice thereof to the
Buyer, then the Buyer agrees to indemnify and hold harmless the Shareholders
from and against any Adverse Consequences the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.2 and in determining the
amount of the Adverse Consequences suffered by the Shareholders for purposes of
this Section 7.2, such representations and warranties shall not be qualified by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such term or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party"), then the Indemnified Party will notify each Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying any Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
-23-
<PAGE> 27
(b) Any Indemnifying Party will have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified Party so long
as (i) the Indemnifying Party notifies the Indemnified Party in writing within
10 days after the Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 7.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to or caused by the Third Party Claim to the fullest
extent provided in this Section 7.
7.4. Right of Offset. To the extent the Escrow Account has been fully
utilized, the Buyer will have the right to offset any Adverse Consequences it
may suffer, subject to the limitations of Section 7.1(b), against any amounts
payable pursuant to this Agreement or any Other Seller Agreement to any
Shareholder or any relative or affiliate of any Shareholder at or after the
Closing.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
-24-
<PAGE> 28
(a) the Buyer and the Shareholders' Agent may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice to
the Shareholders' Agent at any time prior to the Closing (i) in the event any
Shareholder has breached any representation, warranty or covenant contained in
this Agreement in any material way, the Buyer has notified the Shareholders'
Agent of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before June 30,
1997 because of the failure of any condition precedent to the Buyer's
obligations to consummate the Closing (unless the failure results primarily
from the Buyer breaching any representation, warranty or covenant contained in
this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (i) if the Buyer
has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Shareholders' Agent has notified the Buyer
of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before June 30,
1997 because of the failure of any condition precedent to the Shareholders'
obligations to consummate the Closing (unless the failure results primarily
from any Shareholder breaching any representation, warranty or covenant
contained in this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby, and each party will, upon
request, return all documents delivered to such party concerning such other
party's business and operations.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. No Shareholder may assign this Agreement or any of his or
her rights, interests or obligations hereunder without the prior written
approval of the Buyer. The Buyer may assign its rights and obligations
hereunder as permitted by law, including, without limitation, to any debt or
equity financing source as security for any obligations to such Persons.
-25-
<PAGE> 29
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier (including overnight courier), telecopy or facsimile,
and addressed to the intended recipient as set forth below:
<TABLE>
<S> <C>
If to the Shareholders: Copy to:
Addressed to the Maddin, Hauser, Wartell, Roth, Heller
Shareholders' Agent at: & Pesses, P.C.
1621 Gulf Blvd., Unit 1608 3rd Floor Essex Centre
Clearwater, Florida 34630 28400 Northwestern Hiway
Telephone: (813) 595-2124 Southfield, Michigan 48034
Attn: Richard Roth
Telecopy: (248) 354-1422
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
6000 East Evans, Suite 2-300 633 Seventeenth Street, Suite 3000
Denver, Colorado 80222 Denver, Colorado 80202
Attn: President Attn: Andrew L. Blair, Jr.
Telecopy: (303) 512-2028 Telecopy: (303) 298-0940
</TABLE>
Notices will be deemed given five days after mailing if sent by certified
mail, when delivered if sent by courier (including overnight courier), and upon
receipt of confirmation by person or machine if sent by telecopy or facsimile
transmission. Any party may change the address to which notices, requests,
demands, claims and other communications hereunder are to be delivered by
giving the other parties notice in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
-26-
<PAGE> 30
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses.
(a) Except as otherwise provided in Sections 8.2 and 9.10(b), (i) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (ii) the Shareholders will bear all costs and expenses (including,
without limitation, all legal, accounting and tax related fees and expenses,
all fees, commissions, expenses and other amounts payable to any broker, finder
or agent (to the extent such broker, finder or agent has been retained by any
Shareholder) and the costs of any environmental study and additional
environmental testing contemplated by Section 6.1) incurred by the Company
prior to the Closing or by any Shareholder either before or after the date of
this Agreement in connection with this Agreement or the transactions
contemplated hereby (collectively, "Seller Transaction Expenses"); provided,
however, that prior to the Closing Date the Company may use any cash that would
otherwise be an Excluded Asset to pay Seller Transaction Expenses.
(b) The "Phase I" environmental studies required by Section 6.1(l)
shall be conducted by Stewart Environmental Consultants, Inc. ("Stewart"). The
costs and expenses of such "Phase I" environmental studies borne by the
Shareholders shall be limited to $2,500 per site (exclusive of Stewart's travel
expenses) provided, however, that if the Shareholders obtain a written estimate
of the costs and expenses to perform services which are substantially the same
as the services performed or to be performed by Stewart from an established and
reputable environmental engineering company in an amount which is less than an
average of $2,500 per site, the costs and expenses of the "Phase I"
environmental studies borne by the Shareholders shall be limited to the amount
of such estimate. Stewart's travel expenses shall be paid by the Buyer.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Shareholders' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT
-27-
<PAGE> 31
TO ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties
in any such arbitration or in any action to enforce this Agreement will be
entitled to all reasonable costs and expenses, including fees and expenses of
the arbitrators and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Shareholders' Agent. Each Shareholder hereby authorizes and
appoints the Shareholders' Agent as its, his or her exclusive agent and
attorney-in-fact to act on behalf of each of them with respect to all matters
which are the subject of this Agreement, including, without limitation, (a)
receiving or giving all notices, instructions, other communications, consents
or agreements that may be necessary, required or given hereunder and (b)
asserting, settling, compromising, or defending, or determining not to assert,
settle, compromise or defend, (i) any claims which any Shareholder may assert,
or have the right to assert, against the Buyer, or (ii) any claims which the
Buyer may assert, or have the right to assert, against any Shareholder. The
Shareholders' Agent hereby accepts such authorization and appointment. Upon
the receipt of written evidence satisfactory to the Buyer to the effect that
the Shareholders' Agent has been substituted as agent of the Shareholders by
reason of his death, disability or resignation, the Buyer shall be entitled to
rely on such substituted agent to the same extent as they were theretofore
entitled to rely upon the Shareholders' Agent with respect to the matters
covered by this Section 9.14. No Shareholder shall act with respect to any of
the matters which are the subject of this Agreement except through the
Shareholders' Agent. The Shareholders acknowledge and agree that the Buyer may
deal exclusively with the Shareholders' Agent in respect of such matters, that
the enforceability of this Section 9.14 is material to the Buyer, and that the
Buyer has relied upon the enforceability of this Section 9.14 in entering into
this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-28-
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ ARNIE BERNSTEIN
---------------------------------------------
Name: Arnie Bernstein
-------------------------------------------
Title: President
------------------------------------------
SHAREHOLDERS:
/s/ BARBARA E. TITUS
------------------------------------------------
Barbara E. Titus
/s/ JEFFREY W. TITUS
------------------------------------------------
Jeffrey W. Titus
/s/ CHRISTOPHER TITUS
------------------------------------------------
Christopher Titus
/s/ WILLIAM V. TITUS
------------------------------------------------
William V. Titus, Trustee of the William V. Titus
Revocable Living Trust u/t/a dated December 17,
1979
/s/ WILLIAM V. TITUS
------------------------------------------------
William V. Titus
[SIGNATURE PAGE TO PURCHASE AGREEMENT.]
-29-
<PAGE> 1
EXHIBIT 10.17
================================================================================
PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
A-Z RENTS IT OF FORT COLLINS, INC.
AND THE
SHAREHOLDERS
OF
A-Z RENTS IT OF FORT COLLINS, INC.
AS OF JULY 17, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Option to Purchase Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6. Closing; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7. Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Seller and the Shareholders . . . . . . . . . . . . . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2. Operation and Preservation of Rental Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6. Conveyance of Shareholder Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.8. Certain Pre-Closing Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8. Certain Post-Closing Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9. Use of A-Z Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10. Health Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.11. Restriction On Special Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
6.2. Conditions to Obligation of the Seller and the Shareholders . . . . . . . . . . . . . . . . . . . . 17
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.1. Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2. Indemnification Provisions for Benefit of the Seller and the Shareholders . . . . . . . . . . . . . 19
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.14. Seller's and Shareholders' Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Exhibits:
--------
<S> <C>
Exhibit 1.1(a) Exhibit 3.1(g)(i)(B)
Exhibit 1.1(b) Exhibit 3.1(g)(ii)
Exhibit 1.1(c) Exhibit 3.1(h)(i)
Exhibit 1.1(d) Exhibit 3.1(h)(ii)
Exhibit 1.1(e) Exhibit 3.1(i)(i)
Exhibit 1.1(f) Exhibit 3.1(i)(ii)
Exhibit 1.1(g) Exhibit 3.1(k)
Exhibit 3.1(c) Exhibit 3.1(l)
Exhibit 3.1(d)(i) Exhibit 3.1(m)
Exhibit 3.1(d)(ii) Exhibit 3.1(o)(i)
Exhibit 3.1(d)(iii) Exhibit 3.1(r)(ii)
Exhibit 3.1(e)(i) Exhibit 3.1(r)(iii)
Exhibit 3.1(e)(ii) Exhibit 6.1(j)
Exhibit 3.1(f) Exhibit 6.2(e)
Exhibit 3.1(g)(i)(A)
</TABLE>
(iii)
<PAGE> 5
This Purchase Agreement is entered into as of July 17, 1997 among
RentX Industries, Inc., a Delaware corporation (the "Buyer"), A-Z Rents It of
Fort Collins, Inc., a Colorado corporation (the "Seller"), and Ronald K. Wray
and Janet L. Wray (individually, a "Shareholder" and collectively, the
"Shareholders").
Recitals
A. Seller operates two distinct businesses, a general
equipment rental business (the "Rental Business") and a contractor equipment
sales business (the "Sales Business"). The Rental Business and the Sales
Business are conducted in separate but adjoining facilities at 1540 Riverside
Avenue (in the case of the Rental Business) and 1548 Riverside Avenue (in the
case of the Sales Business), Fort Collins, Colorado 80524.
B. The Seller desires to sell, and the Buyer desires to
purchase, substantially all of the Seller's assets used in the Rental Business
as provided in this Agreement. The Seller will retain and continue to operate
the Sales Business.
C. The Shareholders own all of the issued and outstanding
capital stock of the Seller.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth
in this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all the Acquired Assets free and clear of any
Encumbrance or Tax, for the consideration specified in Section 2.3. The Buyer
will have no obligation under this Agreement to purchase less than all of the
Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Buyer will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The purchase price for the Acquired Assets is $2,050,400,
plus the amount described in Section 4.8. At the Closing, the Buyer will, by
wire transfer or other delivery of immediately available funds, (i) (A) pay to
the Seller (subject to Section 2.3(b)) $1,845,400, and (B) deposit $205,000
into the Escrow Account and (ii) assume the Assumed Liabilities (and the
amounts paid and deposited to and in respect of the Seller and the Assumed
Liabilities will constitute the full purchase price for the Acquired Assets).
The amount deposited in the Escrow Account will belong to the Seller, subject
to the Seller's
<PAGE> 6
indemnification obligations set forth in this Agreement, and will be held,
invested, administered and disbursed according to Section 7.1(b) hereof and the
Escrow Agreement.
(b) At or prior to the Closing, Seller shall pay to all
employees of the Rental Business who are expected to become employees of Buyer
after the Closing the full amount of all accrued vacation and other accrued
employee benefits to the extent that such accrued vacation and benefits exceed
40 hours for any employee as of the Closing Date. The remaining vacation and
benefits accrued as of the Closing Date shall be paid by Seller as provided in
Section 5.7.
(c) As soon as practicable after the Closing, but effective as
of the Closing, the parties will prepare and initial a "Price Allocation
Schedule," allocating for Tax reporting purposes the total consideration for
the Acquired Assets among the various categories of Acquired Assets in the
following order and amounts: (i) to cash and cash equivalents, the $400 amount
to be left in petty cash as of the Closing; (ii) to Closing Inventory, the
amount on the Closing Balance Sheet; (iii) to equipment and leasehold
improvements, the greater of the appraised fair market value (if the Buyer in
its sole discretion obtains an appraisal before or after the Closing) or (if no
appraisal is obtained) the current book value thereof as reflected on the
Closing Balance Sheet; (iv) to prepaid expenses, the unamortized balance on the
Closing Balance Sheet; (v) to any other assets, other than goodwill, the amount
on the Closing Balance Sheet; and (vi) the entire remaining balance of the
consideration shall be allocated to the goodwill of the Seller's business or,
at the Buyer's sole discretion, to the other intangible assets which are
included in the Acquired Assets. No portion of the consideration for the
Acquired Assets shall be allocated to the Noncompetition Agreement. The
parties acknowledge that such allocations for Tax reporting purposes were
determined pursuant to arm's length bargaining regarding the fair market values
of the Acquired Assets in accordance with the provisions of Code Section 1060.
The parties agree to be bound by the allocations set forth in the Price
Allocation Schedule for all federal, state and local Tax reporting purposes,
including for purposes of determining any income, gain, loss, depreciation or
other deductions in respect of such assets. The parties further agree to
prepare and file all Tax Returns (including Form 8594 under the Code) in a
manner consistent with such allocations.
2.4. Sales Taxes, Etc. The Seller will pay all sales, use, transfer,
licensing and other Taxes, fees and charges payable in respect of or as a
result of the sale and transfer of the Acquired Assets (including those
relating to vehicles, trailers and mobile equipment) to the Buyer pursuant to
this Agreement.
2.5. Option to Purchase Note. At the Closing, the Seller shall grant
to the Buyer an option to purchase the Party Note by executing and delivering
to Buyer the Party Note Option.
2.6. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
July 17, 1997 (but in any event on or before July 31, 1997), commencing at 8:00
a.m. local time in Denver, Colorado, at the offices of Sherman & Howard L.L.C.,
and all transactions contemplated by this Agreement will be effective at 12:00
a.m. local time in Fort Collins, Colorado on the day of the Closing (such
effective time being the "Closing Date").
2.7. Deliveries at the Closing. At the Closing, (a) the Seller and the
Shareholders will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Seller and the Shareholders the certificates,
instruments and documents referred to in Section 6.2, (c) the Seller will
deliver to the Buyer instruments transferring to the Buyer title
- 2 -
<PAGE> 7
to the Acquired Assets free and clear of any Encumbrances or Taxes and (d) the
Buyer will pay and deposit the purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Seller and the Shareholders.
The Seller and the Shareholders jointly and severally represent and warrant to
the Buyer that the statements contained in this Section 3.1 are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
then substituted for the date of this Agreement throughout this Section 3.1).
(a) Organization, Good Standing, Authority, Etc. The Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Colorado, and is not required to be qualified or
authorized to do business as a foreign corporation in any jurisdiction. The
Seller has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
This Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and unanimously
approved by the board of directors and shareholders of the Seller, and this
Agreement has been duly executed and delivered by the Seller. The Seller has
full corporate power and authority to execute, deliver and perform this
Agreement and the Other Seller Agreements to which the Seller is a party, each
Shareholder and each relative or affiliate of the Seller or of a Shareholder
who is party to any Other Seller Agreement has full and absolute right, power,
authority and legal capacity to execute, deliver and perform this Agreement and
all Other Seller Agreements to which such Shareholder, relative or affiliate is
a party, and this Agreement constitutes, and the Other Seller Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of, and shall be enforceable in accordance with their respective
terms against, the Seller and each such Shareholder, relative or affiliate who
is a party thereto.
(b) Ownership. Ronald K. Wray and Janet L. Wray own, as joint
tenants, beneficially and of record, free and clear of any Encumbrance or Tax,
10,000 shares of the common stock, $1.00 par value, of the Seller, and such
shares constitute all outstanding shares of the capital stock of the Seller.
No other Person has any right to acquire any equity interest in the Seller.
(c) No Violation. The execution, delivery and performance of
this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which the Seller, any Shareholder, or any relative or affiliate
of the Seller or of any Shareholder who is a party to any Other Seller
Agreement is subject or any provision of the articles of incorporation or
bylaws of the Seller or of any such affiliate, or (ii) violate, with or without
the giving of notice or the lapse of time or both, or conflict with or result
in the breach or termination of any provision of, or constitute a default
under, or give any Person the right to accelerate any obligation under, or
result in the creation of any Encumbrance upon any properties, assets or
business of the Seller, of any Shareholder, or of any such relative or
affiliate pursuant to, any indenture, mortgage, deed of trust, lien, lease,
license, Permit, agreement, instrument or other arrangement to which the
Seller, any Shareholder or any such relative or affiliate is a party or by
which the Seller, any Shareholder, or any such relative or affiliate or any of
their respective assets and properties is bound or subject. Except for notices
that will be given and consents that will be obtained by the Seller and the
Shareholders prior to the Closing (which are set forth in Exhibit 3.1(c)),
neither the Seller, any Shareholder, nor any such relative or affiliate need
give any notice to,
- 3 -
<PAGE> 8
make any filing with or obtain any authorization, consent or approval of any
Governmental Authority or other Person in order for the parties to consummate
the transactions contemplated by this Agreement and the Other Seller
Agreements.
(d) Financial Statements. The unaudited balance sheet of the
Rental Business as of December 31, 1996 and the related statement of income for
the fiscal year then ended, and the unaudited balance sheet of the Rental
Business as of May 31, 1997 (the latter being referred to as the "Latest
Balance Sheet") and the related statement of income for the five-month period
then ended, have been prepared in accordance with good accounting practices and
on a consistent basis, are in accordance with the books and records of the
Seller (which books and records are complete and correct), are accurate and
fairly present the financial position and results of operations of the Rental
Business as of such dates and for each of the periods indicated, do not list
book values for the Acquired Assets that are in excess of their fair market
values, and, except as set forth on Exhibit 3.1(d)(i), make adequate provision
for all Liabilities relating to the Rental Business. Copies of the financial
statements described in the first sentence in this Section are attached as
Exhibit 3.1(d)(ii). The expenses itemized on Exhibit 3.1(d)(iii) and reflected
in the financial performance of the Rental Business for the 12-month period
ended December 31, 1996 will not be realized on an on-going basis, and
information sufficient to determine such financial performance for such
12-month period has been provided by the Seller to the Buyer prior to the date
of this Agreement.
(e) Absence of Certain Leases, Changes or Events. The Seller
is not, except as set forth on Exhibit 3.1(e)(i), a party to or otherwise bound
by any contract or agreement relating to the Rental Business that has a term of
three or more months pursuant to which the Seller is obligated to furnish any
equipment, products or services, and no such contract or agreement has been
prepaid with respect to any period after the Closing Date. Since December 31,
1996, the Seller has not (i) incurred any debt, indebtedness or other Liability
relating to the Rental Business, except current Liabilities incurred in the
ordinary course of business; (ii) delayed or postponed the payment of accounts
payable or other Liabilities relating to the Rental Business or accelerated the
collection of any receivable relating to the Rental Business beyond stated,
normal terms; (iii) sold or otherwise transferred any of its equipment or other
assets or properties used in or relating to the Rental Business; (iv)
cancelled, compromised, settled, released, waived, written-off or expensed any
account or note receivable, right, debt or claim relating to the Rental
Business involving more than $2,500 in the aggregate; (v) changed in any
significant manner the way in which it conducts the Rental Business; (vi) made
or granted any individual wage or salary increase in excess of 10% or $1.00 per
hour, any general wage or salary increase, or any additional benefits of any
kind or nature to employees of the Rental Business; (vii) except as otherwise
expressly permitted by this Section 3.1(e), (A) entered into any contracts or
agreements, or made any commitments, involving more than $2,500 individually or
in the aggregate or (B) accelerated, terminated, delayed, modified or cancelled
any agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) relating to the Rental Business involving more
than $2,500 individually or in the aggregate; (viii) suffered any adverse fact
or change relating to the Rental Business, including, without limitation, to or
in the business, assets, financial condition, prospects or customer or supplier
relationships of the Rental Business; (ix) made any payment or transfer to or
for the benefit of any shareholder, officer or director or any relative or
affiliate thereof or permitted any Person, including, without limitation, any
shareholder, officer, director or employee or any relative or affiliate
thereof, to withdraw assets from the Seller used in or relating to the Rental
Business (other than cash of the Seller distributed to its shareholders as set
forth on Exhibit 3.1(e)(ii) and other than the payment to the Shareholders of
the proportionate monthly amount of their respective normal annualized salaries
due and payable during such period); (x) failed to make purchases of new or
used equipment
- 4 -
<PAGE> 9
necessary to maintain the rental/lease inventory of the Rental Business at the
level which is reasonably necessary to maintain the revenue base experienced by
the Rental Business during the 12 months preceding such date; (xi) decreased
its lease rate with respect to any equipment by 10% or more from the applicable
lease rate in effect on December 31, 1996 or rented or leased any equipment or
sold or otherwise transferred any inventory, equipment or services relating to
the Rental Business at below-normal rental or lease rates or margins; (xii)
suffered any other significant occurrence, event, incident, action, failure to
act or transaction relating to the Rental Business outside the ordinary course
of business; or (xiii) agreed to incur, take, enter into, make or permit any of
the matters described in clauses (i) through (xii).
(f) Tax Matters. Neither the Seller nor any of its
shareholders has ever filed (i) an election pursuant to Section 1362 of the
Code that the Seller be taxed as an "S" corporation, except as set forth on
Exhibit 3.1(f), or (ii) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Seller and the Shareholders will pay
all Taxes attributable to the Seller's business and activities, including all
Taxes attributable to the transactions contemplated by this Agreement, on or
before the due date. There are no Encumbrances on any of the assets of the
Seller that arose in connection with any failure (or alleged failure) to pay
any Tax. Exhibit 3.1(f) lists all federal, state and local income Tax Returns
filed with respect to the Seller for taxable periods ended on or after January
1, 1991, indicates those Tax Returns that have been audited and indicates those
Tax Returns that currently are the subject of audit. The Seller has delivered
to the Buyer correct and complete copies of all federal, state and local income
Tax Returns and examination reports of, and statements of deficiencies assessed
against or agreed to by, the Seller since January 1, 1991.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Seller owns
all of the Acquired Assets (other than certain items of Shareholder Property),
free and clear of all Encumbrances (except for those Encumbrances which the
Seller shall cause to be terminated as of the Closing). As of the Closing, all
of the Acquired Assets (including all of the Shareholder Property) will be
owned by the Seller, free and clear of all Encumbrances, and the Seller will
have good and marketable title to all the Acquired Assets. The Acquired Assets
consist of (A) the tangible and intangible assets of the Seller used in or
relating to the Rental Business (exclusive of the Excluded Assets) in existence
as of December 31, 1996 (except for such changes in inventory in the ordinary
course of business as are not in violation of Section 3.1(e)), including,
without limitation, the tangible and intangible assets set forth on Exhibit
3.1(h)(ii), and (B) all tangible and intangible assets, including, without
limitation, all improvements, fixtures and fittings, other than the Premises,
owned by any Shareholder or relative or affiliate thereof or of the Seller
which have been used in the Rental Business at any time on or after January 1,
1996 (the "Shareholder Property"), including, without limitation, the tangible
and intangible assets set forth on Exhibit 3.1(g)(i)(A) owned by any
Shareholder or relative or affiliate thereof. In the case of Acquired Assets
consisting of Seller's interest under an arrangement with the owner of
equipment who makes such equipment available for rental by Seller under a split
rental or similar arrangement ("Consigned Equipment"), such arrangement is in
full force and effect and the owner of the Consigned Equipment is not a
relative or affiliate of the Seller or any Shareholder. The Acquired Assets
and the Consigned Equipment are all of the tangible and intangible assets
(other than the Excluded Assets and the Premises) used by the Seller in, or
necessary for the conduct of, the Rental Business. The Acquired Assets and
the Consigned Equipment encompass all equipment used by the Seller to generate
the income reflected in the financial statements attached as Exhibit
3.1(d)(ii). The total cost to the Seller to use the Consigned Equipment as
part of its rental inventory during the fiscal year ended December 31, 1996 and
the
- 5 -
<PAGE> 10
five-month period ended May 31, 1997 did not exceed $12,549 and $5,837,
respectively. Exhibit 3.1(g)(i)(B) lists all Consigned Equipment as of the
date of this Agreement. Except for items rented or leased to customers, all of
the tangible Acquired Assets and the Consigned Equipment are located on the
Premises.
(ii) The Premises constitute all of the real property,
buildings and improvements used by the Seller in the Rental Business. The
Premises are supplied with utilities and other services necessary for the
operation thereof. Except as set forth on Exhibit 3.1(g)(ii), the Premises are
free from defects, have been maintained in accordance with normal industry
practice, are in good operating condition and repair and are suitable for the
purposes for which they presently are used. To the best knowledge of the
Seller and the Shareholders, the Premises have received all approvals of
Governmental Authorities (including Permits) required in connection with the
occupation and operation thereof and have been occupied, operated and
maintained in accordance with applicable Legal Requirements. The Seller has
not received notice of violation of any Legal Requirement or Permit relating to
its operations or its owned or leased properties.
(iii) No party to any lease with respect to any
Premises has repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data. Attached
as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the items
identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Seller nor any other party thereto is in breach
or default in performance of any of its respective obligations under, and no
event exists which, with the giving of notice or lapse of time or both, would
constitute a breach, default or event of default on the part of a party to, any
of the foregoing that is continuing unremedied.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor,
except as set forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or threatened against, the Seller, its properties or its business or
relating to the transactions contemplated by this Agreement, nor is there any
basis for any such action.
(ii) To the best knowledge of the Seller and the
Shareholders, except as set forth on Exhibit 3.1(i)(ii), neither the Seller nor
the Seller's assets (including its Premises, facilities, machinery and
equipment) are in violation of any applicable Legal Requirement or Right. The
Seller has not received notice from any Governmental Authority or other Person
of any violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or threatened
against the Seller alleging any such violation.
(j) Accounts Receivable. The accounts receivable of the
Seller reflected on the Latest Balance Sheet arose from bona fide transactions
by the Seller in the ordinary course of the Rental Business, are valid
receivables with trade customers subject to no setoffs or counterclaims, and
are current.
- 6 -
<PAGE> 11
(k) Product Quality, Warranty and Liability. All products and
services sold, rented, leased, provided or delivered by the Seller to customers
in the Rental Business on or prior to the Closing Date conform to applicable
contractual commitments, express and implied warranties, product and service
specifications and quality standards, and the Seller has no Liability and there
is no basis for any Liability for replacement or repair thereof or other
damages in connection therewith. No product or service sold, rented, leased,
provided or delivered by the Seller to customers in the Rental Business on or
prior to the Closing is subject to any guaranty, warranty or other indemnity
beyond the applicable standard terms and conditions of sale, rent or lease.
The Seller has no Liability and, except as set forth on Exhibit 3.1(i)(ii),
there is no basis for any Liability arising out of any injury to a Person or
property as a result of the ownership, possession, provision or use of any
product or service sold, rented, leased, provided or delivered by the Seller in
the Rental Business on or prior to the Closing Date. All product or service
liability claims that have been asserted against the Seller with respect to the
Rental Business since January 1, 1992, whether covered by insurance or not and
whether litigation has resulted or not, other than those listed and summarized
on Exhibit 3.1(i)(i), are listed and summarized on Exhibit 3.1(k).
(l) Insurance. The Seller has policies of insurance (i)
covering risk of loss on the Acquired Assets and Consigned Equipment, (ii)
covering products and services liability and liability for fire, property
damage, personal injury and workers' compensation coverage and (iii) for
business interruption, all, to the best knowledge of the Seller and the
Shareholders, with responsible and financially sound insurance carriers in
adequate amounts and in compliance with governmental requirements and in
accordance with good industry practice. All such insurance policies are valid,
in full force and effect and enforceable in accordance with their respective
terms and no party has repudiated any provision thereof. All such policies
will remain in full force and effect until the Closing Date. Neither the
Seller nor any other party to any such policy is in breach or default
(including with respect to the payment of premiums or the giving of notices) in
the performance of any of their respective obligations thereunder, and no event
exists which, with the giving of notice or the lapse of time or both, would
constitute a breach, default or event of default, or permit termination,
modification or acceleration under any such policy. Except as set forth on
Exhibit 3.1(l), there are no claims, actions, proceedings or suits arising out
of or based upon any of such policies nor, to the best knowledge of the Seller
and the Shareholders, does any basis for any such claim, action, suit or
proceeding exist. All premiums have been paid on such policies as of the date
of this Agreement and will be paid on such policies through the Closing Date.
The Seller has been covered during the five years prior to the date of this
Agreement by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. All
claims made during such five-year period with respect to any insurance coverage
of the Seller, other than those described on Exhibit 3.1(k), are set forth on
Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters. The Buyer will not
suffer any Liability or Adverse Consequence from the Seller's administration or
termination of any of its Employee Benefit Plans or from any failure of any
pre-Closing or post-Closing distribution of benefits to employees of the Seller
to be made by the Seller in compliance with all applicable Legal Requirements.
The Buyer will have no obligation to employ any employee of the Seller or to
continue any Employee Benefit Plan, and will have no Liability under any plan
or arrangement maintained by the Seller for the benefit of any employee. The
Seller will remain liable for all costs of employee compensation, including
benefits and Taxes relating to employment and employees attributable to periods
through the Closing Date, whether reported by the Closing Date or thereafter,
and all group health plan continuation coverage to which any employee, former
employee or dependent is entitled because of a qualifying event (as defined in
Section 4980B(f)(3) of the Code)
- 7 -
<PAGE> 12
occurring through the Closing Date or as a result of termination of employment
with the Seller because of the transactions contemplated by this Agreement and
any benefit or excise tax liability or penalty or other costs arising from any
failure by the Seller to provide group health plan continuation coverage.
Except as set forth on Exhibit 3.1(m), neither the Seller nor any Affiliated
Group which includes the Seller (if any) maintains, administers or contributes
to, has maintained, administered or contributed to, or has any Liability to
contribute to, any Employee Benefit Plan. Exhibit 3.1(m) lists each Employee
Benefit Plan that is, or at any time during the past six years was, maintained,
administered, contributed to or required to be contributed to by the Seller or
any Affiliated Group (if any) which includes or has included the Seller, and
the date of termination of each such Employee Benefit Plan (if any) which has
been terminated. The Seller has no Liability (and there is no basis for the
assertion of any Liability) as a result of the Seller's or any such Affiliated
Group's maintenance, administration or termination of, or contribution to, any
Employee Benefit Plan. Neither the Seller nor any member of any Affiliated
Group (if any) which includes or has included the Seller has ever been required
to contribute to any Multiemployer Plan (as defined in ERISA Section 3(37)) nor
has incurred any Liability under Title IV of ERISA.
(n) Employees and Labor. The Seller has not received any
notice, nor, to the best knowledge of the Seller and the Shareholders, is there
any reason to believe that any executive or key employee of the Seller or any
group of employees of the Seller employed in the Rental Business has any plans
to terminate his, her or its employment with the Seller. No executive or key
employee employed in the Rental Business is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Seller prior to the Closing Date and, if such person becomes an
employee of the Buyer, to the affairs of the Buyer after the Closing Date. The
Seller will not be required to give any notice under the Worker Adjustment and
Retraining Notification Act, as amended, or any similar Legal Requirement as a
result of this Agreement, the Other Seller Agreements or the transactions
contemplated hereby or thereby. The Seller does not have any labor relations
problems or disputes, nor has the Seller experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Seller is not a party to or bound by any collective bargaining agreement, there
is no union or collective bargaining unit at the Seller's facilities, and no
union organization effort has been threatened, initiated or is in progress with
respect to any employees of the Seller.
(o) Customer Relationships. Exhibit 3.1(o)(i) lists each
customer that individually or with its affiliates accounted for 2% or more of
the sales, rental or lease revenues of the Rental Business during either the
fiscal year ended December 31, 1996 or the five-month period ended May 31, 1997
(the "Principal Customers"). The Seller has good commercial working
relationships with its Principal Customers and since December 31, 1996, no
Principal Customer has cancelled or otherwise terminated its relationship with
the Seller, materially decreased or limited its purchases, rentals or leases
the Seller, or threatened to take any such action. The Seller and the
Shareholders have no basis to anticipate any problems with the Seller's
customer or business relationships. To the best knowledge of the Seller and
the Shareholders, no Principal Customer has any plans to reduce its purchases,
rentals or leases from the Seller below levels prevailing since January 1,
1996, and the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not adversely affect the relationship
of the Seller with any Principal Customer prior to the Closing Date or of the
Buyer with any Principal Customer after the Closing Date.
- 8 -
<PAGE> 13
(p) Resale Inventory. The resale inventory of the Rental
Business consists of goods which, in the aggregate, are merchantable, are fit
for the purposes for which they were procured and are held by the Seller, are
usable in the ordinary course of the Rental Business and are not obsolete.
(q) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Rental Business consists of machinery, equipment
and other tangible personal property which are merchantable, are fit and
suitable for the purpose for which they were procured and are held by the
Seller, useable in the ordinary course of the Rental Business and are not
obsolete. In the aggregate, the machinery, equipment and other tangible
personal property included in the Acquired Assets (including that held for
rental, lease or sale) and the Consigned Equipment has been well maintained and
is in good repair and good operating condition. None of the machinery,
equipment or other tangible personal property included in the Acquired Assets
(including that held for rental, lease or sale) and the Consigned Equipment is
damaged or defective, the Seller has not experienced material problems or
deficiencies with respect to such machinery, equipment and other tangible
personal property, and, to the best knowledge of the Seller and the
Shareholders, there is no basis to anticipate any such problems or
deficiencies.
(r) Environmental Matters.
(i) Except as set forth in the Environmental Study,
the Seller is conducting and at all times has conducted its business and
operations, and has occupied, used and operated the Premises and all other real
property and facilities presently or previously owned, occupied, used or
operated by the Seller, in compliance with all Environmental Obligations and so
as not to give rise to Liability under any Environmental Obligations or to any
impact on the Seller's business or activities. Except as set forth in the
Environmental Study, the Seller and the Shareholders do not have any knowledge
of pending or proposed changes to any Environmental Obligations which would
require any changes in any of the Seller's Premises, facilities, equipment,
operations or procedures or affect the Seller's business or its cost of
conducting its business as now conducted or as conducted prior to the Closing
Date.
(ii) Except as set forth in the Environmental Study,
no conditions, circumstances or activities have existed or currently exist, and
neither the Seller nor any Shareholder has engaged in any acts or omissions,
with respect to the Premises or any other real properties, facilities or
business presently or previously owned, occupied, used or operated by the
Seller or any predecessor (including, without limitation, off-site disposal or
treatment of Hazardous Materials) which could give rise to any Liability
pursuant to any Environmental Obligation. Exhibit 3.1(r)(ii) identifies all
real properties and facilities, including the addresses thereof, which have
been owned, occupied, used or operated by the Seller or its predecessors at any
time on or prior to the date of this Agreement. There are no outstanding,
pending or threatened Orders against the Seller or any Shareholder, nor are
there any current, pending or threatened investigations of any kind against the
Seller or any Shareholder, concerning any Environmental Obligations. Except as
set forth in the Environmental Study, there are no actions, suits or
administrative, arbitral or other proceedings alleged, claimed, threatened,
pending against or affecting the Seller or any Shareholder at law or in equity
with respect to any Environmental Obligations, and neither the Seller nor any
Shareholder has knowledge of any existing grounds on which any such action,
suit or proceedings might be commenced.
(iii) Except as set forth in the Environmental Study,
any chemicals and chemical compounds and mixtures which are included among the
assets of the Seller are integral to and required for the conduct of the
Seller's business, have not been and are not intended to be discarded or
abandoned, and
- 9 -
<PAGE> 14
are not waste or waste materials. Except as set forth in the environmental
studies attached as Exhibit 3.1(r)(iii) (collectively, the "Environmental
Study"), the Seller has not generated, handled, used, transported or disposed
of Hazardous Materials. All waste materials which are generated as part of the
business of the Seller are handled, stored, treated and disposed of in
accordance with applicable Legal Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental Study,
no underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any facilities presently or previously
owned, occupied, used or operated by the Seller or any predecessor. Except as
set forth in the Environmental Study, neither any of the Premises nor any other
real properties or facilities presently or previously owned, occupied, used or
operated by the Seller or any predecessor has been used at any time as a
gasoline service station or any facility for storing, pumping, dispensing or
producing gasoline or any other petroleum products (other than such storage,
pumping and dispensing of fuels and lubricants as is incidental to the Rental
Business or the Sales Business) or Hazardous Materials. Except as set forth in
the Environmental Study, no building or other structure on any of the Premises
contains asbestos-containing materials. Except as set forth in the
Environmental Study, there are not nor have there been any incinerators, septic
tanks, leach fields, cesspools or wells (including without limitation dry,
drinking, industrial, agricultural and monitoring wells) on any of the
Premises.
(s) Intellectual Property. The Seller owns or has the legal
right to use and to transfer to the Buyer each item of Intellectual Property
required to be identified on Exhibit 3.1(h)(ii). The continued operation of
the business of the Seller as currently conducted will not interfere with,
infringe upon, misappropriate or conflict with any Intellectual Property rights
of another Person. To the best knowledge of the Seller and the Shareholders,
no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of the
Seller or any Intellectual Property included in the Shareholder Property.
Neither the Seller nor any owner of any Intellectual Property included in the
Shareholder Property has granted any license, sublicense or permission with
respect to any Intellectual Property owned or used in the Seller's business.
(t) Disclosure. None of the documents or information provided
to the Buyer by the Seller, any Shareholder or any agent or employee thereof in
the course of the Buyer's due diligence investigation and the negotiation of
this Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, contain any untrue statement of any material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact which materially adversely affects
the business, prospects, condition, affairs or operations of the Rental
Business or any properties or assets used in or relating to the Rental Business
which has not been set forth in this Agreement or such Exhibits, including such
financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Seller and the Shareholders acknowledge and agree that
the fact that they have made disclosures pursuant to
- 10 -
<PAGE> 15
Section 3.1 or otherwise of matters, or did not have knowledge of matters,
which result in Adverse Consequences to the Buyer shall not relieve the Seller
and the Shareholders of their obligation pursuant to Article 7 to indemnify and
hold the Buyer harmless from all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller and the Shareholders that the statements contained
in this Section 3.2 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other Buyer Agreements
and the transactions contemplated hereby and thereby have been duly approved by
all requisite corporate action. The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Buyer
Agreements, and this Agreement constitutes, and the Other Buyer Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of the Buyer, and shall be enforceable in accordance with their
respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery
and performance of this Agreement and the Other Buyer Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Buyer is subject or any provision of
the certificate of incorporation or bylaws of the Buyer or (ii) violate, with
or without the giving of notice or the lapse of time or both, or conflict with
or result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Buyer pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Buyer is a party or which the Buyer or any of its assets and properties is
bound or subject. Except for notices and consents that will be given or
obtained by the Buyer prior to the Closing, the Buyer does not need to give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that the Liabilities of the
Seller and the Shareholders with respect to the representations and warranties
set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(m), 3.1(r),
3.1(s) and 3.1(t), and the Liabilities of the Buyer with respect to the
representations and warranties set forth in Sections 3.2(a) and 3.2(b), shall
survive without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of such party and be exercised always in a reasonable manner and within
reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
- 11 -
<PAGE> 16
4.1. General. Each of the parties will use its best efforts to take
all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will, and will cause the Seller to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Rental Business. The Seller will
not, and the Shareholders will not cause or permit the Seller to, engage in any
practice, take any action or enter into any transaction relating to the Rental
Business outside its ordinary course of business; provided, however, that in no
event will any action be taken or fail to be taken or any transaction be
entered into which would result in a breach of any representation, warranty or
covenant of the Seller or any Shareholder. The Seller will, and the
Shareholders will cause the Seller to, keep the Rental Business and related
properties, including its current operations, physical facilities, working
conditions, and relationships with customers, suppliers, lessors, licensors and
employees, intact and, in connection therewith, to continue to purchase new or
used equipment necessary to maintain its rental/lease inventory at the level
specified in Section 3.1(e)(x).
4.3. Full Access. The Seller will permit the Buyer and its agents to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Seller, to all premises,
properties, personnel, books, records (including Tax records), contracts and
documents of or pertaining to the Seller.
4.4. Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development which occurs after the date of
this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Seller.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.5. Exclusivity. Neither the Seller nor any Shareholder will, and the
Shareholders will not cause or permit the Seller to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities of the Seller
or any portion of the Acquired Assets (including any acquisition structured as
a merger, consolidation or share exchange) or (b) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. No Shareholder will
vote shares of the Seller's stock in favor of any such transaction. The Seller
and Shareholders will notify the Buyer immediately if the Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
4.6. Conveyance of Shareholder Property. Prior to the Closing Date,
the Shareholders shall convey, and shall cause each relative or affiliate of
the Seller or of any Shareholder to convey, to the Seller, free and clear of
any Encumbrance or Tax, all of each Shareholder's and each such relative's or
affiliate's right, title and interest to the Shareholder Property.
- 12 -
<PAGE> 17
4.7. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
4.8. Certain Pre-Closing Environmental Matters. The Seller and the
Shareholders shall, prior to the Closing, take or cause to be taken, in
compliance with applicable Environmental Obligations, the following actions:
(a) remove and dispose of the existing underground storage
tanks and excavate and dispose of any contaminated soils, both in compliance
with all applicable legal requirements; and
(b) cease use of the current wash water disposal system and
replace such system with a wash system containing an oil-water separator, and
further plumb such system to the sanitary sewer, in compliance with all
applicable legal requirements, including, without limitation, obtaining the
necessary discharge permit(s).
The Seller and the Shareholders shall take such actions at their expense;
provided, however, that Buyer shall pay to Seller, at the Closing, as
additional purchase price for the Acquired Assets, the sum of $8,000 to
partially offset the cost to Seller of such actions. Nothing in this Section
4.8 shall relieve the Seller or any Shareholder from any obligation or
Liability under Section 7 of this Agreement, obligate the Buyer to take any
action or impose any Liability on the Buyer.
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Each of the Shareholders will assist with the
transition of the Seller's business to the Buyer during the first six months
following the Closing at no cost to the Buyer. Neither the Seller nor any
Shareholder will take any action at any time that is designed or intended to
have the effect of discouraging any customer, supplier, lessor, licensor or
other business associate of the Seller from establishing or continuing a
business relationship with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Rental Business, each of the other
parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
- 13 -
<PAGE> 18
5.4. Confidentiality. The Seller and the Shareholders will treat and
hold as confidential all Confidential Information concerning the Buyer, the
Seller's business or the Acquired Assets, refrain from using any such
Confidential Information and deliver promptly to the Buyer, at the request and
option of the Buyer, a copy of such Confidential Information in its or their
possession. Seller shall be entitled to retain all original records.
5.5. Post-Closing Announcements. Following the Closing, neither the
Seller nor any Shareholder will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer.
5.6. Financial Statements. The Seller and the Shareholders will, upon
request of the Buyer, cooperate with the Buyer and render such assistance to
the Buyer and its accountants as may be required to produce such historical and
on- going financial statements and audits as the Buyer may request, all at the
sole cost and expense of the Buyer, but without additional consideration to the
Seller or the Shareholders. The Seller and the Shareholders acknowledge that
the Buyer may be required by applicable law to include audited financial
statements with respect to the Rental Business in reports filed with
governmental agencies and that the inability to audit the financial statements
of the Rental Business promptly after the Closing could have a material adverse
effect on the Buyer. The Seller and the Shareholders represent and warrant to
the Buyer that the Seller's records with respect to the Rental Business are
auditable in their current form for at least one full fiscal year prior to the
Closing.
5.7. Satisfaction of Liabilities. The Seller and the Shareholders will
pay and perform, as and when due, all Liabilities (other than the Assumed
Liabilities) relating to the Seller, the business of the Seller and the
Acquired Assets, including without limitation, all Taxes attributable to the
transactions contemplated by this Agreement and all accrued vacation and other
accrued employee benefits; provided, however, that accrued vacation and other
accrued employee benefits with respect to those persons who are employees of
the Seller as of immediately prior to the Closing Date and who become employees
of the Buyer effective as of the Closing will be paid by Seller and the
Shareholders to Buyer as the Buyer provides such benefits or makes cash
payments in lieu thereof to such employees, each such payment to be made within
ten days after receipt of Buyer's statement therefor. In addition, the Seller
and the Shareholders will pay to the Buyer an amount equal to the portion of
the personal property taxes on the Acquired Assets attributable to all periods
prior to the Closing Date, including, without limitation, the period from
January 1, 1997 to the Closing Date (the "Pre-Closing Personal Property Tax
Amount"). The Pre-Closing Personal Property Tax Amount payable by the
Shareholders and the Seller will be determined by prorating personal property
taxes on the Acquired Assets of the Seller for 1997 in proportion to the number
of days in the year prior to the Closing Date compared to the number of days in
the year remaining after the date on which the Closing occurs. The Seller and
the Shareholders shall pay the Pre-Closing Personal Property Tax Amount to the
Buyer within five days after their receipt of notice from the Buyer stating the
amount payable by them and a copy of the invoices from Governmental Authorities
relating thereto. Further, the Seller and the Shareholders, at their expense,
promptly will take or cause to be taken any action necessary to remedy any
failure of the Premises or the acquired business to comply at the Closing Date
with any Legal Requirement, upon receipt of notice from the Buyer at any time.
The Buyer will pay and perform, as and when due (except to the extent the
validity thereof or the liability therefor is being contested by the Buyer),
the Assumed Liabilities.
5.8. Certain Post-Closing Environmental Matters.
- 14 -
<PAGE> 19
(a) The Seller and the Shareholders shall, within 180 days of
the Closing, obtain a "clean closure" letter from the state of Colorado
Department of Public Health and Environment, Oil Inspection Section, regarding
the removal of the underground storage tanks as described in Section 4.8. The
Seller and the Shareholders shall take such actions at their expense.
(b) Within 30 days of Closing, Seller and Shareholders shall
request and use best efforts to obtain access from Union Pacific Railroad (UP)
to collect environmental samples and conduct any necessary remedial actions on
the area on UP's property where wash water from Seller's operations previously
have been deposited. Seller and Shareholders shall commence such sampling
activities within 10 days from the granting of such access and shall diligently
pursue completion of those activities once commenced. The sampling conducted
by Seller and Shareholders shall be adequate to determine the nature and scope
of contamination resulting from the disposal of such wash water. Upon
completion of sampling, Seller and Shareholders shall cause the samples to be
analyzed as promptly as reasonably practicable and shall provide Buyer a copy
of the results thereof. Upon receipt of the results Seller and Shareholders
shall promptly commence and diligently pursue completion of such remedial
activities as may be required by applicable Environmental Obligations or by UP.
If a work plan or similar document is prepared by Seller and Shareholders or
their consultant as part of those activities, such documents shall be provided
to Buyer. Upon completion of those activities, Seller and Shareholders shall
provide Buyer with a final report which identifies the sampling and remedial
activities conducted on the UP property or other properties relating to the
past disposal of wash water by Seller and Shareholders. The final report shall
contain a certification, signed by Seller's consultant, stating that all
sampling and remedial activities were accomplished pursuant to and in
accordance with applicable Environmental Obligations and to the satisfaction of
UP and that no further actions are required. In the event that Seller and
Shareholders are unable to obtain access to UP property, Seller and
Shareholders shall promptly notify Buyer and Buyer and Seller and Shareholders
shall negotiate in good faith to reach a mutually agreeable alternative course
of action. All actions under this Section 5.8(b) shall be at the cost and risk
of Seller and Shareholders and they shall be solely responsible for the conduct
thereof.
(c) Nothing in this Section 5.8 shall relieve the Seller or
any Shareholder from any obligation or Liability under Section 7 of this
Agreement or obligate the Buyer to take any action or impose any Liability on
the Buyer.
5.9. Use of A-Z Names. For a period of two years following the
Closing, the Seller and the Shareholders shall not, and shall not allow any of
their affiliates to, use any name containing "A-Z" or any variation thereof
except as follows:
(a) Seller may continue to use the name A-Z Safety Supply,
Inc. and the A-Z logo in connection with the operation of the business
consisting of selling and servicing safety supplies, including respirators,
medical emergency kits and fire extinguishers, currently conducted by Seller
under that name, but shall not authorize any other person to use that name.
(b) Seller may continue to use the name A-Z
Contractor/Industrial Sales, Inc. and the A-Z logo in connection with the
operation of the business consisting of selling (but not renting) and servicing
power tools and related merchandise to contractors and industrial customers
currently conducted by Seller under that name, but shall not authorize any
other person to use that name.
- 15 -
<PAGE> 20
(c) Seller may use "A-Z Sales & Service, Inc." as its
corporate name.
5.10. Health Insurance. At the request of Buyer, Seller will allow
Buyer to pay the premiums necessary to continue health insurance coverage under
Seller's existing policies for all former employees of Seller who become
employees of Buyer after the Closing for a period of up to 90 days after the
Closing.
5.11. Restriction On Special Events. The Seller and Ronald K. Wray are
parties to a Mutual Covenant Not to Compete with Steven G. Fobes dated May 6,
1996 (the "Fobes Covenant"). In the Fobes Covenant, the Seller and Ronald K.
Wray agree not to compete with the party rental business operated by Mr. Fobes
within a 50-mile radius of Fort Collins, with an exception for up to $20,000
per year in gross rental revenues for equipment similar to that rented by Mr.
Fobes. The Buyer does not intend or agree, expressly or by implication, to
assume the obligations of the Seller or Ronald K. Wray under the Fobes
Covenant. However, the Buyer agrees, for the benefit of the Seller and not for
the benefit of Mr. Fobes, that the Buyer shall not carry any "special events
equipment", as that term is generally used within the Buyer's organization, in
the Premises, or deliver any special events equipment from the Premises, on or
before May 5, 2001; provided, however, that the Buyer may rent up to $20,000 in
gross revenues of special events equipment from the Premises in any fiscal year
of the Buyer. Nothing contained herein shall restrict the Buyer's right to
rent or deliver special events equipment within the geographic area covered by
the Fobes Covenant, from a location within or without that area, as long as the
Buyer does not carry special events equipment at or deliver special events
equipment from the Premises. Without limiting the generality of the foregoing,
the Buyer shall be free to refer inquiries concerning special events rentals
received at the Premises to other stores owned by the Buyer at which special
events equipment is rented. All obligations of the Seller or Ronald K. Wray
under the Fobes Covenant shall be considered Liabilities that are not Assumed
Liabilities for all purposes of this Agreement and shall be subject to Sections
5.7 and 7.1.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the purchase of the Acquired Assets and the consummation of
the other transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Seller's and each Shareholder's representations and
warranties shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to the Buyer pursuant to Section 4.5
and the subject matter thereof shall be satisfactory to the Buyer;
(b) the Seller and the Shareholders shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) the Seller and the Shareholders shall have given all
notices and procured all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this
- 16 -
<PAGE> 21
Agreement to be rescinded following consummation or (iii) affect adversely the
right of the Buyer to own the Acquired Assets or to conduct the acquired
business, and no such Order shall be in effect;
(e) there shall have been no adverse change in the Acquired
Assets or the Seller's business between the date of execution of this Agreement
and the Closing;
(f) the Seller shall have delivered to the Buyer (i) a
certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, (ii) a certificate as
to the adoption of resolutions by the board of directors and shareholders of
the Seller authorizing the execution, delivery and performance of this
Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby and (iii) a good standing
certificate, dated within 10 days of the Closing, from the Secretary of State
of the State of the Seller's jurisdiction of incorporation and each other state
in which the Seller is qualified or authorized to do business as a foreign
corporation;
(g) the Buyer shall have completed its due diligence with
respect to the Seller, the Seller's business and the Acquired Assets with
results satisfactory to the Buyer.
(h) the Other Seller Agreements and documentation necessary to
accomplish the conveyance of the specific ownership tax and fee payments made
by the Seller prior to the Closing in respect of vehicles and mobile equipment
included in the Acquired Assets shall have been executed and delivered by the
Seller and the Shareholders, as applicable;
(i) the Shareholder Lease shall have been executed and
delivered by the parties thereto and the owners of the real property
underlying the Shareholder Lease, and each Person having an Encumbrance on such
property, shall have executed and delivered estoppel, nondisturbance and
landlord waiver agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the Seller
and the Shareholders an opinion in form and substance as set forth in Exhibit
6.1(j) addressed to the Buyer and its debt and equity financing sources and
dated as of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) a "Phase I" environmental study of each of the properties
comprising the Premises, and such additional environmental testing as the Buyer
shall request, shall have been completed at the Seller's expense and supplied
to the Buyer, and the contents and results thereof shall be satisfactory to the
Buyer;
(m) the Seller shall have delivered to the Buyer possession
and control of the Acquired Assets;
(n) the Seller and the Shareholders shall have executed and
delivered to the Buyer (i) appropriate documentation to release on the records
of the Colorado Secretary of State the trade names "A-Z Rents It" and "A-Z
Rental Center" and all other trade names containing the letters "A-Z", other
than the
- 17 -
<PAGE> 22
names expressly included in the Excluded Assets, and (ii) an amendment to the
Seller's articles of incorporation for the purpose of changing its name to "A-Z
Sales & Service, Inc."
(o) the Seller and the Shareholders shall have delivered, or
caused the Seller to deliver, to the Buyer such other instruments, certificates
and documents as are reasonably requested by the Buyer in order to consummate
the transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Seller and the Shareholders. The
obligation of the Seller and the Shareholders to consummate the sale of the
Acquired Assets is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Sections 6.2(a)
and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed and
delivered by the Buyer;
(e) the Seller and the Shareholders shall have received from
counsel to the Buyer an opinion in form and substance as set forth in Exhibit
6.2(e), addressed to the Seller and the Shareholders and dated as of the
Closing; and
(f) the Buyer shall have paid and deposited the purchase price
for the Acquired Assets pursuant to Section 2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) If the Seller or any Shareholder breaches (or if any
Person other than the Buyer alleges facts that, if true, would mean the Seller
or any Shareholder has breached) any of the representations or warranties of
the Seller or any Shareholder contained herein and the Buyer gives notice
thereof to the Shareholders' Agent within the Survival Period, or if the Seller
or any Shareholder breaches (or if any Person other than the Buyer alleges
facts that, if true, would mean the Seller or any Shareholder has breached) any
covenants of the Seller or any Shareholder contained herein or any
representations, warranties or covenants of the Seller or any Shareholder
contained in any Other Seller Agreement and the Buyer gives notice thereof to
the Shareholders' Agent, then the Seller and the Shareholders agree to jointly
and severally indemnify and
- 18 -
<PAGE> 23
hold harmless the Buyer from and against any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to or caused by any of the
foregoing regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.1 and in determining for
purposes of the preceding sentence the amount of Adverse Consequences suffered
by the Buyer, such representations and warranties shall not be qualified (other
than by (A) the reference to "knowledge" set forth in the last sentence of
Section 3.1(o) and (B) the references to "material" set forth in Section
3.1(t)) by "material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of similar import, or
by any phrase using any such terms or words. The Seller and the Shareholders
also agree to jointly and severally indemnify and hold harmless the Buyer from
and against any Adverse Consequences the Buyer may suffer which result from,
arise out of, relate to or are caused by (i) any Liability of the Seller or any
Shareholder not included in the Assumed Liabilities (including, without
limitation, those concerning Hazardous Materials or the failure of the Seller,
any Shareholder or any predecessor to comply with any Environmental Obligation
or other Legal Requirement), (ii) any act or omission of the Seller, any
Shareholder or any predecessor with respect to, or any event or circumstance
related to, the Seller's, any Shareholder's or any predecessor's ownership,
occupation, use or operation of any of the Acquired Assets, the Excluded
Assets, the Premises or any other assets or properties or the conduct of its or
their business, regardless, in the case of (i) or (ii), of (A) whether or not
such Liability, act, omission, event, circumstance or matter was known or
disclosed to the Buyer, was disclosed on any Exhibit hereto or is a matter with
respect to which the Seller or any Shareholder did or did not have knowledge,
(B) when such Liability, act, omission, event, circumstance or matter occurred,
existed, occurs or exists and (C) whether a claim with respect thereto was
asserted before or is asserted after the Closing Date, and (iii) any Liability
resulting from any failure of the parties to comply with any applicable bulk
sales or transfer Legal Requirement in connection with the transactions
contemplated by this Agreement. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against the Seller or any Shareholder during the
Escrow Period will be paid to the Buyer first out of the funds escrowed
pursuant to the Escrow Agreement, along with interest from the date of the
Closing at the rate applicable to the escrowed funds. The Seller and the
Shareholders will have joint and several Liability for any additional amounts
needed to cover such claims, which amounts will be paid directly to the Buyer.
At the end of the Escrow Period amounts that may be needed to cover pending
indemnification claims made by the Buyer (such amounts to be determined by the
Buyer based upon the reasonable exercise of its business judgment) will be
retained in the Escrow Account until such claims are resolved, and any excess
on deposit therein, including any accrued interest, will be paid to the Seller.
Nothing in this Section 7.1(b) will be construed to limit the Buyer's right to
indemnification to amounts on deposit in the Escrow Account. The Buyer and the
Shareholders' Agent shall jointly give instructions to the Escrow Agent to
carry out the intent of this Section 7.1(b). Any disputes concerning the
escrowed funds will be settled by arbitration as provided in this Agreement.
The Buyer, on the one hand, and the Seller and the Shareholders jointly and
severally, on the other hand, shall each be responsible for one-half of the
fees, charges and expenses payable to the Escrow Agent pursuant to paragraph a.
of Article 2 of the Escrow Agreement and, except as otherwise determined
pursuant to Section 9.11 of this Agreement, one-half of any amounts payable
pursuant to paragraph b. of such Article 2.
- 19 -
<PAGE> 24
7.2. Indemnification Provisions for Benefit of the Seller and the
Shareholders. If the Buyer breaches (or if any Person other than the Seller or
a Shareholder alleges facts that, if true, would mean the Buyer has breached)
any of its representations or warranties contained herein and the Shareholders'
Agent gives notice of a claim for indemnification against the Buyer within the
Survival Period, or if the Buyer breaches (or if any Person other than the
Seller or a Shareholder alleges facts that, if true, would mean the Buyer has
breached) any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other Buyer Agreement and the
Shareholders' Agent gives notice thereof to the Buyer, then the Buyer agrees to
indemnify and hold harmless the Seller and the Shareholders from and against
any Adverse Consequences the Seller and the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Seller and the Shareholders for
purposes of this Section, such representations and warranties shall not be
qualified by "material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of similar import, or
by any phrase using any such terms or words. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the parties within 30 days of notice of claim for indemnification from
the party claiming indemnification to the party against whom such claim is
asserted, the dispute will be resolved by arbitration pursuant to this
Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including,
without limitation, any Governmental Authority) notifies any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
- 20 -
<PAGE> 25
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to the Seller, any Shareholder or any
relative or affiliate of the Seller or any Shareholder at or after the Closing;
provided, however, that Buyer's right to offset against amounts payable under
the Shareholder Lease shall terminate upon the expiration of the Primary Lease
Term (as defined in the Shareholder Lease).
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Shareholders' Agent at any time prior to the Closing (i) in the
event the Seller or any Shareholder has breached any representation, warranty
or covenant contained in this Agreement in any material way, the Buyer has
notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before July 31, 1997 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (i) if the
Buyer has breached any representation, warranty or covenant
- 21 -
<PAGE> 26
contained in this Agreement in any material way, the Shareholders' Agent has
notified the Buyer of the breach, and the breach has not been cured within 10
days after the notice of breach or (ii) if the Closing has not occurred on or
before July 31, 1997 because of the failure of any condition precedent to the
Seller's and the Shareholders' obligations to consummate the Closing (unless
the failure results primarily from the Seller or any Shareholder breaching any
representation, warranty or covenant contained in this Agreement in any
material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Seller nor any Shareholder may assign this
Agreement or any of their rights, interests or obligations hereunder without
the prior written approval of the Buyer. The Buyer may assign its rights and
obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
- 22 -
<PAGE> 27
If to the Seller or
the Shareholders:
Addressed to the
Shareholders' Agent at:
1548 Riverside Avenue
Fort Collins, CO 80524
Telecopy: (970) 482-9931
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
6000 East Evans, Suite 2-300 633 Seventeenth Street, Suite 3000
Denver, Colorado 80222 Denver, Colorado 80202
Attn: Arnold A. Bernstein Attn: Andrew L. Blair, Jr.
Telecopy: (303) 782-5370 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Seller and the Shareholders will bear all costs and expenses
(including, without limitation, all legal, accounting and tax related fees and
expenses, all fees, commissions, expenses and other amounts payable to
- 23 -
<PAGE> 28
any broker, finder or agent and the costs of any environmental study and
additional environmental testing contemplated by Section 6.1) incurred by the
Seller or any Shareholder either before or after the date of this Agreement in
connection with this Agreement or the transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Shareholders' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE
WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Seller's and Shareholders' Agent. The Seller and each Shareholder
hereby authorize and appoint the Shareholders' Agent to act as its, his or her
exclusive agent and attorney-in-fact to act on behalf of each of them with
respect to all matters which are the subject of this Agreement, including,
without limitation, (a) receiving or giving all notices, instructions, other
communications, consents or agreements that may be necessary, required or given
hereunder and (b) asserting, settling, compromising, or defending, or
determining not to assert, settle, compromise or defend, (i) any claims which
the Seller or any Shareholder may assert, or have the right to assert, against
the Buyer, or (ii) any claims which the Buyer may assert, or have the right to
assert, against the Seller or any Shareholder. The Shareholders' Agent hereby
accepts such
- 24 -
<PAGE> 29
authorization and appointment. Upon the receipt of written evidence
satisfactory to the Buyer to the effect that the Shareholders' Agent has been
substituted as agent of the Seller and the Shareholders by reason of his death,
disability or resignation, the Buyer shall be entitled to rely on such
substituted agent to the same extent as they were theretofore entitled to rely
upon the Shareholders' Agent with respect to the matters covered by this
Section 9.14. Neither the Seller nor any Shareholder shall act with respect to
any of the matters which are the subject of this Agreement except through the
Shareholders' Agent. The Seller and the Shareholders acknowledge and agree
that the Buyer may deal exclusively with the Shareholders' Agent in respect of
such matters, that the enforceability of this Section 9.14 is material to the
Buyer, and that the Buyer has relied upon the enforceability of this Section
9.14 in entering into this Agreement.
- 25 -
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A. BERNSTEIN
---------------------------------
Name: Arnold A. Bernstein
-------------------------------
Title: President - CEO
------------------------------
SELLER:
A-Z RENTS IT OF FORT COLLINS, INC.
By: /s/ RONALD K. WRAY
---------------------------------
Name: Ronald K. Wray
-------------------------------
Title: President
------------------------------
SHAREHOLDERS:
/s/ RONALD K. WRAY
-------------------------------------
Ronald K. Wray
/s/ JANET L. WRAY
-------------------------------------
Janet L. Wray
[SIGNATURE PAGE TO PURCHASE AGREEMENT.]
- 26 -
<PAGE> 1
EXHIBIT 10.18
================================================================================
PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
A-1 RENT ALL, INC. CHARITABLE REMAINDER UNITRUST,
A-1 RENT ALL, INC.,
AND THE
SHAREHOLDERS
OF
A-1 RENT ALL, INC.
AS OF JULY 23, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . 1
2.2. Assumption of Certain Liabilities . . . . . . . . . . . 1
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . 1
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . 2
2.5. Closing; Closing Date . . . . . . . . . . . . . . . . . 3
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . 3
3. Representations and Warranties. . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Seller, the
Corporation and the Shareholders . . . . . . . . . . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . 12
3.3. Survival of Representations . . . . . . . . . . . . . . 12
3.4. Representations as to Knowledge . . . . . . . . . . . . 13
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . 13
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2. Operation and Preservation of Business . . . . . . . . 13
4.3. Acquisitions and Dispositions of Rental Equipment . . . 13
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . 14
4.5. Notice of Developments . . . . . . . . . . . . . . . . 14
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . 14
4.7. Conveyance of Shareholder Property . . . . . . . . . . 14
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . 14
4.9. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . 14
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . 15
5.1. Further Assurances . . . . . . . . . . . . . . . . . . 15
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . 15
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . 15
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . 15
5.5. Post-Closing Announcements . . . . . . . . . . . . . . 15
5.6. Financial Statements . . . . . . . . . . . . . . . . . 15
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . 15
5.8. Certain Post-Closing Environmental Matters . . . . . . 16
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . 16
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . 16
6.1. Conditions to Obligation of the Buyer . . . . . . . . . 16
6.2. Conditions to Obligation of the Seller, the
Corporation and the Shareholders . . . . . . . . . . . 18
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Remedies for Breaches of This Agreement . . . . . . . . . . . 19
7.1. Indemnification Provisions for Benefit of the Buyer . . 19
7.2. Indemnification Provisions for Benefit of the Seller,
the Corporation and the Shareholders 20
7.3. Matters Involving Third Parties . . . . . . . . . . . . 20
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . 21
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . 21
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1. Termination of Agreement . . . . . . . . . . . . . . . 22
8.2. Effect of Termination . . . . . . . . . . . . . . . . . 22
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . 22
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . 22
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . 22
9.3. Succession and Assignment . . . . . . . . . . . . . . . 22
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . 23
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . 23
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . 23
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . 23
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . 23
9.9. Severability . . . . . . . . . . . . . . . . . . . . . 24
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . 24
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . 24
9.12. Construction . . . . . . . . . . . . . . . . . . . . . 24
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . 25
9.14. Seller's, Corporation's and Shareholders' Agent. . . . 25
</TABLE>
(ii)
<PAGE> 4
Exhibits:
Exhibit 1.1(a) Exhibit 3.1(h)(ii)
Exhibit 1.1(b) Exhibit 3.1(i)(i)
Exhibit 1.1(c) Exhibit 3.1(i)(ii)
Exhibit 1.1(d) Exhibit 3.1(k)
Exhibit 1.1(e) Exhibit 3.1(l)
Exhibit 1.1(f) Exhibit 3.1(m)
Exhibit 1.1(g) Exhibit 3.1(n)
Exhibit 3.1(c) Exhibit 3.1(o)(i)
Exhibit 3.1(d)(i) Exhibit 3.1(o)(ii)
Exhibit 3.1(d)(ii) Exhibit 3.1(r)(ii)
Exhibit 3.1(d)(iii) Exhibit 3.1(r)(iii)
Exhibit 3.1(e)(i) Exhibit 4.3
Exhibit 3.1(e)(ii) Exhibit 5.8
Exhibit 3.1(f) Exhibit 6.1(j)
Exhibit 3.1(g)(i)(A) Exhibit 6.2(e)
Exhibit 3.1(g)(i)(B)
Exhibit 3.1(g)(ii)
Exhibit 3.1(h)(i)
(iii)
<PAGE> 5
This Purchase Agreement is entered into as of July 23, 1997 among
RentX Industries, Inc., a Delaware corporation (the "Buyer"), A-1 Rent All,
Inc. Charitable Remainder Unitrust (the "Seller"), A-1 Rent All, Inc., a Texas
corporation (the "Corporation"), and A. Reed Franklin, Patricia Franklin, The
Franklin Children Trust No. One and The Cynthia Frazier Trust No. One
(individually, a "Shareholder" and collectively, the "Shareholders").
Recitals
The Seller is a charitable remainder unitrust organized under the
laws of the State of Texas, of which the Corporation is a beneficiary. The
Shareholders own all of the issued and outstanding capital stock of the
Corporation. The Seller desires to sell, and the Buyer desires to purchase,
substantially all of the Seller's assets as provided in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the
meanings designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth
in this Agreement, the Buyer agrees to purchase from the Seller and the
Corporation, and the Seller and the Corporation agree to sell to the Buyer, all
the Acquired Assets owned by each of them, free and clear of any Encumbrance or
Tax, for the consideration specified in Section 2.3. The Buyer will have no
obligation under this Agreement to purchase less than all of the Acquired
Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Buyer will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The purchase price for the Seller Assets is $1,415,000,
increased or decreased as appropriate for the Net Rental Equipment Adjustment,
and the purchase price for the Corporation Assets is $436,500. At the Closing,
the Buyer will, (i) by wire transfer or other delivery of immediately available
funds, (A) pay to the Seller $1,230,000, subject to increase or decrease as
applicable for the Net Rental Equipment Adjustment, (B) deposit $185,000 into
the Escrow Account and (C) pay to the Corporation $436,500, less $11,250
representing the Estimated Pre-Closing Personal Property Tax Amount and (ii)
assume the Assumed Liabilities (and the amounts paid and deposited to and in
respect of the Seller and the Corporation and the Assumed Liabilities will
constitute the full purchase price for the Acquired Assets). The amount
deposited in the Escrow Account will belong to the Seller, subject to the
Seller's indemnification obligations set forth in this Agreement, and will be
held, invested, administered and disbursed according to Section 7.1(b) hereof
and the Escrow Agreement.
<PAGE> 6
(b) At the Closing, the Buyer will deposit into a demand
deposit account in the names of the Buyer and the Shareholders' Agent, from the
amount otherwise payable to the Corporation pursuant to Section 2.3(a)(i)(A),
an amount equal to the Reserve Amount, and such funds shall initially
constitute the Liabilities Reserve. The funds on deposit in the Liabilities
Reserve will belong to the Corporation, subject to the provisions of this
Section 2.3(b). Following the Closing, the Liabilities Reserve will be applied
to the payment of Reserved Corporation Liabilities, by disbursements from that
account upon the joint signatures of a representative of the Buyer and the
Shareholders' Agent, as the Reserved Corporation Liabilities are ascertained.
To the extent that the Buyer receives a bill or invoice representing, or is
otherwise aware of, any Reserved Corporation Liabilities, the Shareholders'
Agent shall sign checks drawn on the Liabilities Reserve to satisfy such
Reserved Corporation Liabilities promptly upon the request of Buyer. Reserved
Corporation Liabilities representing accrued vacation and other accrued
employee benefits with respect to those persons who are employees of the
Corporation as of immediately prior to the Closing Date and who become
employees of the Buyer effective as of the Closing will be satisfied by payment
of the amount thereof to the Buyer as the Buyer provides such benefits or makes
cash payments in lieu thereof to employees. The Shareholders' Agent will take
all actions necessary to cause the Liabilities Reserve to be applied to satisfy
Reserved Corporation Liabilities and, if the Liabilities Reserve has been
exhausted, the Seller, the Corporation and the Shareholders will provide
additional funds as required to satisfy Reserved Corporation Liabilities.
Nothing in this Agreement will be deemed to limit the joint and several
obligations of the Seller, the Corporation and the Shareholders to pay the
Reserved Corporation Liabilities in full. After all Reserved Corporation
Liabilities have been satisfied, any excess Liabilities Reserve on deposit in
the account created pursuant to this Section 2.3(b) will be paid to the
Corporation. Any disputes concerning the Liabilities Reserve will be settled
by arbitration as provided in this Agreement.
(c) As soon as practicable after the Closing, but effective as
of the Closing, the parties will prepare and initial a "Price Allocation
Schedule", allocating for Tax reporting purposes the total consideration for
the Acquired Assets among the various categories of Acquired Assets in the
following order and amounts: (i) to cash and cash equivalents, the $1,500
amount on the Closing Balance Sheet; (ii) to Closing Accounts Receivable, the
amount on the Closing Balance Sheet; (iii) to Closing Inventory, the amount on
the Closing Balance Sheet; (iv) to equipment and leasehold improvements, the
greater of the appraised fair market value (if the Buyer in its sole discretion
obtains an appraisal before or after the Closing) or the current book value
thereof as reflected on the Closing Balance Sheet; (v) to prepaid expenses, the
unamortized balance on the Closing Balance Sheet; (vi) to any other assets,
other than goodwill, the amount on the Closing Balance Sheet; and (vii) the
entire remaining balance of the consideration shall be allocated to the
goodwill of the acquired business or, at the Buyer's sole discretion, to the
other intangible assets which are included in the Acquired Assets. The parties
acknowledge that such allocations for Tax reporting purposes were determined
pursuant to arm's length bargaining regarding the fair market values of the
Acquired Assets in accordance with the provisions of Code Section 1060. The
parties agree to be bound by the allocations set forth in the Price Allocation
Schedule for all federal, state and local Tax reporting purposes, including for
purposes of determining any income, gain, loss, depreciation or other
deductions in respect of such assets. The parties further agree to prepare and
file all Tax Returns (including Form 8594 under the Code) in a manner
consistent with such allocations.
2.4. Sales Taxes, Etc. The Seller and the Corporation, jointly and
severally, will pay all sales, use, transfer, licensing and other Taxes, fees
and charges payable in respect of or as a result of the sale and transfer of
the Acquired Assets (including those relating to vehicles, trailers and mobile
equipment) (a) by
- 2 -
<PAGE> 7
the Seller or the Corporation to the Buyer pursuant to this Agreement or (b) to
the Seller from the Corporation at any time prior to the Closing hereunder.
2.5. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
July 23, 1997 (but in any event on or before July 31, 1997), commencing at 8:00
a.m. local time in Denver, Colorado, at the offices of Sherman & Howard L.L.C.,
and all transactions contemplated by this Agreement will be effective at 12:00
a.m. local time in Tyler, Texas on the day of the Closing (such effective time
being the "Closing Date").
2.6. Deliveries at the Closing. At the Closing, (a) the Seller, the
Corporation and the Shareholders will deliver, or cause to be delivered, to
the Buyer the certificates, instruments and documents referred to in Section
6.1, (b) the Buyer will deliver to the Seller, the Corporation and the
Shareholders the certificates, instruments and documents referred to in Section
6.2, (c) the Seller and the Corporation will deliver to the Buyer instruments
transferring to the Buyer title to the Acquired Assets owned by each of them,
free and clear of any Encumbrances or Taxes and (d) the Buyer will pay and
deposit the purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Seller, the Corporation and
the Shareholders. The Seller, the Corporation and the Shareholders jointly and
severally represent and warrant to the Buyer that the statements contained in
this Section 3.1 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were then substituted for the date of this Agreement
throughout this Section 3.1).
(a) Organization, Good Standing, Authority, Etc. (i) The
Seller is a charitable remainder unitrust duly organized and validly existing
under the laws of the State of Texas. The Corporation is the beneficiary of the
Seller. The Seller has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
This Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and unanimously
approved by the trustee and the beneficiary of the Seller, and this Agreement
has been duly executed and delivered by the Seller. The Seller has full power
and authority to execute, deliver and perform this Agreement and the Other
Seller Agreements to which the Seller is a party. This Agreement constitutes,
and the Other Seller Agreements will when executed and delivered constitute,
the legal, valid and binding obligations of, and shall be enforceable in
accordance with their respective terms against, the Seller.
(ii) The Corporation is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas, and is not required
to be qualified or authorized to do business as a foreign corporation in any
jurisdiction. The Corporation has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted. This Agreement and the Other Seller Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
and unanimously approved by the board of directors and shareholders of the
Corporation, and this Agreement has been duly executed and delivered by the
Corporation. The Corporation has full corporate power and authority to
execute, deliver and perform this Agreement and the Other Seller Agreements to
which the Corporation is a party. This Agreement constitutes, and the Other
Seller Agreements will when
- 3 -
<PAGE> 8
executed and delivered constitute, the legal, valid and binding obligation of,
and shall be enforceable in accordance with their respective terms against, the
Corporation.
(iii) Each Shareholder and each relative or affiliate of the
Corporation or of a Shareholder who is party to any Other Seller Agreement has
full and absolute right, power, authority and legal capacity to execute,
deliver and perform this Agreement and all Other Seller Agreements to which
such Shareholder, relative or affiliate is a party, and this Agreement
constitutes, and the Other Seller Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of, and shall be
enforceable in accordance with their respective terms against, the Corporation
and each such Shareholder, relative or affiliate who is a party thereto.
(b) Ownership. A. Reed Franklin, The Franklin Children Trust
No. One and The Cynthia Frazier Trust No. One own, beneficially and of record,
free and clear of any Encumbrance or Tax, 4,076, 2,858 and 566 shares,
respectively, of the common stock, $.10 par value, of the Corporation, and such
shares constitute all outstanding shares of the capital stock of the
Corporation. No other Person has any right to acquire any equity interest in
the Corporation.
(c) No Violation. The execution, delivery and performance of
this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which the Seller, the Corporation, any Shareholder, or any
relative or affiliate of the Seller, the Corporation or of any Shareholder who
is a party to any Other Seller Agreement is subject or any provision of the
trust documents relating to the Seller or any Shareholder or of the articles of
incorporation or bylaws of the Corporation or of any such affiliate, or (ii)
violate, with or without the giving of notice or the lapse of time or both, or
conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any Person the right to accelerate any
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of the Seller, of the Corporation, of any
Shareholder, or of any such relative or affiliate pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, Permit, agreement, instrument or
other arrangement to which the Seller, the Corporation, any Shareholder or any
such relative or affiliate is a party or by which the Seller, the Corporation,
any Shareholder, or any such relative or affiliate or any of their respective
assets and properties is bound or subject. Except for notices that will be
given and consents that will be obtained by the Seller, the Corporation and the
Shareholders prior to the Closing (which are set forth in Exhibit 3.1(c)),
neither the Seller, the Corporation any Shareholder, nor any such relative or
affiliate need give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement and the Other Seller Agreements.
(d) Financial Statements. The unaudited balance sheets of the
Corporation as of July 31, 1995, and July 31, 1996, the related statements of
income, shareholders' equity and cash flows for the fiscal years then ended,
the unaudited balance sheet of the Corporation as of January 31, 1997 (the
latter being referred to as the "Latest Balance Sheet"), and the related
statements of income, shareholders' equity and cash flows for the 6-month
period then ended, have been prepared in accordance with good accounting
practices and on a consistent basis, are in accordance with the books and
records of the Corporation (which books and records are complete and correct),
are accurate and fairly present the financial position and results of
operations of the Corporation as of such dates and for each of the periods
indicated, to the best knowledge of the Seller, the Corporation and the
Shareholders do not list book values for the assets that are in excess
- 4 -
<PAGE> 9
of their fair market values, and, except as set forth on Exhibit 3.1(d)(i),
make adequate provision for all Liabilities to which the Seller or the
Corporation is subject. Copies of the financial statements described in the
first sentence in this Section are attached as Exhibit 3.1(d)(ii). The
expenses itemized on Exhibit 3.1(d)(iii) and reflected in the Corporation's
financial performance for the 12-month period ended July 31, 1996 will not be
realized on an on-going basis, and information sufficient to determine such
financial performance for such 12-month period has been provided by the
Corporation to the Buyer prior to the date of this Agreement.
(e) Absence of Certain Leases, Changes or Events. Neither the
Seller nor the Corporation is, except as set forth on Exhibit 3.1(e)(i), a
party to or otherwise bound by any contract or agreement that has a term of
three or more months pursuant to which the Seller or the Corporation is
obligated to furnish any equipment, products or services, and no such contract
or agreement has been prepaid with respect to any period after the Closing
Date. Since January 31, 1997, neither the Corporation nor the Seller has (i)
incurred any debt, indebtedness or other Liability, except current Liabilities
incurred in the ordinary course of business; (ii) delayed or postponed the
payment of accounts payable or other Liabilities or accelerated the collection
of any receivable beyond stated, normal terms; (iii) except as set forth on
Exhibit 3.1(e)(ii), sold (except as set forth on Exhibit 4.3 with respect to
the period between February 1, 1997 and the date of this Agreement and as
permitted by Section 4.3 with respect to the period after the date of this
Agreement and before the Closing Date) or otherwise transferred any of its
equipment or other assets or properties; (iv) cancelled, compromised, settled,
released, waived, written-off (except as set forth as Exhibit 3.1(e)(ii)) or
expensed any account or note receivable, right, debt or claim involving more
than $5,000 in the aggregate; (v) changed in any significant manner the way in
which it conducts its business; (vi) except as set forth on Exhibit 3.1(e)(ii),
made or granted any individual wage or salary increase in excess of 10% or
$1.00 per hour, any general wage or salary increase, or any additional benefits
of any kind or nature; (vii) except as otherwise expressly permitted by this
Section 3.1(e), (A) except as set forth on Exhibit 3.1(e)(ii), entered into any
contracts or agreements, or made any commitments, involving more than $5,000
individually or in the aggregate or (B) accelerated, terminated, delayed,
modified or cancelled any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) involving more than $5,000
individually or in the aggregate; (viii) suffered any adverse fact or change,
including, without limitation, to or in its business, assets, financial
condition, prospects or customer relationships; (ix) except as set forth on
Exhibit 3.1(e)(ii), made any payment or transfer to or for the benefit of any
shareholder, officer or director or any relative or affiliate thereof or
permitted any Person, including, without limitation, any shareholder, officer,
director or employee or any relative or affiliate thereof, to withdraw assets
from the Seller (other than cash of the Seller distributed to its shareholders
as set forth on Exhibit 3.1(e)(ii) and other than the payment to the
Shareholders of the proportionate monthly amount of their respective normal
annualized salaries due and payable during such period); (x) failed to make
purchases of new or used equipment necessary to maintain its rental/lease
inventory at the level which is reasonably necessary to maintain the revenue
base experienced by the Seller during the 12 months preceding such date; (xi)
decreased its lease rate with respect to any equipment by 10% or more from the
applicable lease rate in effect on January 31, 1997 or rented or leased (except
as set forth on Exhibit 3.1 (e)(ii)) any equipment or sold or otherwise
transferred any inventory, equipment or services at below-normal rental or
lease rates or margins; (xii) suffered any other significant occurrence, event,
incident, action, failure to act or transaction outside the ordinary course of
business; or (xiii) agreed to incur, take, enter into, make or permit any of
the matters described in clauses (i) through (xii).
- 5 -
<PAGE> 10
(f) Tax Matters. Neither the Seller, nor the Corporation nor
any of the Corporation's shareholders has ever filed (i) an election pursuant
to Section 1362 of the Code that the Corporation be taxed as an "S"
corporation, except as set forth on Exhibit 3.1(f), or (ii) a consent pursuant
to Section 341(f) of the Code relating to collapsible corporations. The
Seller, the Corporation and the Shareholders will pay all Taxes attributable to
the Seller's and the Corporation's business and activities, including all Taxes
attributable to the transactions contemplated by this Agreement, on or before
the due date. There are no Encumbrances on any of the assets of the Seller or
the Corporation that arose in connection with any failure (or alleged failure)
to pay any Tax. Exhibit 3.1(f) lists all federal, state and local income Tax
Returns filed with respect to the Seller or the Corporation for taxable periods
ended on or after January 1, 1991, indicates those Tax Returns that have been
audited and indicates those Tax Returns that currently are the subject of
audit. The Corporation has delivered to the Buyer correct and complete copies
of all federal, state and local income Tax Returns and examination reports of,
and statements of deficiencies assessed against or agreed to by, the
Corporation since January 1, 1991.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Seller owns
all of the Seller Assets and the Corporation owns all of the Corporation Assets
(other than certain items of Shareholder Property), in each case free and clear
of all Encumbrances (except for those Encumbrances which the Seller and the
Corporation shall cause to be terminated as of the Closing). As of the
Closing, all of the Seller Assets will be owned by the Seller and all of the
Corporation Assets will be owned by the Corporation, in each case, free and
clear of all Encumbrances, and the Seller will have good and marketable title
to all the Seller Assets and the Corporation will have good and marketable
title to the Corporation Assets. The Acquired Assets consist of (A) the
tangible and intangible assets of the Corporation (exclusive of the Excluded
Assets) in existence as of January 31, 1997 (except as set forth on Exhibit
3.1(e)(ii) with respect to cash of the Corporation which was distributed to
its shareholders and except for such changes in inventory and in accounts
receivable in the ordinary course of business as are not in violation of
Section 3.1(e)) or Section 4.3), increased by New Rental Equipment acquired
from and after February 1, 1997, and decreased by Current Rental Equipment sold
or otherwise transferred on or after February 1, 1997, as set forth on Exhibit
4.3, and (B) all tangible and intangible assets, including, without limitation,
all improvements, fixtures and fittings, owned by any Shareholder or relative
or affiliate thereof or of the Corporation or the Seller which have been used
in its business at any time on or after February 1, 1997 (the "Shareholder
Property"), including, without limitation, the tangible and intangible assets
set forth on Exhibit 3.1(g)(i)(A) owned by any Shareholder or relative or
affiliate thereof. Between February 1, 1997 and the day before the date of
this Agreement, the Seller or the Corporation has purchased the New Rental
Equipment and has sold, for cash or a Current Rental Equipment Receivable only,
the Current Rental Equipment described on Exhibit 4.3, but has not otherwise
sold, traded, transferred or otherwise disposed of any Current Rental
Equipment. In the case of Acquired Assets consisting of a leasehold interest
in equipment held by the Seller or the Corporation as rental inventory ("Leased
Rental Equipment"), the Seller or the Corporation, as the case may be, has a
valid leasehold interest in the Leased Rental Equipment and the lessor thereof
is not a relative or affiliate of the Seller, the Corporation, or any
Shareholder. In the case of Acquired Assets consisting of Seller's or the
Corporation's interest under an arrangement with the owner of equipment who
makes such equipment available for rental by Seller or the Corporation under a
split rental or similar arrangement ("Consigned Equipment"), such arrangement
is in full force and effect and the owner of the Consigned Equipment is not a
relative or affiliate of the Seller, Corporation or any Shareholder. The
Acquired Assets, the Leased Rental Equipment and the Consigned Equipment are
all of the tangible and intangible assets (other than the Excluded Assets and
the
- 6 -
<PAGE> 11
Premises) used by the Corporation in, or necessary for the conduct of, its
business. The Acquired Assets, the Leased Rental Equipment and the Consigned
Equipment encompass all equipment used by the Corporation to generate the
income reflected in the financial statements attached as Exhibit 3.1(d)(ii).
The total cost to the Corporation to lease the Leased Rental Equipment during
the fiscal year ended July 31 1996 and the 6-month period ended January 31,
1997 did not exceed $-0- and $-0-, respectively. The total cost to the
Corporation to use the Consigned Equipment as part of its rental inventory
during the fiscal year ended July 31, 1996 and the 6-month period ended January
31, 1997 did not exceed $-0- and $-0-, respectively. Exhibit 3.1(g)(i)(B)
lists all Leased Rental Equipment and all Consigned Equipment as of the date of
this Agreement. Except for items rented or leased to customers, all of the
tangible Acquired Assets, the Leased Rental Equipment and the Consigned
Equipment are located on the Premises.
(ii) The Premises constitute all of the real property,
buildings and improvements used by the Corporation or the Seller in its
business. The Premises are supplied with utilities and other services
necessary for the operation thereof. Except as set forth on Exhibit
3.1(g)(ii), to the best knowledge of the Seller, the Corporation and the
Shareholders the Premises are free from defects, have been maintained in
accordance with normal industry practice, are in good operating condition and
repair and are suitable for the purposes for which they presently are used. To
the best knowledge of the Seller, the Corporation and the Shareholders, the
Premises have received all approvals of Governmental Authorities (including
Permits) required in connection with the occupation and operation thereof and
have been occupied, operated and maintained in accordance with applicable Legal
Requirements. Neither the Seller nor the Corporation has received notice of
violation of any Legal Requirement or Permit relating to its operations or its
owned or leased properties.
(iii) No party to any lease with respect to any Premises
has repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data. Attached
as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the items
identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Seller, the Corporation, nor any other party
thereto is in breach or default in performance of any of its respective
obligations under, and no event exists which, with the giving of notice or
lapse of time or both, would constitute a breach, default or event of default
on the part of a party to, any of the foregoing that is continuing unremedied.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor, except
as set forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or threatened against, the Seller, the Corporation, their respective
properties or their respective business or relating to the transactions
contemplated by this Agreement, nor is the Seller, the Corporation or any
Shareholder aware of any basis for any such action.
- 7 -
<PAGE> 12
(ii) To the best knowledge of the Seller, the
Corporation and the Shareholders, except as set forth on Exhibit 3.1(i)(ii),
neither the Seller, nor the Corporation, nor the Seller's or the Corporation's
assets (including its Premises, facilities, machinery and equipment) are in
violation of any applicable Legal Requirement or Right. Neither the Seller nor
the Corporation has received notice from any Governmental Authority or other
Person of any violation or alleged violation of any Legal Requirement or Right,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice has been filed or commenced or is pending or threatened
against the Seller or the Corporation alleging any such violation.
(j) Accounts Receivable. The accounts receivable reflected on
the Latest Balance Sheet, and all accounts receivable arising prior to the
Closing Date (including, without limitation, any Current Rental Equipment
Receivables in existence as of the Closing Date), arose and will arise from
bona fide transactions by the Seller or the Corporation in the ordinary course
of business, are valid receivables of the Seller or the Corporation with trade
customers subject to no setoffs or counterclaims, and 90% of the aggregate
amount thereof is current and collectible.
(k) Product Quality, Warranty and Liability. All products and
services sold, rented, leased, provided or delivered by the Seller or the
Corporation to customers on or prior to the Closing Date conform to applicable
contractual commitments, express and implied warranties, product and service
specifications and quality standards, and neither the Seller nor the
Corporation has any Liability and there is no basis for any Liability for
replacement or repair thereof or other damages in connection therewith. No
product or service sold, rented, leased, provided or delivered by the Seller or
the Corporation to customers on or prior to the Closing is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale, rent or lease. Neither the Seller nor the Corporation has
any Liability and there is no basis for any Liability arising out of any injury
to a Person or property as a result of the ownership, possession, provision or
use of any product or service sold, rented, leased, provided or delivered by
the Seller or the Corporation on or prior to the Closing Date. All product or
service liability claims that have been asserted against the Seller or the
Corporation since January 1, 1992, whether covered by insurance or not and
whether litigation has resulted or not, other than those listed and summarized
on Exhibit 3.1(i)(i), are listed and summarized on Exhibit 3.1(k).
(l) Insurance. The Seller and the Corporation have policies
of insurance (i) covering risk of loss on the Acquired Assets, Leased Rental
Equipment and Consigned Equipment, and (ii) covering products and services
liability and liability for fire, property damage, and personal injury, all, to
the best knowledge of the Seller, the Corporation and the Shareholders, with
responsible and financially sound insurance carriers in adequate amounts and in
compliance with governmental requirements and in accordance with good industry
practice. All such insurance policies are valid, in full force and effect and
enforceable in accordance with their respective terms and no party has
repudiated any provision thereof. All such policies will remain in full force
and effect until the Closing Date. Neither the Seller, the Corporation nor any
other party to any such policy is in breach or default (including with respect
to the payment of premiums or the giving of notices) in the performance of any
of their respective obligations thereunder, and no event exists which, with the
giving of notice or the lapse of time or both, would constitute a breach,
default or event of default, or permit termination, modification or
acceleration under any such policy. There are no claims, actions, proceedings
or suits arising out of or based upon any of such policies nor, to the best
knowledge of the Seller, the Corporation and the Shareholders, does any basis
for any such claim, action, suit or proceeding exist. All premiums have been
paid on such policies as of the date of this Agreement and will be paid on
- 8 -
<PAGE> 13
such policies through the Closing Date. The Seller and the Corporation have
been covered during the five years prior to the date of this Agreement by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. All claims made during
such five-year period with respect to any insurance coverage of the Seller or
the Corporation, other than those described on Exhibit 3.1(k), are set forth on
Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters. The Buyer will not
suffer any Liability or Adverse Consequence from the Seller's or the
Corporation's administration or termination of any of its Employee Benefit
Plans or from any failure of any pre-Closing or post-Closing distribution of
benefits to employees of the Seller or the Corporation to be made by the Seller
or the Corporation in compliance with all applicable Legal Requirements. The
Buyer will have no obligation to employ any employee of the Seller or the
Corporation or to continue any Employee Benefit Plan, and will have no
Liability under any plan or arrangement maintained by the Seller or the
Corporation for the benefit of any employee. The Seller and the Corporation
will remain liable for all costs of employee compensation, including benefits
and Taxes relating to employment and employees attributable to periods through
the Closing Date, whether reported by the Closing Date or thereafter, and all
group health plan continuation coverage to which any employee, former employee
or dependent is entitled because of a qualifying event (as defined in Section
4980B(f)(3) of the Code) occurring through the Closing Date or as a result of
termination of employment with the Seller or the Corporation because of the
transactions contemplated by this Agreement and any benefit or excise tax
liability or penalty or other costs arising from any failure by the Seller or
the Corporation to provide group health plan continuation coverage. Except as
set forth on Exhibit 3.1(m), neither the Seller nor the Corporation, nor any
Affiliated Group which includes the Seller or the Corporation (if any)
maintains, administers or contributes to, has maintained, administered or
contributed to, or has any Liability to contribute to, any Employee Benefit
Plan. Exhibit 3.1(m) lists each Employee Benefit Plan that is, or at any time
during the past six years was, maintained, administered, contributed to or
required to be contributed to by the Seller or the Corporation or any
Affiliated Group (if any) which includes or has included the Seller or the
Corporation, and the date of termination of each such Employee Benefit Plan (if
any) which has been terminated. Any Employee Benefit Plan disclosed on Exhibit
3.1(m) that is an "employee pension benefit plan" as defined in ERISA Section
3(2), has (i) been determined to be qualified by the Internal Revenue Service,
(ii) been maintained since its effective date by all members of the Affiliated
Group and (iii) been maintained and administered in accordance with all
applicable Legal Requirements. Neither the Seller nor the Corporation has any
Liability (and there is no basis for the assertion of any Liability) as a
result of the Seller's, the Corporation's or any such Affiliated Group's
maintenance, administration or termination of, or contribution to, any Employee
Benefit Plan. Neither the Seller, nor the Corporation, nor any member of any
Affiliated Group (if any) which includes or has included the Seller or the
Corporation has ever been required to contribute to any Multiemployer Plan (as
defined in ERISA Section 3(37)) nor has incurred any Liability under Title IV
of ERISA.
(n) Employees and Labor. Except as set forth on Exhibit
3.1(n) neither the Seller nor the Corporation has received any notice, nor, to
the best knowledge of the Seller, the Corporation and the Shareholders, is
there any reason to believe that any executive or key employee of the Seller or
the Corporation or any group of employees of the Seller or the Corporation has
any plans to terminate his, her or its employment with the Seller or the
Corporation. No executive or key employee is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Seller or the Corporation prior to the Closing Date and, if such
person becomes an employee of the Buyer, to the affairs of the Buyer after the
- 9 -
<PAGE> 14
Closing Date. Neither the Seller nor the Corporation will be required to give
any notice under the Worker Adjustment and Retraining Notification Act, as
amended, or any similar Legal Requirement as a result of this Agreement, the
Other Seller Agreements or the transactions contemplated hereby or thereby.
Neither the Seller nor the Corporation has any labor relations problems or
disputes, nor has the Seller or the Corporation experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. Neither the Seller nor the Corporation is a party to or bound by any
collective bargaining agreement, there is no union or collective bargaining
unit at the Seller's facilities, and no union organization effort has been
threatened, initiated or is in progress with respect to any employees of the
Seller or the Corporation.
(o) Customer Relationships. Exhibit 3.1(o)(i) lists each
customer that individually or with its affiliates was, based upon the
Corporation's sales, rental or lease revenues during the fiscal year ended July
31, 1996 and the 6-month period ended January 31, 1997, one of the
Corporation's 20 largest customers during either such fiscal year or such 6-
month period (the "Principal Customers"). The Seller and Corporation have good
commercial working relationships with their Principal Customers and since
January 31, 1997, no Principal Customer has cancelled or otherwise terminated
its relationship with the Seller or the Corporation, materially decreased or
limited its purchases, rentals or leases from the Seller, or threatened to take
any such action. Neither the Seller nor the Corporation nor the Shareholders
have any basis to anticipate any problems with the Seller's customer or
business relationships. Except as disclosed on Exhibit 3.1(o)(i) with respect
to Principal Customers who are temporary customers, to the best knowledge of
the Seller, the Corporation and the Shareholders, no Principal Customer has any
plans to reduce its purchases, rentals or leases from the Seller below levels
prevailing since the fiscal year ended July 31, 1996 or the 6-month period
ended January 31, 1997, and the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not adversely
affect the relationship of the Corporation with any Principal Customer prior to
the Closing Date or of the Buyer with any Principal Customer after the Closing
Date.
(p) Resale Inventory. The resale inventory of the Seller and
the Corporation consists of goods which, in the aggregate, are merchantable,
are fit for the purposes for which they were procured and are held by the
Seller or the Corporation, are usable in the ordinary course of the Seller's or
the Corporation's business and are not obsolete.
(q) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Seller or the Corporation consists of machinery,
equipment and other tangible personal property which are merchantable, are fit
and suitable for the purpose for which they were procured and are held by the
Seller or the Corporation, useable in the ordinary course of the Corporation's
business and are not obsolete. All of the machinery, equipment and other
tangible personal property included in the Acquired Assets (including that held
for rental, lease or sale), the Leased Rental Equipment and the Consigned
Equipment has been well maintained and is in good repair and good operating
condition. None of the machinery, equipment or other tangible personal
property included in the Acquired Assets (including that held for rental, lease
or sale), the Leased Rental Equipment and the Consigned Equipment is damaged or
defective, neither the Seller nor the Corporation has experienced material
problems or deficiencies with respect to such machinery, equipment and other
tangible personal property, and, to the best knowledge of the Seller, the
Corporation and the Shareholders, there is no basis to anticipate any such
problems or deficiencies.
- 10 -
<PAGE> 15
(r) Environmental Matters.
(i) To the best knowledge of the Seller, the
Corporation and the Shareholders, the Corporation is conducting and the
Corporation has at all times conducted its business and operations, and has
occupied, used and operated the Premises and all other real property and
facilities presently or previously owned, occupied, used or operated by the
Seller or the Corporation, in compliance with all Environmental Obligations and
so as not to give rise to Liability under any Environmental Obligations or to
any impact on the Seller's or the Corporation's business or activities. The
Seller, the Corporation and the Shareholders do not have any knowledge of
pending or proposed changes to any Environmental Obligations which would
require any changes in any of the Seller's or the Corporation's Premises,
facilities, equipment, operations or procedures or affect the Seller's or the
Corporation's business or its cost of conducting its business as now conducted
or as conducted immediately prior to the Closing Date.
(ii) To the best knowledge of the Seller, the
Corporation and the Shareholders, no conditions, circumstances or activities
have existed or currently exist, and neither the Seller, the Corporation nor
any Shareholder has engaged in any acts or omissions, with respect to the
Premises or any other real properties, facilities or business presently or
previously owned, occupied, used or operated by the Seller, the Corporation or
any predecessor (including, without limitation, off-site disposal or treatment
of Hazardous Materials) which could give rise to any Liability pursuant to any
Environmental Obligation. Exhibit 3.1(r)(ii) identifies all real properties
and facilities, including the addresses thereof, which have been owned,
occupied, used or operated by the Seller, the Corporation or its predecessors
at any time on or prior to the date of this Agreement. There are no
outstanding, pending or threatened Orders against the Seller, the Corporation
or any Shareholder, nor are there any current, pending or threatened
investigations of any kind against the Seller, the Corporation or any
Shareholder, concerning any Environmental Obligations. There are no actions,
suits or administrative, arbitral or other proceedings alleged, claimed,
threatened, pending against or affecting the Seller, the Corporation or any
Shareholder at law or in equity with respect to any Environmental Obligations,
and neither the Seller, the Corporation nor any Shareholder has knowledge of
any existing grounds on which any such action, suit or proceedings might be
commenced.
(iii) Any chemicals and chemical compounds and mixtures
which are included among the assets of the Seller or of the Corporation are
integral to and required for the conduct of the Seller's or the Corporation's
business, have not been and are not intended to be discarded or abandoned, and
are not waste or waste materials. Except as set forth in the environmental
studies attached as Exhibit 3.1(r)(iii) (collectively, the "Environmental
Study"), neither the Seller nor the Corporation has generated, handled, used,
transported or disposed of Hazardous Materials. All waste materials which are
generated as part of the business of the Seller or of the Corporation are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental Study, no
underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any facilities presently or previously
owned, occupied, used or operated by the Seller, the Corporation or any
predecessor. Except as set forth in the Environmental Study, neither any of
the Premises nor any other real properties or facilities presently or
previously owned, occupied, used or operated by the Seller, the Corporation or
any predecessor has been used at any time as a gasoline service station or any
facility for storing, pumping, dispensing or producing gasoline or any other
petroleum products (other than such storage, pumping and dispensing of fuels
and lubricants as is incidental to the Seller's equipment rental/leasing
business) or
- 11 -
<PAGE> 16
Hazardous Materials. No building or other structure on any of the Premises
contains asbestos-containing materials. Except as set forth in the
Environmental Study, there are not nor have there been any incinerators, septic
tanks, leach fields, cesspools or wells (including without limitation dry,
drinking, industrial, agricultural and monitoring wells) on any of the
Premises.
(s) Intellectual Property. The Seller owns or has the legal
right to use and to transfer to the Buyer each item of Intellectual Property
required to be identified on Exhibit 3.1(h)(ii). The continued operation of
the business of the Seller or the Corporation as currently conducted will not
interfere with, infringe upon, misappropriate or conflict with any Intellectual
Property rights of another Person. To the best knowledge of the Seller, the
Corporation and the Shareholders, no other Person has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of the Seller or any Intellectual Property
included in the Shareholder Property. Neither the Seller, the Corporation nor
any owner of any Intellectual Property included in the Shareholder Property has
granted any license, sublicense or permission with respect to any Intellectual
Property owned or used in the Seller's or the Corporation's business.
(t) Disclosure. To the best knowledge of the Seller, the
Corporation and the Shareholders, none of the documents or information provided
to the Buyer by the Seller, the Corporation, any Shareholder or any agent or
employee thereof in the course of the Buyer's due diligence investigation and
the negotiation of this Agreement and Section 3.1 of this Agreement and the
disclosure Exhibits referred to therein, including the financial statements
referred to above in Section 3.1, contain any untrue statement of any material
fact or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. To the best knowledge of the
Seller, the Corporation and the Shareholders, there is no fact which materially
adversely affects the business, prospects, condition, affairs or operations of
the Seller, the Corporation or any of their properties or assets which has not
been set forth in this Agreement or such Exhibits, including such financial
statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Seller, the Corporation and the Shareholders
acknowledge and agree that the fact that they have made disclosures pursuant to
Section 3.1 or otherwise of matters, or did not have knowledge of matters,
which result in Adverse Consequences to the Buyer shall not relieve the Seller,
the Corporation and the Shareholders of their obligation pursuant to Article 7
to indemnify and hold the Buyer harmless from all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller, the Corporation and the Shareholders
that the statements contained in this Section 3.2 are correct and complete as
of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other
- 12 -
<PAGE> 17
Buyer Agreements and the transactions contemplated hereby and thereby have been
duly approved by all requisite corporate action. The Buyer has full corporate
power and authority to execute, deliver and perform this Agreement and the
Other Buyer Agreements, and this Agreement constitutes, and the Other Buyer
Agreements will when executed and delivered constitute, the legal, valid and
binding obligations of the Buyer, and shall be enforceable in accordance with
their respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery
and performance of this Agreement and the Other Buyer Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Buyer is subject or any provision of
the certificate of incorporation or bylaws of the Buyer or (ii) violate, with
or without the giving of notice or the lapse of time or both, or conflict with
or result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Buyer pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Buyer is a party or which the Buyer or any of its assets and properties is
bound or subject. Except for notices and consents that will be given or
obtained by the Buyer prior to the Closing, the Buyer does not need to give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that the Liabilities of the
Seller, the Corporation and the Shareholders with respect to the
representations and warranties set forth in Section 3.1(t) shall survive the
Closing for the period ending on the expiration of the applicable statute of
limitations, and the Liabilities of the Seller, the Corporation and the
Shareholders with respect to the representations and warranties set forth in
Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(m), 3.1(r) and 3.1(s), and
the Liabilities of the Buyer with respect to the representations and warranties
set forth in Sections 3.2(a) and 3.2(b), shall survive without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of such party and be exercised always in a reasonable manner and within
reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to take
all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the beneficiary and trustee of the Seller will and the Shareholders
will, and will cause the Corporation to, give any notices, make any filings and
obtain any consents, authorizations or approvals needed to consummate the
transactions contemplated by this Agreement.
- 13 -
<PAGE> 18
4.2. Operation and Preservation of Business. The Seller and the
Corporation will not, and the Shareholders will not cause or permit the Seller
or the Corporation to, engage in any practice, take any action or enter into
any transaction outside its ordinary course of business; provided, however,
that in no event will any action be taken or fail to be taken or any
transaction be entered into which would result in a breach of any
representation, warranty or covenant of the Seller, the Corporation or any
Shareholder. The Seller and the Corporation will, and the Shareholders will
cause the Corporation to, keep its business and properties, including its
current operations, physical facilities, working conditions, and relationships
with customers, suppliers, lessors, licensors and employees, intact and, in
connection therewith, to continue to purchase new or used equipment necessary
to maintain its rental/lease inventory at the level specified in Section
3.1(e)(x).
4.3. Acquisitions and Dispositions of Rental Equipment. From February
1, 1997 through the Closing Date, the Seller or the Corporation may purchase
for cash new or used rental or lease equipment for use in the growth and
expansion of its business ("New Rental Equipment;" provided, however, that the
term New Rental Equipment shall not include any new or used rental or lease
equipment acquired to maintain its business or to replace equipment used
during the twelve-month period ending January 31, 1997) or may sell (but only
for cash or a Current Rental Equipment Receivable) rental or lease equipment
owned by the Seller or the Corporation on or after February 1, 1997 ("Current
Rental Equipment"), but may not otherwise sell, trade, transfer or dispose of
any Current Rental Equipment; provided, however, that between the date of this
Agreement and the Closing Date, no New Rental Equipment shall be purchased and
no Current Rental Equipment shall be sold without the express prior written
approval of an officer of the Buyer and without the Shareholders' Agent and an
officer of the Buyer expressly agreeing on the amount by which the purchase
price payable pursuant to Section 2.3(a) shall be increased in respect of such
New Rental Equipment purchases ("New Rental Equipment Increases") and the
amount by which the purchase price payable pursuant to Section 2.3(a) shall be
decreased in respect of such Current Rental Equipment sales ("Current Rental
Equipment Decreases"). Exhibit 4.3 sets forth (a) New Rental Equipment
Increases with respect to New Rental Equipment purchased between February 1,
1997 and the date of this Agreement and (b) Current Rental Equipment Decreases
with respect to Current Rental Equipment sold or otherwise transferred between
February 1, 1997 and the date of this Agreement, as agreed by the Shareholders'
Agent and an officer of the Buyer. If any New Rental Equipment purchases or
Current Rental Equipment sales or other transfers occur after the date hereof
and before the Closing Date, Exhibit 4.3 shall be amended to reflect any agreed
upon New Rental Equipment Increases and Current Rental Equipment Decreases
relating thereto.
4.4. Full Access. The Seller and the Corporation will permit the
Buyer and its agents to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of the Seller
or the Corporation, as the case may be, to all premises, properties, personnel,
books, records (including Tax records), contracts and documents of or
pertaining to the Seller or the Corporation.
4.5. Notice of Developments. The Seller and the Corporation will give
prompt written notice to the Buyer of any material development which occurs
after the date of this Agreement and affects the business, assets, Liabilities,
financial condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Seller or
the Corporation. No such written notice, however, will be deemed to amend or
supplement any disclosure Exhibit or to prevent or cure any misrepresentation,
breach of warranty or breach of covenant.
- 14 -
<PAGE> 19
4.6. Exclusivity. Until this Agreement is terminated in accordance
with its terms, neither the Seller, nor the Corporation nor any Shareholder
will, and the Shareholders will not cause or permit the Corporation to, (a)
solicit, initiate or encourage the submission of any proposal or offer from any
Person relating to the acquisition of any capital stock or other voting
securities, or any portion of the assets of, the Seller or of the Corporation
(including any acquisition structured as a merger, consolidation or share
exchange) or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in or facilitate
in any other manner any effort or attempt by any Person to do or seek any of
the foregoing. Until this Agreement is terminated in accordance with its
terms, no Shareholder will vote shares of the Corporation's stock in favor of
any such transaction. Until this Agreement is terminated in accordance with
its terms, the Seller, the Corporation and the Shareholders will notify the
Buyer immediately if the Person makes any proposal, offer, inquiry or contact
with respect to any of the foregoing.
4.7. Conveyance of Shareholder Property. Prior to the Closing Date,
the Shareholders shall convey, and shall cause each relative or affiliate of
the Corporation or of any Shareholder to convey, to the Seller, free and clear
of any Encumbrance or Tax, all of each Shareholder's and each such relative's
or affiliate's right, title and interest to the Shareholder Property.
4.8. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
4.9. Bulk Sales Laws. In reliance upon its indemnification rights set
forth in Section 7, the Buyer waives compliance by the Seller and the
Corporation with the bulk transfer law and any other similar law of any
applicable jurisdiction in respect to the transactions contemplated by this
Agreement.
5. Post-Closing Covenants. The parties agree as follows with respect to
the period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. A. Reed Franklin will assist with the transition of
the acquired business to the Buyer during the first six months following the
Closing at no cost to the Buyer. Neither the Seller, the Corporation nor any
Shareholder will take any action at any time that is designed or intended to
have the effect of discouraging any customer, supplier, lessor, licensor or
other business associate of the Seller from establishing or continuing a
business relationship with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Seller's or the Corporation's
business, each of the other parties will cooperate with such party and its
counsel in the contest or defense, make available
- 15 -
<PAGE> 20
their personnel, and provide such testimony and access to their books and
records as shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to indemnification
therefor under Section 7).
5.4. Confidentiality. The Seller, the Corporation and the
Shareholders will treat and hold as confidential all Confidential Information
concerning the Buyer, the Seller's or the Corporation's business or the
Acquired Assets, refrain from using any such Confidential Information and
deliver promptly to the Buyer or destroy, at the request and option of the
Buyer, all of such Confidential Information in its or their possession.
5.5. Post-Closing Announcements. Following the Closing, neither the
Seller, nor the Corporation nor any Shareholder will issue any press release
or make any public announcement relating to the subject matter of this
Agreement without the prior written approval of the Buyer.
5.6. Financial Statements. The Seller and the Shareholders will, upon
request of the Buyer, cooperate with the Buyer to produce such historical and
on-going financial statements and audits as the Buyer may request, all at the
sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities. The Seller, the Corporation and the
Shareholders will pay and perform, as and when due, all Liabilities (other than
the Assumed Liabilities) relating to the Seller, the Corporation, the business
of the Seller or the Corporation, the Acquired Assets and the transfer of the
Seller Assets from the Corporation to the Seller, including without limitation,
all Taxes attributable to the transactions contemplated by this Agreement and
all accrued vacation and other accrued employee benefits; provided, however,
that accrued vacation and other accrued employee benefits with respect to those
persons who are employees of the Seller as of immediately prior to the Closing
Date and who become employees of the Buyer effective as of the Closing will be
satisfied as set forth in Section 2.3(b). In addition, the Seller, the
Corporation and the Shareholders will pay to the Buyer an amount equal to the
portion of the personal property taxes on the Acquired Assets of the Seller or
the Corporation attributable to the period from January 1, 1997 to the Closing
Date (the "Pre-Closing Personal Property Tax Amount"). The Pre-Closing
Personal Property Tax Amount payable by the Shareholders, the Corporation and
the Seller will be determined by prorating personal property taxes on the
Acquired Assets for 1997 in proportion to the number of days in the year prior
to the Closing Date compared to the number of days in the year remaining after
the date on which the Closing occurs. If the actual Pre-Closing Personal
Property Tax Amount exceeds the estimated Pre-Closing Personal Property Tax
Amount used for purposes of Section 2.3(a), the Seller, the Corporation and the
Shareholders shall pay such excess amount to the Buyer within five days after
their receipt of notice from the Buyer stating the amount payable by them and a
copy of the invoices from Governmental Authorities relating thereto. If the
estimated Pre-Closing Personal Property Tax Amount used for purposes of Section
2.3(a) exceeds the actual Pre-Closing Personal Property Tax Amount, the Buyer
shall pay such excess amount to the Seller and the Corporation within five days
of receipt of the invoices from Governmental Authorities relating thereto.
Further, the Seller, the Corporation and the Shareholders, at their expense,
promptly will take or cause to be taken any action necessary to remedy any
failure of the Premises or the acquired business to comply at the Closing Date
with any Legal Requirement, upon receipt of notice from the Buyer at any time.
The Buyer will pay and perform, as and when due (except to the extent the
validity thereof or the liability therefor is being contested by the Buyer),
the Assumed Liabilities.
- 16 -
<PAGE> 21
5.8. Certain Post-Closing Environmental Matters. The Seller, the
Corporation and the Shareholders shall, within the time specified in Exhibit
5.8, take or cause to be taken, in compliance with applicable Environmental
Obligations, the actions specified in Exhibit 5.8. The Seller, the Corporation
and the Shareholders shall take such actions at their expense. Nothing in this
Section 5.8 shall relieve the Seller, the Corporation or any Shareholder from
any obligation or Liability under Section 7 of this Agreement, obligate the
Buyer to take any action or impose any Liability on the Buyer.
5.9. Repurchase of Unpaid Receivables. The Seller, the Corporation
and the Shareholders jointly and severally guarantee that 90% of the aggregate
amount of the Closing Accounts Receivable will be fully paid to the Buyer in
accordance with their terms at their recorded amounts not later than 120 days
from the Closing Date. Upon demand by the Buyer at any time after 120 days
from the Closing Date, the Seller, the Corporation and the Shareholders shall
jointly and severally pay to the Buyer the full amount of any unpaid Closing
Accounts Receivables which are the subject of such demand. Upon such payment
to the Buyer, the Closing Accounts Receivable which are so paid for by the
Seller, the Corporation and the Shareholders shall, without further action of
any party, become the property of the Seller.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the purchase of the Acquired Assets and the consummation of
the other transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Seller's, the Corporation's and each Shareholder's
representations and warranties shall be correct and complete at and as of the
Closing Date and the Closing and any written notices delivered to the Buyer
pursuant to Section 4.5 and the subject matter thereof shall be satisfactory to
the Buyer;
(b) the Seller, the Corporation and the Shareholders shall
have performed and complied with all of their covenants hereunder through the
Closing;
(c) the Seller, the Corporation and the Shareholders shall
have given all notices and procured all of the third-party consents,
authorizations and approvals required to consummate the transactions
contemplated by this Agreement, all in form and substance reasonably
satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets or to conduct the
acquired business, and no such Order shall be in effect;
(e) there shall have been no adverse change in the Acquired
Assets or the Seller's or the Corporation's business between the date of
execution of this Agreement and the Closing;
(f) the Seller shall have delivered to the Buyer (i) a
certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, (ii) a certificate as
to the adoption of resolutions by the board of directors and shareholders of
the Corporation and a certificate of the trustee of the Seller authorizing the
execution, delivery and performance of this Agreement and the
- 17 -
<PAGE> 22
Other Seller Agreements and the consummation of the transactions contemplated
hereby and thereby, (iii) a good standing certificate, dated within 10 days of
the Closing, from the Secretary of State of the State of the Corporation's
jurisdiction of incorporation and each other state in which the Corporation is
qualified or authorized to do business as a foreign corporation and evidence of
the Seller's existence; and (iv) evidence of transfer from the Corporation to
the Seller of ownership of the Seller Assets.
(g) the Buyer shall have completed its due diligence with
respect to the Seller, the Corporation, the Seller's and the Corporation's
business and the Acquired Assets with results satisfactory to the Buyer.
(h) the Other Seller Agreements and documentation necessary to
accomplish the conveyance of the specific ownership tax and fee payments made
by the Seller or the Corporation prior to the Closing in respect of vehicles
and mobile equipment included in the Acquired Assets shall have been executed
and delivered by the Seller, the Corporation and the Shareholders, as
applicable;
(i) the Premises Leases shall have been executed and delivered
by the parties thereto, and the owners of the real property underlying the
Premises Leases, and each Person having an Encumbrance on such property, shall
have executed and delivered estoppel, nondisturbance and landlord waiver
agreements relating thereto satisfactory to the Buyer.
(j) the Buyer shall have received from counsel to the Seller,
the Corporation and the Shareholders an opinion in form and substance as set
forth in Exhibit 6.1(j) addressed to the Buyer and its debt and equity
financing sources and dated as of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) a "Phase I" environmental study of each of the properties
comprising the Premises, and such additional environmental testing as the Buyer
shall request, shall have been completed at the Seller's expense and supplied
to the Buyer, and the contents and results thereof shall be satisfactory to the
Buyer;
(m) the Seller and the Corporation shall have delivered to the
Buyer possession and control of the Acquired Assets;
(n) the Seller, the Corporation and the Shareholders shall
have executed and delivered to the Buyer (i) appropriate documentation to
transfer to the Buyer record ownership of the trade names "A-1 Rent All" and
"A-1's Party Rental" and all other registered Intellectual Property and
applications therefor and (ii) an amendment to the Corporation's articles of
incorporation for the purpose of changing its name to a name that does not
include the term "A-1 Rent All" or any derivation thereof;
(o) the Buyer and A-1 Rent All of Marshall, Inc., shall have
closed, simultaneously with the Closing hereunder, the purchase by the Buyer of
the assets of A-1 Rent All of Marshall, Inc. contemplated by the Purchase
Agreement of approximately even date herewith among the Buyer, A-1 Rent All of
Marshall, Inc. and the Shareholders (as defined therein); and
- 18 -
<PAGE> 23
(p) the Seller, the Corporation and the Shareholders shall
have delivered, or caused the Seller and the Corporation to deliver, to the
Buyer such other instruments, certificates and documents as are reasonably
requested by the Buyer in order to consummate the transactions contemplated by
this Agreement, all in form and substance reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Seller, the Corporation and the
Shareholders. The obligation of the Seller, the Corporation and the
Shareholders to consummate the sale of the Acquired Assets is subject to
satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Sections 6.2(a)
and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed and
delivered by the Buyer;
(e) the Seller, the Corporation and the Shareholders shall
have received from counsel to the Buyer an opinion in form and substance as set
forth in Exhibit 6.2(e), addressed to the Seller, the Corporation and the
Shareholders and dated as of the Closing; and
(f) the Buyer shall have paid and deposited the purchase price
for the Acquired Assets pursuant to Section 2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) If the Seller, the Corporation or any Shareholder breaches
(or if any Person other than the Buyer alleges facts that, if true, would mean
the Seller, the Corporation or any Shareholder has breached) any of the
representations or warranties of the Seller, the Corporation or any Shareholder
contained herein and the Buyer gives notice thereof to the Shareholders' Agent
within the Survival Period, or if the Seller, the Corporation or any
Shareholder breaches (or if any Person other than the Buyer alleges facts that,
if true, would mean the Seller, the Corporation or any Shareholder has
breached) any covenants of the Seller, the Corporation or any Shareholder
contained herein or any representations, warranties or covenants of the Seller,
the Corporation or any Shareholder contained in any Other Seller Agreement and
the Buyer gives notice thereof to the Shareholders' Agent, then the Seller, the
Corporation and the Shareholders agree to jointly and severally indemnify and
hold harmless the Buyer from and against any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to or caused by any of the
foregoing regardless
- 19 -
<PAGE> 24
of whether the Adverse Consequences are suffered during or after the Survival
Period. In determining whether there has been a breach of any representation
or warranty contained in Section 3.1 and in determining for purposes of the
preceding sentence the amount of Adverse Consequences suffered by the Buyer,
such representations and warranties shall not be qualified (other than by (A)
the reference to "knowledge" set forth in the last sentence of Section 3.1(o)
and (B) the references to "material" set forth in Section 3.1(t)) by
"material," "materiality," "in all material respects," "best knowledge," "best
of knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. The Seller, the Corporation and the Shareholders also
agree to jointly and severally indemnify and hold harmless the Buyer from and
against any Adverse Consequences the Buyer may suffer which result from, arise
out of, relate to or are caused by (i) any Liability of the Seller, the
Corporation or any Shareholder not included in the Assumed Liabilities
(including, without limitation, those concerning Hazardous Materials or the
failure of the Seller, the Corporation, any Shareholder or any predecessor to
comply with any Environmental Obligation or other Legal Requirement), (ii) any
act or omission of the Seller, the Corporation, any Shareholder or any
predecessor with respect to, or any event or circumstance related to, the
Seller's, the Corporation's, any Shareholder's or any predecessor's ownership,
occupation, use or operation of any of the Acquired Assets, the Excluded
Assets, the Premises or any other assets or properties or the conduct of its or
their business, regardless, in the case of (i) or (ii), of (A) whether or not
such Liability, act, omission, event, circumstance or matter was known or
disclosed to the Buyer, was disclosed on any Exhibit hereto or is a matter with
respect to which the Seller, the Corporation or any Shareholder did or did not
have knowledge, (B) when such Liability, act, omission, event, circumstance or
matter occurred, existed, occurs or exists and (C) whether a claim with respect
thereto was asserted before or is asserted after the Closing Date, and (iii)
any Liability resulting from any failure of the parties to comply with any
applicable bulk sales or transfer Legal Requirement in connection with the
transactions contemplated by this Agreement. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the parties within 30 days of notice of claim for indemnification from
the party claiming indemnification to the party against whom such claim is
asserted, the dispute will be resolved by arbitration pursuant to this
Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against the Seller, the Corporation or any
Shareholder during the Escrow Period will be paid to the Buyer first out of the
funds escrowed pursuant to the Escrow Agreement, along with interest from the
date of the Closing at the rate applicable to the escrowed funds. The Seller,
the Corporation and the Shareholders will have joint and several Liability for
any additional amounts needed to cover such claims, which amounts will be paid
directly to the Buyer. At the end of the Escrow Period amounts that may be
needed to cover pending indemnification claims made by the Buyer (such amounts
to be determined in good faith by the Buyer based upon the reasonable exercise
of its business judgment) will be retained in the Escrow Account until such
claims are resolved, and any excess on deposit therein, including any accrued
interest, will be paid to the Seller. Nothing in this Section 7.1(b) will be
construed to limit the Buyer's right to indemnification to amounts on deposit
in the Escrow Account. The Buyer and the Shareholders' Agent shall jointly
give instructions to the Escrow Agent to carry out the intent of this Section
7.1(b). Any disputes concerning the escrowed funds will be settled by
arbitration as provided in this Agreement. The Buyer, on the one hand, and the
Seller, the Corporation and the Shareholders jointly and severally, on the
other hand, shall each be responsible for one-half of the Annual Administration
Fee (as defined in Exhibit 7.1(b)), provided, however, that the Seller and the
Shareholders shall not be responsible for more than $750 of such Annual
Administration Fee, and the Buyer shall be responsible for all of the
Transaction Charges described on Exhibit 7.1(b), which are payable to the
Escrow Agent pursuant to paragraph a. of Article 2 of the Escrow Agreement.
Except as otherwise determined pursuant to Section 9.11 of this Agreement, the
Buyer, on the
- 20 -
<PAGE> 25
one hand, and the Shareholders jointly and severally, on the other hand, shall
each be responsible for one-half of any amounts payable pursuant to paragraph
b. of such Article 2.
7.2. Indemnification Provisions for Benefit of the Seller, the
Corporation and the Shareholders. If the Buyer breaches (or if any Person
other than the Seller, the Corporation or a Shareholder alleges facts that, if
true, would mean the Buyer has breached) any of its representations or
warranties contained herein and the Shareholders' Agent gives notice of a claim
for indemnification against the Buyer within the Survival Period, or if the
Buyer breaches (or if any Person other than the Seller, the Corporation or a
Shareholder alleges facts that, if true, would mean the Buyer has breached) any
of its covenants contained herein or any of its representations, warranties or
covenants contained in any Other Buyer Agreement and the Shareholders' Agent
gives notice thereof to the Buyer, then the Buyer agrees to indemnify and hold
harmless the Seller, the Corporation and the Shareholders from and against any
Adverse Consequences the Seller, the Corporation and the Shareholders may
suffer which result from, arise out of, relate to, or are caused by the breach
or alleged breach, regardless of whether the Adverse Consequences are suffered
during or after the Survival Period. In determining whether there has been a
breach of any representation or warranty contained in Section 3.2 and in
determining the amount of Adverse Consequences suffered by the Seller, the
Corporation and the Shareholders for purposes of this Section, such
representations and warranties shall not be qualified by "material,"
"materiality," "in all material respects," "best knowledge," "best of
knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including,
without limitation, any Governmental Authority) notifies any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified
- 21 -
<PAGE> 26
Party, and (v) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently. If the Indemnifying Party does not assume
control of the defense or settlement of any Third Party Claim in the manner
described above, it will be bound by the results obtained by the Indemnified
Party with respect to the Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to the Seller, the Corporation, or any
Shareholder at or after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Shareholders' Agent at any time prior to the Closing (i) in the
event the Seller, the Corporation or any Shareholder has breached any
representation, warranty or covenant contained in this Agreement in any
material way, the Buyer has notified the Shareholders' Agent of the breach, and
the breach has not been cured within 10 days after the notice of breach or (ii)
if the Closing has not occurred on or before July 31, 1997 because of the
failure of any condition precedent to the Buyer's obligations to consummate the
Closing (unless the failure results primarily from the Buyer breaching any
representation, warranty or covenant contained in this Agreement in any
material way); or
- 22 -
<PAGE> 27
(c) the Shareholders' Agent may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (i) if the
Buyer has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Shareholders' Agent has notified the Buyer
of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before July 31,
1997 because of the failure of any condition precedent to the Seller's, the
Corporation's and the Shareholders' obligations to consummate the Closing
(unless the failure results primarily from the Seller, the Corporation or any
Shareholder breaching any representation, warranty or covenant contained in
this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party
will treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Seller, the Corporation nor any Shareholder may
assign this Agreement or any of their rights, interests or obligations
hereunder without the prior written approval of the Buyer. The Buyer may
assign its rights and obligations hereunder as permitted by law, including,
without limitation, to any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly
- 23 -
<PAGE> 28
given if it is sent by registered or certified mail, return receipt requested,
postage prepaid, or by courier, telecopy or facsimile, and addressed to the
intended recipient as set forth below:
If to the Seller, the Corporation
or the Shareholders: Copy to:
Addressed to the Jerry L. Atherton, Esq.
Shareholders' Agent at: Hardy & Atherton
One American Center, Suite 750
18203 Lakeside Drive 909 ESE Loop 323
Flint, Texas 75762 Tyler, Texas 75701
Telecopy: (___) ___-____ Telecopy: (903) 561-8228
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
6000 East Evans, Suite 2-300 633 Seventeenth Street, Suite 3000
Denver, Colorado 80222 Denver, Colorado 80202
Attn: President Attn: Andrew L. Blair, Jr.
Telecopy: (303) 512-2028 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date
- 24 -
<PAGE> 29
of this Agreement in connection with this Agreement or the transactions
contemplated hereby and (b) the Seller, the Corporation and the Shareholders
will bear all costs and expenses (including, without limitation, all legal,
accounting and tax related fees and expenses, all fees, commissions, expenses
and other amounts payable to any broker, finder or agent and the costs of any
environmental study and additional environmental testing contemplated by
Section 6.1) incurred by the Seller, the Corporation or any Shareholder either
before or after the date of this Agreement in connection with this Agreement or
the transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Shareholders' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE
WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Seller's, Corporation's and Shareholders' Agent. The Seller, the
Corporation and each Shareholder hereby authorize and appoint the Shareholders'
Agent to act as its, his or her exclusive agent and attorney-in-fact to act on
behalf of each of them with respect to all matters which are the subject of
this Agreement, including, without limitation, (a) receiving or giving all
notices, instructions, other communications, consents or agreements that may be
necessary, required or given hereunder and
- 25 -
<PAGE> 30
(b) asserting, settling, compromising, or defending, or determining not to
assert, settle, compromise or defend, (i) any claims which the Seller, the
Corporation or any Shareholder may assert, or have the right to assert, against
the Buyer, or (ii) any claims which the Buyer may assert, or have the right to
assert, against the Seller, the Corporation or any Shareholder. The
Shareholders' Agent hereby accepts such authorization and appointment. Upon
the receipt of written evidence satisfactory to the Buyer to the effect that
the Shareholders' Agent has been substituted as agent of the Seller, the
Corporation and the Shareholders by reason of his death, disability or
resignation, the Buyer shall be entitled to rely on such substituted agent to
the same extent as they were theretofore entitled to rely upon the
Shareholders' Agent with respect to the matters covered by this Section 9.14.
Neither the Seller, the Corporation nor any Shareholder shall act with respect
to any of the matters which are the subject of this Agreement except through
the Shareholders' Agent. The Seller, the Corporation and the Shareholders
acknowledge and agree that the Buyer may deal exclusively with the
Shareholders' Agent in respect of such matters, that the enforceability of this
Section 9.14 is material to the Buyer, and that the Buyer has relied upon the
enforceability of this Section 9.14 in entering into this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 26 -
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By:/s/ ARNOLD A. BERNSTEIN
----------------------------------
Name: Arnold A. Bernstein
--------------------------------
Title: President
-------------------------------
SELLER:
A-1 RENT ALL, INC. CHARITABLE
REMAINDER UNITRUST
By:/s/ A. REED FRANKLIN
----------------------------------
Name: A. Reed Franklin
--------------------------------
Trustee
CORPORATION:
A-1 RENT ALL, INC.
By:/s/ A. REED FRANKLIN
----------------------------------
Name: A. Reed Franklin
--------------------------------
Title: President
-------------------------------
- 27 -
<PAGE> 32
SHAREHOLDERS:
/s/ A. REED FRANKLIN
-------------------------------------
A. Reed Franklin
/s/ PATRICIA FRANKLIN
-------------------------------------
Patricia Franklin
THE FRANKLIN CHILDREN TRUST NO. ONE
By: /s/ CYNTHIA F. CUNDIFF
----------------------------------
Name: Cynthia F. Cundiff
--------------------------------
Title: Trustee
-------------------------------
CYNTHIA FRAZIER TRUST NO. ONE
By:/s/ CYNTHIA F. CUNDIFF
----------------------------------
Name: Cynthia F. Cundiff
--------------------------------
Title: Trustee
-------------------------------
[SIGNATURE PAGE TO PURCHASE AGREEMENT.]
- 28 -
<PAGE> 1
EXHIBIT 10.19
================================================================================
PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
A-1 RENT ALL OF MARSHALL, INC.
AND THE
SHAREHOLDERS
OF
A-1 RENT ALL OF MARSHALL, INC.
AS OF JULY 23, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Closing; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Seller and the Shareholders . . . . . . . . . . . . . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2. Operation and Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3. Acquisitions and Dispositions of Rental Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7. Conveyance of Shareholder Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8. Certain Post-Closing Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2. Conditions to Obligation of the Seller and the Shareholders . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1. Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2. Indemnification Provisions for Benefit of the Seller and the Shareholders . . . . . . . . . . . . . 19
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.14. Seller's and Shareholders' Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Exhibits:
- ---------
<S> <C>
Exhibit 1.1(a) Exhibit 3.1(h)(ii)
Exhibit 1.1(b) Exhibit 3.1(i)(i)
Exhibit 1.1(c) Exhibit 3.1(i)(ii)
Exhibit 1.1(d) Exhibit 3.1(k)
Exhibit 1.1(e) Exhibit 3.1(l)
Exhibit 1.1(f) Exhibit 3.1(m)
Exhibit 1.1(g) Exhibit 3.1(o)(i)
Exhibit 1.1(h) Exhibit 3.1(o)(ii)
Exhibit 1.1(i) Exhibit 3.1(q)
Exhibit 3.1(c) Exhibit 3.1(r)(ii)
Exhibit 3.1(d)(i)(A) Exhibit 3.1(r)(iii)
Exhibit 3.1 (d)(i)(B) Exhibit 4.3
Exhibit 3.1(d)(ii) Exhibit 5.8
Exhibit 3.1(d)(iii) Exhibit 6.1(j)
Exhibit 3.1(e)(i) Exhibit 6.2(e)
Exhibit 3.1(e)(ii) Exhibit 7.1(b)
Exhibit 3.1(f)
Exhibit 3.1(g)(i)(A)
Exhibit 3.1(g)(i)(B)
Exhibit 3.1(g)(ii)
Exhibit 3.1(h)(i)
</TABLE>
(iii)
<PAGE> 5
This Purchase Agreement is entered into as of July 23, 1997
among RentX Industries, Inc., a Delaware corporation (the "Buyer"), A-1 Rent
All of Marshall, Inc., a Texas corporation (the "Seller"), and Patricia
Franklin, A. Reed Franklin and Richard I. Jackson (individually, a
"Shareholder" and collectively, the "Shareholders").
Recitals
The Shareholders own all of the issued and outstanding capital
stock of the Seller. The Seller desires to sell, and the Buyer desires to
purchase, substantially all of the Seller's assets as provided in this
Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the
meanings designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set
forth in this Agreement, the Buyer agrees to purchase from the Seller, and the
Seller agrees to sell to the Buyer, all the Acquired Assets free and clear of
any Encumbrance or Tax, for the consideration specified in Section 2.3. The
Buyer will have no obligation under this Agreement to purchase less than all of
the Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Buyer will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The purchase price for the Acquired Assets is
$425,500, increased or decreased as appropriate for the Net Rental Equipment
Adjustment. At the Closing, the Buyer will, by wire transfer or other delivery
of immediately available funds, (i) (A) pay to the Seller (subject to Section
2.3(b)) $383,000, subject to increase or decrease as applicable for the Net
Rental Equipment Adjustment, less $1,629.23 representing the estimated
Pre-Closing Personal Property Tax Amount, and (B) deposit $42,500 into the
Escrow Account and (ii) assume the Assumed Liabilities (and the amounts paid
and deposited to and in respect of the Seller and the Assumed Liabilities will
constitute the full purchase price for the Acquired Assets). The amount
deposited in the Escrow Account will belong to the Seller, subject to the
Seller's indemnification obligations set forth in this Agreement, and will be
held, invested, administered and disbursed according to Section 7.1(b) hereof
and the Escrow Agreement.
(b) At the Closing, the Buyer will deposit into a
demand deposit account in the names of the Buyer and the Shareholders' Agent,
from the amount otherwise payable to the Seller pursuant to Section
2.3(a)(i)(A), an amount equal to the Reserve Amount, and such funds shall
initially constitute the Liabilities Reserve. The funds on deposit in the
Liabilities Reserve will belong to the Seller, subject to the provisions
<PAGE> 6
of this Section 2.3(b). Following the Closing, the Liabilities Reserve will be
applied to the payment of Reserved Seller Liabilities, by disbursements from
that account upon the joint signatures of a representative of the Buyer and the
Shareholders' Agent, as the Reserved Seller Liabilities are ascertained. To
the extent that the Buyer receives a bill or invoice representing, or is
otherwise aware of, any Reserved Seller Liabilities, the Shareholders' Agent
shall sign checks drawn on the Liabilities Reserve to satisfy such Reserved
Seller Liabilities promptly upon the request of Buyer. Reserved Seller
Liabilities representing accrued vacation and other accrued employee benefits
with respect to those persons who are employees of the Seller as of immediately
prior to the Closing Date and who become employees of the Buyer effective as of
the Closing will be satisfied by payment of the amount thereof to the Buyer as
the Buyer provides such benefits or makes cash payments in lieu thereof to
employees. The Shareholders' Agent will take all actions necessary to cause
the Liabilities Reserve to be applied to satisfy Reserved Seller Liabilities
and, if the Liabilities Reserve has been exhausted, the Seller and the
Shareholders will provide additional funds as required to satisfy Reserved
Seller Liabilities. Nothing in this Agreement will be deemed to limit the
joint and several obligations of the Seller and the Shareholders to pay the
Reserved Seller Liabilities in full. After all Reserved Seller Liabilities
have been satisfied, any excess Liabilities Reserve on deposit in the account
created pursuant to this Section 2.3(b) will be paid to the Seller. Any
disputes concerning the Liabilities Reserve will be settled by arbitration as
provided in this Agreement.
(c) As soon as practicable after the Closing, but
effective as of the Closing, the parties will prepare and initial a "Price
Allocation Schedule", allocating for Tax reporting purposes the total
consideration for the Acquired Assets among the various categories of Acquired
Assets in the following order and amounts: (i) to cash and cash equivalents,
the $500 amount on the Closing Balance Sheet; (ii) to Closing Accounts
Receivable, the amount on the Closing Balance Sheet; (iii) to Closing
Inventory, the amount on the Closing Balance Sheet; (iv) to equipment and
leasehold improvements, the greater of the appraised fair market value (if the
Buyer in its sole discretion obtains an appraisal before or after the Closing)
or the current book value thereof as reflected on the Closing Balance Sheet;
(v) to prepaid expenses, the unamortized balance on the Closing Balance Sheet;
(vi) to any other assets, other than goodwill, the amount on the Closing
Balance Sheet; and (vii) the entire remaining balance of the consideration
shall be allocated to the goodwill of the Seller's business or, at the Buyer's
sole discretion, to the other intangible assets which are included in the
Acquired Assets. The parties acknowledge that such allocations for Tax
reporting purposes were determined pursuant to arm's length bargaining
regarding the fair market values of the Acquired Assets in accordance with the
provisions of Code Section 1060. The parties agree to be bound by the
allocations set forth in the Price Allocation Schedule for all federal, state
and local Tax reporting purposes, including for purposes of determining any
income, gain, loss, depreciation or other deductions in respect of such assets.
The parties further agree to prepare and file all Tax Returns (including Form
8594 under the Code) in a manner consistent with such allocations.
2.4. Sales Taxes, Etc. The Seller will pay all sales, use,
transfer, licensing and other Taxes, fees and charges payable in respect of or
as a result of the sale and transfer of the Acquired Assets (including those
relating to vehicles, trailers and mobile equipment) to the Buyer pursuant to
this Agreement.
2.5. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
July 23, 1997 (but in any event on or before July 31, 1997), commencing at 8:00
a.m. local time in Denver, Colorado, at the offices of Sherman & Howard
L.L.C., and all transactions contemplated by this Agreement will be effective
at 12:00 a.m. local time in Marshall, Texas on the day of the Closing (such
effective time being the "Closing Date").
- 2 -
<PAGE> 7
2.6. Deliveries at the Closing. At the Closing, (a) the Seller and
the Shareholders will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Seller and the Shareholders the certificates,
instruments and documents referred to in Section 6.2, (c) the Seller will
deliver to the Buyer instruments transferring to the Buyer title to the
Acquired Assets free and clear of any Encumbrances or Taxes and (d) the Buyer
will pay and deposit the purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Seller and the
Shareholders. The Seller and the Shareholders jointly and severally represent
and warrant to the Buyer that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were then substituted for the date of this Agreement throughout this
Section 3.1).
(a) Organization, Good Standing, Authority, Etc. The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas, and is not required to be qualified or
authorized to do business as a foreign corporation in any jurisdiction. The
Seller has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
This Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and unanimously
approved by the board of directors and shareholders of the Seller, and this
Agreement has been duly executed and delivered by the Seller. The Seller has
full corporate power and authority to execute, deliver and perform this
Agreement and the Other Seller Agreements to which the Seller is a party, each
Shareholder and each relative or affiliate of the Seller or of a Shareholder
who is party to any Other Seller Agreement has full and absolute right, power,
authority and legal capacity to execute, deliver and perform this Agreement and
all Other Seller Agreements to which such Shareholder, relative or affiliate is
a party, and this Agreement constitutes, and the Other Seller Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of, and shall be enforceable in accordance with their respective
terms against, the Seller and each such Shareholder, relative or affiliate who
is a party thereto.
(b) Ownership. Patricia Franklin and Richard I.
Jackson own, beneficially and of record, free and clear of any Encumbrance or
Tax, 900 and 100 shares, respectively, of the common stock, $1.00 par value, of
the Seller, and such shares constitute all outstanding shares of the capital
stock of the Seller. No other Person has any right to acquire any equity
interest in the Seller.
(c) No Violation. The execution, delivery and
performance of this Agreement and the Other Seller Agreements and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Seller, any Shareholder, or any
relative or affiliate of the Seller or of any Shareholder who is a party to any
Other Seller Agreement is subject or any provision of the articles of
incorporation or bylaws of the Seller or of any such affiliate, or (ii)
violate, with or without the giving of notice or the lapse of time or both, or
conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any Person the right to accelerate any
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of the Seller, of any Shareholder, or of any
such relative or affiliate pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, Permit, agreement, instrument or other arrangement to
which the Seller, any Shareholder or any such
- 3 -
<PAGE> 8
relative or affiliate is a party or by which the Seller, any Shareholder, or
any such relative or affiliate or any of their respective assets and properties
is bound or subject. Except for notices that will be given and consents that
will be obtained by the Seller and the Shareholders prior to the Closing (which
are set forth in Exhibit 3.1(c)), neither the Seller, any Shareholder, nor any
such relative or affiliate need give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental Authority or
other Person in order for the parties to consummate the transactions
contemplated by this Agreement and the Other Seller Agreements.
(d) Financial Statements. The unaudited balance sheets
of the Seller as of December 31, 1994, December 31, 1995, and December 31,
1996, and the related statements of income, shareholders' equity and cash flows
for the fiscal years then ended, the unaudited balance sheet of the Seller as
of January 31, 1997 (the latter being referred to as the "Latest Balance
Sheet"), and the related statements of income, shareholders' equity and cash
flows for the one-month period then ended, have been prepared in accordance
with good accounting practices and on a consistent basis, are in accordance
with the books and records of the Seller (which books and records are complete
and correct), are accurate (except as set forth on Exhibit 3.1(d)(i)(A)) and
fairly present the financial position and results of operations of the Seller
as of such dates and for each of the periods indicated, to the best knowledge
of the Seller and the Shareholders do not list book values for the assets that
are in excess of their fair market values, and, except as set forth on Exhibit
3.1(d)(i)(B), make adequate provision for all Liabilities to which the Seller
is subject. Copies of the financial statements described in the first sentence
in this Section are attached as Exhibit 3.1(d)(ii). The expenses itemized on
Exhibit 3.1(d)(iii) and reflected in the Seller's financial performance for the
12-month period ended December 31, 1996 will not be realized on an on-going
basis, and information sufficient to determine such financial performance for
such 12-month period has been provided by the Seller to the Buyer prior to the
date of this Agreement.
(e) Absence of Certain Leases, Changes or Events. The
Seller is not, except as set forth on Exhibit 3.1(e)(i), a party to or
otherwise bound by any contract or agreement that has a term of three or more
months pursuant to which the Seller is obligated to furnish any equipment,
products or services, and no such contract or agreement has been prepaid with
respect to any period after the Closing Date. Since January 31, 1997, the
Seller has not (i) incurred any debt, indebtedness or other Liability, except
current Liabilities incurred in the ordinary course of business; (ii) delayed
or postponed the payment of accounts payable or other Liabilities or
accelerated the collection of any receivable beyond stated, normal terms; (iii)
except as set forth on Exhibit 3.1(e)(ii) sold (except as set forth on Exhibit
4.3 with respect to the period between February 1, 1997 and the date of this
Agreement and as permitted by Section 4.3 with respect to the period after the
date of this Agreement and before the Closing Date) or otherwise transferred
any of its equipment or other assets or properties; (iv) cancelled,
compromised, settled, released, waived, written-off (except as set forth on
Exhibit 3.1(e)(ii)) or expensed any account or note receivable, right, debt or
claim involving more than $2,000 in the aggregate; (v) changed in any
significant manner the way in which it conducts its business; (vi) made or
granted any individual wage or salary increase in excess of 10% or $1.00 per
hour, any general wage or salary increase, or any additional benefits of any
kind or nature; (vii) except as otherwise expressly permitted by this Section
3.1(e), (A) except as set forth on Exhibit 3.1(e)(ii), entered into any
contracts or agreements, or made any commitments, involving more than $2,000
individually or in the aggregate or (B) accelerated, terminated, delayed,
modified or cancelled any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) involving more than $2,000
individually or in the aggregate; (viii) suffered any adverse fact or change,
including, without limitation, to or in its business, assets, financial
condition, prospects or customer relationships; (ix) except as set forth on
- 4 -
<PAGE> 9
Exhibit 3.1(e)(ii), made any payment or transfer to or for the benefit of any
shareholder, officer or director or any relative or affiliate thereof or
permitted any Person, including, without limitation, any shareholder, officer,
director or employee or any relative or affiliate thereof, to withdraw assets
from the Seller (other than cash of the Seller distributed to its shareholders
as set forth on Exhibit 3.1(e)(ii) and other than the payment to the
Shareholders of the proportionate monthly amount of their respective normal
annualized salaries due and payable during such period); (x) failed to make
purchases of new or used equipment necessary to maintain its rental/lease
inventory at the level which is reasonably necessary to maintain the revenue
base experienced by the Seller during the 12 months preceding such date; (xi)
decreased its lease rate with respect to any equipment by 10% or more from the
applicable lease rate in effect on January 31, 1997 or rented or leased any
equipment or sold or otherwise transferred any inventory, equipment or services
at below-normal rental (except as set forth on Exhibit 3.1(e)(ii)) or lease
rates or margins; (xii) suffered any other significant occurrence, event,
incident, action, failure to act or transaction outside the ordinary course of
business; or (xiii) agreed to incur, take, enter into, make or permit any of
the matters described in clauses (i) through (xii).
(f) Tax Matters. Neither the Seller nor any of its
shareholders has ever filed (i) an election pursuant to Section 1362 of the
Code that the Seller be taxed as an "S" corporation, except as set forth on
Exhibit 3.1(f), or (ii) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Seller and the Shareholders will pay
all Taxes attributable to the Seller's business and activities, including all
Taxes attributable to the transactions contemplated by this Agreement, on or
before the due date. There are no Encumbrances on any of the assets of the
Seller that arose in connection with any failure (or alleged failure) to pay
any Tax. Exhibit 3.1(f) lists all federal, state and local income Tax Returns
filed with respect to the Seller for taxable periods ended on or after January
1, 1991, indicates those Tax Returns that have been audited and indicates those
Tax Returns that currently are the subject of audit. The Seller has delivered
to the Buyer correct and complete copies of all federal, state and local income
Tax Returns and examination reports of, and statements of deficiencies assessed
against or agreed to by, the Seller since January 1, 1991.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Seller
owns all of the Acquired Assets (other than certain items of Shareholder
Property), free and clear of all Encumbrances (except for those Encumbrances
which the Seller shall cause to be terminated as of the Closing). As of the
Closing, all of the Acquired Assets (including all of the Shareholder Property)
will be owned by the Seller, free and clear of all Encumbrances, and the Seller
will have good and marketable title to all the Acquired Assets. The Acquired
Assets consist of (A) the tangible and intangible assets of the Seller
(exclusive of the Excluded Assets) in existence as of January 31, 1997 (except
as set forth on Exhibit 3.1(e)(ii) with respect to cash of the Seller which
was distributed to its shareholders and except for such changes in inventory
and in accounts receivable in the ordinary course of business as are not in
violation of Section 3.1(e)) or Section 4.3), increased by New Rental Equipment
acquired from and after February 1, 1997 and decreased by Current Rental
Equipment sold or otherwise transferred on or after February 1, 1997 as set
forth on Exhibit 4.3 and (B) all tangible and intangible assets, including,
without limitation, all improvements, fixtures and fittings, owned by any
Shareholder or relative or affiliate thereof or of the Seller which have been
used in its business at any time on or after February 1, 1997 (the "Shareholder
Property"), including, without limitation, the tangible and intangible assets
set forth on Exhibit 3.1(g)(i)(A) owned by any Shareholder or relative or
affiliate thereof. Between February 1, 1997 and the day before the date of
this Agreement, the Seller has purchased the New Rental
- 5 -
<PAGE> 10
Equipment and has sold, for cash or a Current Rental Equipment Receivable only,
the Current Rental Equipment described on Exhibit 4.3, but has not otherwise
sold, traded, transferred or otherwise disposed of any Current Rental
Equipment. In the case of Acquired Assets consisting of a leasehold interest
in equipment held by the Seller as rental inventory ("Leased Rental
Equipment"), the Seller has a valid leasehold interest in the Leased Rental
Equipment and the lessor thereof is not a relative or affiliate of the Seller
or any Shareholder. In the case of Acquired Assets consisting of Seller's
interest under an arrangement with the owner of equipment who makes such
equipment available for rental by Seller under a split rental or similar
arrangement ("Consigned Equipment"), such arrangement is in full force and
effect and the owner of the Consigned Equipment is not a relative or affiliate
of the Seller or any Shareholder. The Acquired Assets, the Leased Rental
Equipment and the Consigned Equipment are all of the tangible and intangible
assets (other than the Excluded Assets and the Premises) used by the Seller in,
or necessary for the conduct of, its business. The Acquired Assets, the
Leased Rental Equipment and the Consigned Equipment encompass all equipment
used by the Seller to generate the income reflected in the financial statements
attached as Exhibit 3.1(d)(ii). The total cost to the Seller to lease the
Leased Rental Equipment during the fiscal year ended December 31, 1996 and the
1-month period ended January 31, 1997 did not exceed $-0- and $-0-,
respectively. The total cost to the Seller to use the Consigned Equipment as
part of its rental inventory during the fiscal year ended December 31, 1996 and
the 1-month period ended January 31, 1997 did not exceed $-0- and $-0-,
respectively. Check all arrangements under which Seller leases or uses
equipment and treat items leased under capital lease as owned equipment.
Exhibit 3.1(g)(i)(B) lists all Leased Rental Equipment and all Consigned
Equipment as of the date of this Agreement. Except for items rented or leased
to customers, all of the tangible Acquired Assets, the Leased Rental Equipment
and the Consigned Equipment are located on the Premises.
(ii) The Premises constitute all of the real
property, buildings and improvements used by the Seller in its business. The
Premises are supplied with utilities and other services necessary for the
operation thereof. Except as set forth on Exhibit 3.1(g)(ii), to the best
knowledge of the Seller and the Shareholders, the Premises are free from
defects, have been maintained in accordance with normal industry practice, are
in good operating condition and repair and are suitable for the purposes for
which they presently are used. To the best knowledge of the Seller and the
Shareholders, the Premises have received all approvals of Governmental
Authorities (including Permits) required in connection with the occupation and
operation thereof and have been occupied, operated and maintained in accordance
with applicable Legal Requirements. The Seller has not received notice of
violation of any Legal Requirement or Permit relating to its operations or its
owned or leased properties.
(iii) No party to any lease with respect to any
Premises has repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data.
Attached as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the
items identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Seller nor any other party thereto is in breach
or default in performance of any of its respective obligations under, and no
event exists which, with the giving of notice or lapse of time or both, would
constitute a breach, default or event of default on the part of a party to, any
of the foregoing that is continuing unremedied.
- 6 -
<PAGE> 11
(i) Litigation; Compliance with Applicable Laws and
Rights.
(i) There is no outstanding Order against, nor,
except as set forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or threatened against, the Seller, its properties or its business or
relating to the transactions contemplated by this Agreement, nor is the Seller
or any Shareholder aware of any basis for any such action.
(ii) To the best knowledge of the Seller and the
Shareholders, except as set forth on Exhibit 3.1(i)(ii), neither the Seller nor
the Seller's assets (including its Premises, facilities, machinery and
equipment) are in violation of any applicable Legal Requirement or Right. The
Seller has not received notice from any Governmental Authority or other Person
of any violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or threatened
against the Seller alleging any such violation.
(j) Accounts Receivable. The accounts receivable of
the Seller reflected on its Latest Balance Sheet, and all accounts receivable
arising prior to the Closing Date (including, without limitation, any Current
Rental Equipment Receivables in existence as of the Closing Date), arose and
will arise from bona fide transactions by the Seller in the ordinary course of
business, are valid receivables of the Seller and the Shareholders with trade
customers subject to no setoffs or counterclaims, and 90% of the aggregate
amount thereof is current and collectible.
(k) Product Quality, Warranty and Liability. Except as
disclosed on Exhibit 3.1(i)(i), all products and services sold, rented, leased,
provided or delivered by the Seller to customers on or prior to the Closing
Date conform to applicable contractual commitments, express and implied
warranties, product and service specifications and quality standards, and the
Seller has no Liability and there is no basis for any Liability for replacement
or repair thereof or other damages in connection therewith. No product or
service sold, rented, leased, provided or delivered by the Seller to customers
on or prior to the Closing is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale, rent or
lease. The Seller has no Liability and there is no basis for any Liability
arising out of any injury to a Person or property as a result of the ownership,
possession, provision or use of any product or service sold, rented, leased,
provided or delivered by the Seller on or prior to the Closing Date. All
product or service liability claims that have been asserted against the Seller
since January 1, 1992, whether covered by insurance or not and whether
litigation has resulted or not, other than those listed and summarized on
Exhibit 3.1(i)(i), are listed and summarized on Exhibit 3.1(k).
(l) Insurance. The Seller has policies of insurance
(i) covering risk of loss on the Acquired Assets, Leased Rental Equipment and
Consigned Equipment, (ii) covering products and services liability and
liability for fire, property damage, and personal injury, all, to the best
knowledge of the Seller and the Shareholders, with responsible and financially
sound insurance carriers in adequate amounts and in compliance with
governmental requirements and in accordance with good industry practice. All
such insurance policies are valid, in full force and effect and enforceable in
accordance with their respective terms and no party has repudiated any
provision thereof. All such policies will remain in full force and effect
until the Closing Date. Neither the Seller nor any other party to any such
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices) in the performance of any of their
- 7 -
<PAGE> 12
respective obligations thereunder, and no event exists which, with the giving
of notice or the lapse of time or both, would constitute a breach, default or
event of default, or permit termination, modification or acceleration under any
such policy. There are no claims, actions, proceedings or suits arising out of
or based upon any of such policies nor, to the best knowledge of the Seller and
the Shareholders, does any basis for any such claim, action, suit or proceeding
exist. All premiums have been paid on such policies as of the date of this
Agreement and will be paid on such policies through the Closing Date. The
Seller has been covered during the five years prior to the date of this
Agreement by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. All
claims made during such five-year period with respect to any insurance coverage
of the Seller, other than those described on Exhibit 3.1(k), are set forth on
Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters. The Buyer
will not suffer any Liability or Adverse Consequence from the Seller's
administration or termination of any of its Employee Benefit Plans or from any
failure of any pre-Closing or post-Closing distribution of benefits to
employees of the Seller to be made by the Seller in compliance with all
applicable Legal Requirements. The Buyer will have no obligation to employ any
employee of the Seller or to continue any Employee Benefit Plan, and will have
no Liability under any plan or arrangement maintained by the Seller for the
benefit of any employee. The Seller will remain liable for all costs of
employee compensation, including benefits and Taxes relating to employment and
employees attributable to periods through the Closing Date, whether reported by
the Closing Date or thereafter, and all group health plan continuation coverage
to which any employee, former employee or dependent is entitled because of a
qualifying event (as defined in Section 4980B(f)(3) of the Code) occurring
through the Closing Date or as a result of termination of employment with the
Seller because of the transactions contemplated by this Agreement and any
benefit or excise tax liability or penalty or other costs arising from any
failure by the Seller to provide group health plan continuation coverage.
Except as set forth on Exhibit 3.1(m), neither the Seller nor any Affiliated
Group which includes the Seller (if any) maintains, administers or contributes
to, has maintained, administered or contributed to, or has any Liability to
contribute to, any Employee Benefit Plan. Exhibit 3.1(m) lists each Employee
Benefit Plan that is, or at any time during the past six years was, maintained,
administered, contributed to or required to be contributed to by the Seller or
any Affiliated Group (if any) which includes or has included the Seller, and
the date of termination of each such Employee Benefit Plan (if any) which has
been terminated. Any Employee Benefit Plan disclosed on Exhibit 3.1(m) that is
an "employee pension benefit plan" as defined in ERISA Section 3(2), has (i)
been determined to be qualified by the Internal Revenue Service, (ii) been
maintained since its effective date by all members of the Affiliated Group and
(iii) been maintained and administered in accordance with all applicable Legal
Requirements. The Seller has no Liability (and there is no basis for the
assertion of any Liability) as a result of the Seller's or any such Affiliated
Group's maintenance, administration or termination of, or contribution to, any
Employee Benefit Plan. Neither the Seller nor any member of any Affiliated
Group (if any) which includes or has included the Seller has ever been required
to contribute to any Multiemployer Plan (as defined in ERISA Section 3(37)) nor
has the Seller incurred any Liability under Title IV of ERISA.
(n) Employees and Labor. The Seller has not received
any notice, nor, to the best knowledge of the Seller and the Shareholders, is
there any reason to believe that any executive or key employee of the Seller or
any group of employees of the Seller has any plans to terminate his, her or its
employment with the Seller. No executive or key employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Seller prior to the Closing Date and, if such person
becomes an
- 8 -
<PAGE> 13
employee of the Buyer, to the affairs of the Buyer after the Closing Date. The
Seller will not be required to give any notice under the Worker Adjustment and
Retraining Notification Act, as amended, or any similar Legal Requirement as a
result of this Agreement, the Other Seller Agreements or the transactions
contemplated hereby or thereby. The Seller does not have any labor relations
problems or disputes, nor has the Seller experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Seller is not a party to or bound by any collective bargaining agreement, there
is no union or collective bargaining unit at the Seller's facilities, and no
union organization effort has been threatened, initiated or is in progress with
respect to any employees of the Seller.
(o) Customer Relationships. Exhibit 3.1(o)(i) lists
each customer that individually or with its affiliates was, based upon the
Seller's sales, rental or lease revenues during the fiscal year ended December
31, 1996 and the one-month period ended January 31, 1997, one of the Seller's
five largest customers during either such fiscal year or such one-month period
(the "Principal Customers"). The Seller has good commercial working
relationships with its Principal Customers and since December 31, 1996, no
Principal Customer has cancelled or otherwise terminated its relationship with
the Seller, materially decreased or limited its purchases, rentals or leases
from the Seller, or threatened to take any such action. The Seller and the
Shareholders have no basis to anticipate any problems with the Seller's
customer or business relationships. To the best knowledge of the Seller and
the Shareholders, no Principal Customer has any plans to reduce its purchases,
rentals or leases from the Seller below levels prevailing since December 31,
1996, and the one-month period ended January 31, 1997, and the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not adversely affect the relationship of the Seller
with any Principal Customer prior to the Closing Date or of the Buyer with any
Principal Customer after the Closing Date.
(p) Resale Inventory. The resale inventory of the
Seller consists of goods which, in the aggregate, are merchantable, are fit
for the purposes for which they were procured and are held by the Seller, are
usable in the ordinary course of the Seller's business and are not obsolete.
(q) Condition, Adequacy and Type of Equipment. Except
as set forth on Exhibit 3.1(q), the rental/lease inventory of the Seller
consists of machinery, equipment and other tangible personal property which are
merchantable, are fit and suitable for the purpose for which they were procured
and are held by the Seller, useable in the ordinary course of the Seller's
business and are not obsolete. Except as set forth on Exhibit 3.1(q), all of
the machinery, equipment and other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale), the Leased
Rental Equipment and the Consigned Equipment has been well maintained and is in
good repair and good operating condition. Except as set forth on Exhibit
3.1(q), none of the machinery, equipment or other tangible personal property
included in the Acquired Assets (including that held for rental, lease or
sale), the Leased Rental Equipment and the Consigned Equipment is damaged or
defective, the Seller has not experienced material problems or deficiencies
with respect to such machinery, equipment and other tangible personal property,
and, to the best knowledge of the Seller and the Shareholders, there is no
basis to anticipate any such problems or deficiencies.
- 9 -
<PAGE> 14
(r) Environmental Matters.
(i) To the best knowledge of the Seller and the
Shareholders, the Seller is conducting and at all times has conducted its
business and operations, and has occupied, used and operated the Premises and
all other real property and facilities presently or previously owned, occupied,
used or operated by the Seller, in compliance with all Environmental
Obligations and so as not to give rise to Liability under any Environmental
Obligations or to any impact on the Seller's business or activities. The
Seller and the Shareholders do not have any knowledge of pending or proposed
changes to any Environmental Obligations which would require any changes in any
of the Seller's Premises, facilities, equipment, operations or procedures or
affect the Seller's business or its cost of conducting its business as now
conducted or as conducted immediately prior to the Closing Date.
(ii) To the best knowledge of the Seller and the
Shareholders, no conditions, circumstances or activities have existed or
currently exist, and neither the Seller nor any Shareholder has engaged in any
acts or omissions, with respect to the Premises or any other real properties,
facilities or business presently or previously owned, occupied, used or
operated by the Seller or any predecessor (including, without limitation,
off-site disposal or treatment of Hazardous Materials) which could give rise to
any Liability pursuant to any Environmental Obligation. Exhibit 3.1(r)(ii)
identifies all real properties and facilities, including the addresses thereof,
which have been owned, occupied, used or operated by the Seller or its
predecessors at any time on or prior to the date of this Agreement. There are
no outstanding, pending or threatened Orders against the Seller or any
Shareholder, nor are there any current, pending or threatened investigations of
any kind against the Seller or any Shareholder, concerning any Environmental
Obligations. There are no actions, suits or administrative, arbitral or other
proceedings alleged, claimed, threatened, pending against or affecting the
Seller or any Shareholder at law or in equity with respect to any Environmental
Obligations, and neither the Seller nor any Shareholder has knowledge of any
existing grounds on which any such action, suit or proceedings might be
commenced.
(iii) Any chemicals and chemical compounds and
mixtures which are included among the assets of the Seller are integral to and
required for the conduct of the Seller's business, have not been and are not
intended to be discarded or abandoned, and are not waste or waste materials.
Except as set forth in the environmental studies attached as Exhibit
3.1(r)(iii) (collectively, the "Environmental Study"), the Seller has not
generated, handled, used, transported or disposed of Hazardous Materials. All
waste materials which are generated as part of the business of the Seller are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental
Study, no underground or above ground storage tanks are or have been located on
the Premises or any other real properties or any facilities presently or
previously owned, occupied, used or operated by the Seller or any predecessor.
Except as set forth in the Environmental Study, neither any of the Premises nor
any other real properties or facilities presently or previously owned,
occupied, used or operated by the Seller or any predecessor has been used at
any time as a gasoline service station or any facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products (other than
such storage, pumping and dispensing of fuels and lubricants as is incidental
to the Seller's equipment rental/leasing business) or Hazardous Materials. No
building or other structure on any of the Premises contains asbestos-containing
materials. Except as set forth in the Environmental Study, there are not nor
have there been any incinerators, septic tanks, leach fields, cesspools
- 10 -
<PAGE> 15
or wells (including without limitation dry, drinking, industrial, agricultural
and monitoring wells) on any of the Premises.
(s) Intellectual Property. The Seller owns or has the
legal right to use and to transfer to the Buyer each item of Intellectual
Property required to be identified on Exhibit 3.1(h)(ii). The continued
operation of the business of the Seller as currently conducted will not
interfere with, infringe upon, misappropriate or conflict with any Intellectual
Property rights of another Person. To the best knowledge of the Seller and the
Shareholders, no other Person has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
rights of the Seller or any Intellectual Property included in the Shareholder
Property. Neither the Seller nor any owner of any Intellectual Property
included in the Shareholder Property has granted any license, sublicense or
permission with respect to any Intellectual Property owned or used in the
Seller's business.
(t) Disclosure. To the best knowledge of the Seller
and the Shareholders, none of the documents or information provided to the
Buyer by the Seller, any Shareholder or any agent or employee thereof in the
course of the Buyer's due diligence investigation and the negotiation of this
Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, contain any untrue statement of any material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. To the best knowledge of the Seller and the
Shareholders, there is no fact which materially adversely affects the business,
prospects, condition, affairs or operations of the Seller or any of its
properties or assets which has not been set forth in this Agreement or such
Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Seller and the Shareholders acknowledge and agree that
the fact that they have made disclosures pursuant to Section 3.1 or otherwise
of matters, or did not have knowledge of matters, which result in Adverse
Consequences to the Buyer shall not relieve the Seller and the Shareholders of
their obligation pursuant to Article 7 to indemnify and hold the Buyer harmless
from all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller and the Shareholders that the statements
contained in this Section 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. This Agreement and the Other Buyer
Agreements and the transactions contemplated hereby and thereby have been duly
approved by all requisite corporate action. The Buyer has full corporate power
and authority to execute, deliver and perform this Agreement and the Other
Buyer Agreements, and this Agreement constitutes, and the Other Buyer
Agreements will when executed and delivered constitute, the legal, valid and
binding obligations of the Buyer, and shall be enforceable in accordance with
their respective terms against the Buyer.
- 11 -
<PAGE> 16
(b) No Violation of Agreements, Etc. The execution,
delivery and performance of this Agreement and the Other Buyer Agreements, and
the consummation of the transactions contemplated hereby and thereby will not
(i) violate any Legal Requirement to which the Buyer is subject or any
provision of the certificate of incorporation or bylaws of the Buyer or (ii)
violate, with or without the giving of notice or the lapse of time or both, or
conflict with or result in the breach or termination of any provision of, or
constitute a default under, or give any Person the right to accelerate any
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of the Buyer pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, agreement, instrument or other
arrangement to which the Buyer is a party or which the Buyer or any of its
assets and properties is bound or subject. Except for notices and consents
that will be given or obtained by the Buyer prior to the Closing, the Buyer
does not need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any Governmental Authority or other
Person in order for the parties to consummate the transactions contemplated by
this Agreement.
3.3. Survival of Representations. The representations and
warranties contained in Sections 3.1 and 3.2 and the Liabilities of the parties
with respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that the Liabilities of the
Seller and the Shareholders with respect to the representations and warranties
set forth in Section 3.1(t) shall survive the Closing for the period ending on
the expiration of the applicable statute of limitations, and the Liabilities of
the Seller and the Shareholders with respect to representations and warranties
set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(m), 3.1(r),
and 3.1(s), and the Liabilities of the Buyer with respect to the
representations and warranties set forth in Sections 3.2(a) and 3.2(b), shall
survive without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of such party and be exercised always in a reasonable manner and within
reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to
take all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will, and will cause the Seller to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Seller will not,
and the Shareholders will not cause or permit the Seller to, engage in any
practice, take any action or enter into any transaction outside its ordinary
course of business; provided, however, that in no event will any action be
taken or fail to be taken or any transaction be entered into which would result
in a breach of any representation, warranty or covenant of the Seller or any
Shareholder. The Seller will, and the Shareholders will cause the Seller to,
keep its business and properties, including its current operations, physical
facilities, working conditions, and relationships with customers, suppliers,
lessors, licensors and employees, intact and, in connection therewith,
- 12 -
<PAGE> 17
to continue to purchase new or used equipment necessary to maintain its
rental/lease inventory at the level specified in Section 3.1(e)(x).
4.3. Acquisitions and Dispositions of Rental Equipment. From
February 1, 1997 through the Closing Date, the Seller may purchase for cash new
or used rental or lease equipment for use in the growth and expansion of its
business ("New Rental Equipment;" provided, however, that the term New Rental
Equipment shall not include any new or used rental or lease equipment acquired
to maintain its business or replace equipment used during the twelve-month
period ending January 31, 1997) or may sell (but only for cash or a Current
Rental Equipment Receivable) rental or lease equipment owned by the Seller on
or after February 1, 1997 ("Current Rental Equipment"), but may not otherwise
sell, trade, transfer or dispose of any Current Rental Equipment; provided,
however, that between the date of this Agreement and the Closing Date, no New
Rental Equipment shall be purchased and no Current Rental Equipment shall be
sold without the express prior written approval of an officer of the Buyer and
without the Shareholders' Agent and an officer of the Buyer expressly agreeing
on the amount by which the purchase price payable pursuant to Section 2.3(a)
shall be increased in respect of such New Rental Equipment purchases ("New
Rental Equipment Increases") and the amount by which the purchase price payable
pursuant to Section 2.3(a) shall be decreased in respect of such Current Rental
Equipment sales ("Current Rental Equipment Decreases"). Exhibit 4.3 sets forth
(a) New Rental Equipment Increases with respect to New Rental Equipment
purchased between February 1, 1997 and the date of this Agreement and (b)
Current Rental Equipment Decreases with respect to Current Rental Equipment
sold or otherwise transferred between February 1, 1997 and the date of this
Agreement, as agreed by the Shareholders' Agent and an officer of the Buyer.
If any New Rental Equipment purchases or Current Rental Equipment sales or
other transfers occur after the date hereof and before the Closing Date,
Exhibit 4.3 shall be amended to reflect any agreed upon New Rental Equipment
Increases and Current Rental Equipment Decreases relating thereto.
4.4. Full Access. The Seller will permit the Buyer and its agents
to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Seller, to all premises,
properties, personnel, books, records (including Tax records), contracts and
documents of or pertaining to the Seller.
4.5. Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development which occurs after the date of
this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Seller.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.6. Exclusivity. Until this Agreement is terminated in accordance
with its terms, neither the Seller nor any Shareholder will, and the
Shareholders will not cause or permit the Seller to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any portion
of the assets of, the Seller (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Until this Agreement is terminated
in accordance with its terms, no Shareholder will vote shares of the Seller's
stock in favor of any such transaction. Until this Agreement is terminated in
accordance with its terms, the Seller and Shareholders will
- 13 -
<PAGE> 18
notify the Buyer immediately if the Person makes any proposal, offer, inquiry
or contact with respect to any of the foregoing.
4.7. Conveyance of Shareholder Property. Prior to the Closing
Date, the Shareholders shall convey, and shall cause each relative or affiliate
of the Seller or of any Shareholder to convey, to the Seller, free and clear of
any Encumbrance or Tax, all of each Shareholder's and each such relative's or
affiliate's right, title and interest to the Shareholder Property.
4.8. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
4.9. Bulk Sales Laws. In reliance upon its indemnification rights
set forth in Section 7, the Buyer waives compliance by the Seller with the bulk
transfer law and any other similar law of any applicable jurisdiction in
respect to the transactions contemplated by this Agreement.
5. Post-Closing Covenants. The parties agree as follows with respect to
the period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Each of the Shareholders will assist with the
transition of the Seller's business to the Buyer during the first six months
following the Closing at no cost to the Buyer. Neither the Seller nor any
Shareholder will take any action at any time that is designed or intended to
have the effect of discouraging any customer, supplier, lessor, licensor or
other business associate of the Seller from establishing or continuing a
business relationship with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(a) any transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Seller's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
5.4. Confidentiality. The Seller and the Shareholders will treat
and hold as confidential all Confidential Information concerning the Buyer, the
Seller's business or the Acquired Assets, refrain from using any such
Confidential Information and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all of such Confidential Information in its or
their possession.
- 14 -
<PAGE> 19
5.5. Post-Closing Announcements. Following the Closing, neither
the Seller nor any Shareholder will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer.
5.6. Financial Statements. The Seller and the Shareholders will,
upon request of the Buyer, cooperate with the Buyer to produce such historical
and on-going financial statements and audits as the Buyer may request, all at
the sole cost and expense of the Buyer.
5.7. Satisfaction of Liabilities. The Seller and the Shareholders
will pay and perform, as and when due, all Liabilities (other than the Assumed
Liabilities) relating to the Seller, the business of the Seller and the
Acquired Assets, including without limitation, all Taxes attributable to the
transactions contemplated by this Agreement and all accrued vacation and other
accrued employee benefits; provided, however, that accrued vacation and other
accrued employee benefits with respect to those persons who are employees of
the Seller as of immediately prior to the Closing Date and who become employees
of the Buyer effective as of the Closing will be satisfied as set forth in
Section 2.3(b). In addition, the Seller and the Shareholders will pay to the
Buyer an amount equal to the portion of the personal property taxes on the
Acquired Assets of the Seller attributable to the period from January 1, 1997
to the Closing Date (the "Pre-Closing Personal Property Tax Amount"). The
Pre-Closing Personal Property Tax Amount payable by the Shareholders and the
Seller will be determined by prorating personal property taxes on the Acquired
Assets of the Seller for 1997 in proportion to the number of days in the year
prior to the Closing Date compared to the number of days in the year remaining
after the date on which the Closing occurs. If the actual Pre-Closing Personal
Property Tax Amount exceeds the estimated Pre-Closing Personal Property Tax
Amount used for purposes of Section 2.3(a), the Seller and the Shareholders
shall pay such excess amount to the Buyer within five days after their receipt
of notice from the Buyer stating the amount payable by them and a copy of the
invoices from Governmental Authorities relating thereto. If the estimated
Pre-Closing Personal Property Tax Amount used for purposes of Section 2.3(a)
exceeds the actual Pre-Closing Personal Property Tax Amount, the Buyer shall
pay such excess amount to the Seller within five days of receipt of the
invoices from Governmental Authorities relating thereto. Further, the Seller
and the Shareholders, at their expense, promptly will take or cause to be taken
any action necessary to remedy any failure of the Premises or the acquired
business to comply at the Closing Date with any Legal Requirement, upon receipt
of notice from the Buyer at any time. The Buyer will pay and perform, as and
when due (except to the extent the validity thereof or the liability therefor
is being contested by the Buyer), the Assumed Liabilities.
5.8. Certain Post-Closing Environmental Matters. The Seller and
the Shareholders shall, within the time specified in Exhibit 5.8, take or cause
to be taken, in compliance with applicable Environmental Obligations, the
actions specified in Exhibit 5.8. The Seller and the Shareholders shall take
such actions at their expense. Nothing in this Section 5.8 shall relieve the
Seller or any Shareholder from any obligation or Liability under Section 7 of
this Agreement, obligate the Buyer to take any action or impose any Liability
on the Buyer.
5.9. Repurchase of Unpaid Receivables. The Seller and the
Shareholders jointly and severally guarantee that 90% of the aggregate amount
of the Closing Accounts Receivable will be fully paid to the Buyer in
accordance with their terms at their recorded amounts not later than 120 days
from the Closing Date. Upon demand by the Buyer at any time after 120 days
from the Closing Date, the Seller and the Shareholders shall jointly and
severally pay to the Buyer the full amount of any unpaid Closing Accounts
Receivables which are the subject of such demand. Upon such payment to the
Buyer, the Closing Accounts Receivable
- 15 -
<PAGE> 20
which are so paid for by the Seller and the Shareholders shall, without further
action of any party, become the property of the Seller.
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the purchase of the Acquired Assets and the consummation of
the other transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Seller's and each Shareholder's representations
and warranties shall be correct and complete at and as of the Closing Date and
the Closing and any written notices delivered to the Buyer pursuant to Section
4.5 and the subject matter thereof shall be satisfactory to the Buyer;
(b) the Seller and the Shareholders shall have
performed and complied with all of their covenants hereunder through the
Closing;
(c) the Seller and the Shareholders shall have given
all notices and procured all of the third- party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets or to conduct the
acquired business, and no such Order shall be in effect;
(e) there shall have been no adverse change in the
Acquired Assets or the Seller's business between the date of execution of this
Agreement and the Closing;
(f) the Seller shall have delivered to the Buyer (i) a
certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, (ii) a certificate as
to the adoption of resolutions by the board of directors and shareholders of
the Seller authorizing the execution, delivery and performance of this
Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby and (iii) a good standing
certificate, dated within 10 days of the Closing, from the Secretary of State
of the State of the Seller's jurisdiction of incorporation and each other state
in which the Seller is qualified or authorized to do business as a foreign
corporation;
(g) the Buyer shall have completed its due diligence
with respect to the Seller, the Seller's business and the Acquired Assets with
results satisfactory to the Buyer;
(h) the Other Seller Agreements and documentation
necessary to accomplish the conveyance of the specific ownership tax and fee
payments made by the Seller prior to the Closing in respect of vehicles and
mobile equipment included in the Acquired Assets shall have been executed and
delivered by the Seller and the Shareholders, as applicable;
- 16 -
<PAGE> 21
(i) the Premises Lease shall have been executed and
delivered by the parties thereto and the owners of the real property underlying
the Premises Lease, and each Person having an Encumbrance on such property,
shall have executed and delivered estoppel, nondisturbance and landlord waiver
agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the
Seller and the Shareholders an opinion in form and substance as set forth in
Exhibit 6.1(j) addressed to the Buyer and its debt and equity financing sources
and dated as of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) a "Phase I" environmental study of each of the
properties comprising the Premises, and such additional environmental testing
as the Buyer shall request, shall have been completed at the Seller's expense
and supplied to the Buyer, and the contents and results thereof shall be
satisfactory to the Buyer;
(m) the Seller shall have delivered to the Buyer
possession and control of the Acquired Assets;
(n) the Seller and the Shareholders shall have executed
and delivered to the Buyer (i) appropriate documentation to transfer to the
Buyer record ownership of the trade name "A-1 Rent All" and "A-1's Party
Rental" and all other registered Intellectual Property and applications
therefor and (ii) an amendment to the Seller's articles of incorporation for
the purpose of changing its name to a name that does not include the term "A-1
Rent All" or any derivation thereof;
(o) the Buyer and A-1 Rent All, Inc., shall have
closed, simultaneously with the Closing hereunder, the purchase by the Buyer of
the assets of A-1 Rent All, Inc., contemplated by the Purchase Agreement of
approximately even date herewith among the Buyer, A-1 Rent All, Inc. Charitable
Remainder Unitrust, A-1 Rent All, Inc. and the Shareholders (as defined
therein); and
(p) the Seller and the Shareholders shall have
delivered, or caused the Seller to deliver, to the Buyer such other
instruments, certificates and documents as are reasonably requested by the
Buyer in order to consummate the transactions contemplated by this Agreement,
all in form and substance reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Seller and the Shareholders.
The obligation of the Seller and the Shareholders to consummate the sale of the
Acquired Assets is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
- 17 -
<PAGE> 22
(b) the Buyer shall have performed and complied with
all of its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in
Sections 6.2(a) and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed
and delivered by the Buyer;
(e) the Seller and the Shareholders shall have received
from counsel to the Buyer an opinion in form and substance as set forth in
Exhibit 6.2(e), addressed to the Seller and the Shareholders and dated as of
the Closing; and
(f) the Buyer shall have paid and deposited the
purchase price for the Acquired Assets pursuant to Section 2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) If the Seller or any Shareholder breaches (or if
any Person other than the Buyer alleges facts that, if true, would mean the
Seller or any Shareholder has breached) any of the representations or
warranties of the Seller or any Shareholder contained herein and the Buyer
gives notice thereof to the Shareholders' Agent within the Survival Period, or
if the Seller or any Shareholder breaches (or if any Person other than the
Buyer alleges facts that, if true, would mean the Seller or any Shareholder has
breached) any covenants of the Seller or any Shareholder contained herein or
any representations, warranties or covenants of the Seller or any Shareholder
contained in any Other Seller Agreement and the Buyer gives notice thereof to
the Shareholders' Agent, then the Seller and the Shareholders agree to jointly
and severally indemnify and hold harmless the Buyer from and against any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to or caused by any of the foregoing regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In determining
whether there has been a breach of any representation or warranty contained in
Section 3.1 and in determining for purposes of the preceding sentence the
amount of Adverse Consequences suffered by the Buyer, such representations and
warranties shall not be qualified (other than by (A) the reference to
"knowledge" set forth in the last sentence of Section 3.1(o) and (B) the
references to "material" set forth in Section 3.1(t)) by "material,"
"materiality," "in all material respects," "best knowledge," "best of
knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. The Seller and the Shareholders also agree to jointly
and severally indemnify and hold harmless the Buyer from and against any
Adverse Consequences the Buyer may suffer which result from, arise out of,
relate to or are caused by (i) any Liability of the Seller or any Shareholder
not included in the Assumed Liabilities (including, without limitation, those
concerning Hazardous Materials or the failure of the Seller, any Shareholder or
any predecessor to comply with any Environmental Obligation or other Legal
Requirement), (ii) any act or omission of the Seller, any Shareholder or any
predecessor with respect to, or any event or circumstance related to, the
Seller's, any Shareholder's or any predecessor's ownership, occupation, use or
operation of any of the Acquired Assets, the Excluded Assets, the Premises or
any other assets or properties or the conduct of its or their business,
regardless, in the case of (i) or (ii),
- 18 -
<PAGE> 23
of (A) whether or not such Liability, act, omission, event, circumstance or
matter was known or disclosed to the Buyer, was disclosed on any Exhibit hereto
or is a matter with respect to which the Seller or any Shareholder did or did
not have knowledge, (B) when such Liability, act, omission, event, circumstance
or matter occurred, existed, occurs or exists and (C) whether a claim with
respect thereto was asserted before or is asserted after the Closing Date, and
(iii) any Liability resulting from any failure of the parties to comply with
any applicable bulk sales or transfer Legal Requirement in connection with the
transactions contemplated by this Agreement. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the parties within 30 days of notice of claim for indemnification from
the party claiming indemnification to the party against whom such claim is
asserted, the dispute will be resolved by arbitration pursuant to this
Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against the Seller or any Shareholder during the
Escrow Period will be paid to the Buyer first out of the funds escrowed
pursuant to the Escrow Agreement, along with interest from the date of the
Closing at the rate applicable to the escrowed funds. The Seller and the
Shareholders will have joint and several Liability for any additional amounts
needed to cover such claims, which amounts will be paid directly to the Buyer.
At the end of the Escrow Period amounts that may be needed to cover pending
indemnification claims made by the Buyer (such amounts to be determined in good
faith by the Buyer based upon the reasonable exercise of its business judgment)
will be retained in the Escrow Account until such claims are resolved, and any
excess on deposit therein, including any accrued interest, will be paid to the
Seller. Nothing in this Section 7.1(b) will be construed to limit the Buyer's
right to indemnification to amounts on deposit in the Escrow Account. The
Buyer and the Shareholders' Agent shall jointly give instructions to the Escrow
Agent to carry out the intent of this Section 7.1(b). Any disputes concerning
the escrowed funds will be settled by arbitration as provided in this
Agreement. The Buyer, on the one hand, and the Seller and the Shareholders
jointly and severally, on the other hand, shall each be responsible for
one-half of the Annual Administration Fee (as defined in Exhibit 7.1(b)),
provided, however, that the Seller and the Shareholders shall not be
responsible for more than $750 of such Annual Administration Fee, and the Buyer
shall be responsible for all of the Transaction Charges described on Exhibit
7.1(b), which are payable to the Escrow Agent pursuant to paragraph a. of
Article 2 of the Escrow Agreement. Except as otherwise determined pursuant to
Section 9.11 of this Agreement, the Buyer, on the one hand, and the
Shareholders jointly and severally, on the other hand, shall each be
responsible for one-half of any amounts payable pursuant to paragraph b. of
such Article 2.
7.2. Indemnification Provisions for Benefit of the Seller and the
Shareholders. If the Buyer breaches (or if any Person other than the Seller or
a Shareholder alleges facts that, if true, would mean the Buyer has breached)
any of its representations or warranties contained herein and the Shareholders'
Agent gives notice of a claim for indemnification against the Buyer within the
Survival Period, or if the Buyer breaches (or if any Person other than the
Seller or a Shareholder alleges facts that, if true, would mean the Buyer has
breached) any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other Buyer Agreement and the
Shareholders' Agent gives notice thereof to the Buyer, then the Buyer agrees to
indemnify and hold harmless the Seller and the Shareholders from and against
any Adverse Consequences the Seller and the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Seller and the Shareholders for
purposes of this Section, such representations and warranties shall not be
qualified by "material," "materiality," "in all material respects," "best
knowledge," "best of
- 19 -
<PAGE> 24
knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. If any dispute arises concerning whether any
indemnification is owing which cannot be resolved by negotiation among the
parties within 30 days of notice of claim for indemnification from the party
claiming indemnification to the party against whom such claim is asserted, the
dispute will be resolved by arbitration pursuant to this Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement
(including, without limitation, any Governmental Authority) notifies any party
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other party (the
"Indemnifying Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such notice. No delay
on the part of the Indemnified Party in notifying any Indemnifying Party will
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its
sole cost and expense, to defend the Indemnified Party against the Third Party
Claim with counsel of its choice satisfactory to the Indemnified Party so long
as (i) the Indemnifying Party notifies the Indemnified Party in writing within
10 days after the Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section
7.3(b) above is or becomes unsatisfied, however, (i) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it reasonably
may deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in
- 20 -
<PAGE> 25
connection therewith), (ii) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' fees and expenses), and
(iii) the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to or caused by the Third Party Claim to the fullest extent provided
in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to the Seller or any Shareholder at or
after the Closing.
7.5. Other Remedies. The foregoing indemnification provisions are
in addition to, and not in derogation of, any statutory, equitable or common
law remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate
this Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving
written notice to the Shareholders' Agent at any time prior to the Closing (i)
in the event the Seller or any Shareholder has breached any representation,
warranty or covenant contained in this Agreement in any material way, the Buyer
has notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before July 31, 1997 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this
Agreement by giving written notice to the Buyer at any time prior to the
Closing (i) if the Buyer has breached any representation, warranty or covenant
contained in this Agreement in any material way, the Shareholders' Agent has
notified the Buyer of the breach, and the breach has not been cured within 10
days after the notice of breach or (ii) if the Closing has not occurred on or
before July 31, 1997 because of the failure of any condition precedent to the
Seller's and the Shareholders' obligations to consummate the Closing (unless
the failure results primarily from the Seller or any Shareholder breaching any
representation, warranty or covenant contained in this Agreement in any
material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
- 21 -
<PAGE> 26
8.3. Confidentiality. If this Agreement is terminated, each party
will treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer
any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. Neither the Seller nor any Shareholder may assign this
Agreement or any of their rights, interests or obligations hereunder without
the prior written approval of the Buyer. The Buyer may assign its rights and
obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement
are inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
If to the Seller or
the Shareholders: Copy to:
Addressed to the Jerry L. Atherton
Shareholders' Agent at: Hardy & Atherton, Esq.
One American Center, Suite 750
18203 Lakeside Drive 909 ESE Loop 323
Flint, Texas 75762 Tyler, Texas 75701
Telecopy: (___) ___-____ Telecopy: (903) 561-8228
- 22 -
<PAGE> 27
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
6000 East Evans, Suite 2-300 633 Seventeenth Street, Suite 3000
Denver, Colorado 80222 Denver, Colorado 80202
Attn: President Attn: Andrew L. Blair, Jr.
Telecopy: (303) 512-2028 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
9.7. Governing Law. This Agreement will be governed by and
construed in accordance with the domestic laws of the State of Colorado without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Colorado or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a)
the Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Seller and the Shareholders will bear all costs and expenses
(including, without limitation, all legal, accounting and tax related fees and
expenses, all fees, commissions, expenses and other amounts payable to any
broker, finder or agent and the costs of any environmental study and additional
environmental testing contemplated by Section 6.1) incurred by the Seller or
any Shareholder either before or after the date of this Agreement in connection
with this Agreement or the transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK
- 23 -
<PAGE> 28
REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO JURY TRIAL. The
arbitration will be conducted only in Denver, Colorado, before a single
arbitrator selected by the parties or, if they are unable to agree on an
arbitrator, before a panel of three arbitrators, one selected by the Buyer, one
selected by the Shareholders' Agent and the third selected by the other two
arbitrators. The arbitrators shall have full authority to order specific
performance and award damages and other relief available under this Agreement
or applicable law, but shall have no authority to add to, detract from, change
or amend the terms of this Agreement or existing law. All arbitration
proceedings, including settlements and awards, shall be confidential. The
decision of the arbitrators will be final and binding, and judgment on the
award by the arbitrators may be entered in any court of competent jurisdiction.
THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE.
The prevailing party or parties in any such arbitration or in any action to
enforce this Agreement will be entitled to all reasonable costs and expenses,
including fees and expenses of the arbitrators and attorneys, incurred in
connection therewith.
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Seller's and Shareholders' Agent. The Seller and each
Shareholder hereby authorize and appoint the Shareholders' Agent to act as its,
his or her exclusive agent and attorney-in-fact to act on behalf of each of
them with respect to all matters which are the subject of this Agreement,
including, without limitation, (a) receiving or giving all notices,
instructions, other communications, consents or agreements that may be
necessary, required or given hereunder and (b) asserting, settling,
compromising, or defending, or determining not to assert, settle, compromise or
defend, (i) any claims which the Seller or any Shareholder may assert, or have
the right to assert, against the Buyer, or (ii) any claims which the Buyer may
assert, or have the right to assert, against the Seller or any Shareholder.
The Shareholders' Agent hereby accepts such authorization and appointment.
Upon the receipt of written evidence satisfactory to the Buyer to the effect
that the Shareholders' Agent has been substituted as agent of the Seller and
the Shareholders by reason of his death, disability or resignation, the Buyer
shall be entitled to rely on such substituted agent to the same extent as they
were theretofore entitled to rely upon the Shareholders' Agent with respect to
the matters covered by this Section 9.14. Neither the Seller nor any
Shareholder shall act with respect to any of the matters which are the subject
of this Agreement except through the Shareholders' Agent. The Seller and the
Shareholders acknowledge and agree that the Buyer may deal exclusively with the
Shareholders' Agent in respect of such matters, that the enforceability of this
Section 9.14 is material to the Buyer, and that the Buyer has relied upon the
enforceability of this Section 9.14 in entering into this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 24 -
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By:/s/ ARNOLD A. BERNSTEIN
------------------------------------
Name: Arnold A. Bernstein
----------------------------------
Title: President
---------------------------------
SELLER:
A-1 RENT ALL OF MARSHALL, INC.
By:/s/ PATRICIA FRANKLIN
------------------------------------
Name: Patricia Franklin
----------------------------------
Title: President
---------------------------------
SHAREHOLDERS:
/s/ PATRICIA FRANKLIN
---------------------------------------
Patricia Franklin
/s/ A. REED FRANKLIN
---------------------------------------
A. Reed Franklin
/s/ RICHARD I. JACKSON
---------------------------------------
Richard I. Jackson
[SIGNATURE PAGE TO PURCHASE AGREEMENT.]
- 25 -
<PAGE> 1
EXHIBIT 10.20
================================================================================
PURCHASE AGREEMENT
AMONG
RENTX INDUSTRIES, INC.,
MER-CAL ENTERPRISES, INC.
AND THE
SHAREHOLDERS
OF
MER-CAL ENTERPRISES, INC.
AS OF JULY 30, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Assumption of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Purchase Price; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4. Sales Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5. Closing; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6. Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1. Representations and Warranties of the Seller and the Shareholders . . . . . . . . . . . . . . . . . . 3
3.2. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Representations as to Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2. Operation and Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3. Acquisitions and Dispositions of Rental Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7. Conveyance of Shareholder Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2. Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5. Post-Closing Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7. Satisfaction of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8. Certain Post-Closing Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9. Repurchase of Unpaid Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2. Conditions to Obligation of the Seller and the Shareholders . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.1. Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2. Indemnification Provisions for Benefit of the Seller and the Shareholders . . . . . . . . . . . . . 18
7.3. Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3. Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.11. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.13. Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.14. Seller's and Shareholders' Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<TABLE>
<CAPTION>
Exhibits:
<S> <C>
Exhibit 1.1(a) Exhibit 3.1(g)(ii)
Exhibit 1.1(b) Exhibit 3.1(h)(i)
Exhibit 1.1(c) Exhibit 3.1(h)(ii)
Exhibit 1.1(d) Exhibit 3.1(i)(i)
Exhibit 1.1(e) Exhibit 3.1(i)(ii)
Exhibit 1.1(f) Exhibit 3.1(k)
Exhibit 1.1(g) Exhibit 3.1(l)
Exhibit 3.1(c) Exhibit 3.1(m)
Exhibit 3.1(d)(i) Exhibit 3.1(o)(i)
Exhibit 3.1(d)(ii) Exhibit 3.1(o)(ii)
Exhibit 3.1(d)(iii) Exhibit 3.1(r)(ii)
Exhibit 3.1(e)(i) Exhibit 3.1(r)(iii)
Exhibit 3.1(e)(ii) Exhibit 4.3
Exhibit 3.1(f) Exhibit 5.8
Exhibit 3.1(g)(i)(A) Exhibit 6.1(j)
Exhibit 3.1(g)(i)(B) Exhibit 6.2(e)
</TABLE>
(ii)
<PAGE> 4
This Purchase Agreement is entered into as of July 30, 1997 among
RentX Industries, Inc., a Delaware corporation (the "Buyer"), Mer-Cal
Enterprises, Inc., d/b/a Duncan Rents All, Inc., an Oklahoma corporation (the
"Seller"), and Dean Callas and W. R. Merrill (individually, a "Shareholder" and
collectively, the "Shareholders").
Recitals
The Shareholders own all of the issued and outstanding capital
stock of the Seller. The Seller desires to sell, and the Buyer desires to
purchase, substantially all of the Seller's assets as provided in this
Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. Definitions. The terms defined in Exhibit 1.1(a) shall have the meanings
designated therein.
2. Purchase and Sale.
2.1. Basic Transaction. Subject to the terms and conditions set forth
in this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all the Acquired Assets free and clear of any
Encumbrance or Tax, for the consideration specified in Section 2.3. The Buyer
will have no obligation under this Agreement to purchase less than all of the
Acquired Assets.
2.2. Assumption of Certain Liabilities. Subject to the terms and
conditions set forth in this Agreement, the Buyer agrees to assume and become
responsible at the Closing for all of the Assumed Liabilities. The Buyer will
not assume or have any responsibility with respect to any other Liability not
expressly included within the definition of Assumed Liabilities.
2.3. Purchase Price; Payment.
(a) The purchase price for the Acquired Assets is $925,400
plus $17,300 paid by the Seller for the Multiquip generator, $10,200 paid by
the Seller for new portable toilets and $19,200 paid by the Seller for a new
John Deere 970 tractor and loader and Rhino equipment purchased in connection
therewith, decreased for the Rental Equipment Adjustment. At the Closing, the
Buyer will (i) by wire transfer or other delivery of immediately available
funds, (A) pay to the Seller (subject to Section 2.3(b)) $879,600, subject to
decrease for the Rental Equipment Adjustment, less $1,800.00 representing the
estimated Pre-Closing Personal Property Tax Amount, and (B) deposit $92,500
into the Escrow Account and (ii) assume the Assumed Liabilities (and the
amounts paid and deposited to and in respect of the Seller and the Assumed
Liabilities will constitute the full purchase price for the Acquired Assets).
The amount deposited in the Escrow Account will belong to the Seller, subject
to the Seller's indemnification obligations set forth in this Agreement, and
will be held, invested, administered and disbursed according to Section 7.1(b)
hereof and the Escrow Agreement.
(b) At the Closing, the Buyer will deposit into a demand
deposit account in the names of the Buyer and the Shareholders' Agent, from the
amount otherwise payable to the Seller pursuant to Section
<PAGE> 5
2.3(a)(i)(A), an amount equal to the Reserve Amount, and such funds shall
initially constitute the Liabilities Reserve. The funds on deposit in the
Liabilities Reserve will belong to the Seller, subject to the provisions of
this Section 2.3(b). Following the Closing, the Liabilities Reserve will be
applied to the payment of Reserved Seller Liabilities, by disbursements from
that account upon the joint signatures of a representative of the Buyer and the
Shareholders' Agent, as the Reserved Seller Liabilities are ascertained. To
the extent that the Buyer receives a bill or invoice representing, or is
otherwise aware of, any Reserved Seller Liabilities, the Shareholders' Agent
shall sign checks drawn on the Liabilities Reserve to satisfy such Reserved
Seller Liabilities promptly upon the request of Buyer. Reserved Seller
Liabilities representing accrued vacation and other accrued employee benefits
with respect to those persons who are employees of the Seller as of immediately
prior to the Closing Date and who become employees of the Buyer effective as of
the Closing will be satisfied by payment of the amount thereof to the Buyer as
the Buyer provides such benefits or makes cash payments in lieu thereof to
employees. The Shareholders' Agent will take all actions necessary to cause
the Liabilities Reserve to be applied to satisfy Reserved Seller Liabilities
and, if the Liabilities Reserve has been exhausted, the Seller and the
Shareholders will provide additional funds as required to satisfy Reserved
Seller Liabilities. Nothing in this Agreement will be deemed to limit the
joint and several obligations of the Seller and the Shareholders to pay the
Reserved Seller Liabilities in full. After all Reserved Seller Liabilities
have been satisfied, any excess Liabilities Reserve on deposit in the account
created pursuant to this Section 2.3(b) will be paid to the Seller. Any
disputes concerning the Liabilities Reserve will be settled by arbitration as
provided in this Agreement.
(c) As soon as practicable after the Closing, but effective as
of the Closing, the parties will prepare and initial a "Price Allocation
Schedule", allocating for Tax reporting purposes the total consideration for
the Acquired Assets among the various categories of Acquired Assets in the
following order and amounts: (i) to cash and cash equivalents, the $400 amount
on the Closing Balance Sheet; (ii) to Closing Accounts Receivable, the amount
on the Closing Balance Sheet; (iii) to Closing Inventory, the amount on the
Closing Balance Sheet; (iv) to equipment and leasehold improvements, the
greater of the appraised fair market value (if the Buyer in its sole discretion
obtains an appraisal before or after the Closing) or the current book value
thereof as reflected on the Closing Balance Sheet; (v) to prepaid expenses, the
unamortized balance on the Closing Balance Sheet; (vi) to any other assets,
other than goodwill, the amount on the Closing Balance Sheet; and (vii) the
entire remaining balance of the consideration shall be allocated to the
goodwill of the Seller's business or, at the Buyer's sole discretion, to the
other intangible assets which are included in the Acquired Assets. The parties
acknowledge that such allocations for Tax reporting purposes were determined
pursuant to arm's length bargaining regarding the fair market values of the
Acquired Assets in accordance with the provisions of Code Section 1060. The
parties agree to be bound by the allocations set forth in the Price Allocation
Schedule for all federal, state and local Tax reporting purposes, including for
purposes of determining any income, gain, loss, depreciation or other
deductions in respect of such assets. The parties further agree to prepare and
file all Tax Returns (including Form 8594 under the Code) in a manner
consistent with such allocations.
2.4. Sales Taxes, Etc. The Seller will pay all sales, use, transfer,
licensing and other Taxes, fees and charges payable in respect of or as a
result of the sale and transfer of the Acquired Assets (including those
relating to vehicles, trailers and mobile equipment) to the Buyer pursuant to
this Agreement.
2.5. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") is anticipated to take place on
July 31, 1997 commencing at 8:00 a.m. local time in Denver, Colorado, at the
offices of Sherman & Howard L.L.C., and all transactions contemplated by this
Agreement
- 2 -
<PAGE> 6
will be effective at 12:00 a.m. local time in Duncan, Oklahoma on the day of
the Closing (such effective time being the "Closing Date").
2.6. Deliveries at the Closing. At the Closing, (a) the Seller and the
Shareholders will deliver, or cause to be delivered, to the Buyer the
certificates, instruments and documents referred to in Section 6.1, (b) the
Buyer will deliver to the Seller and the Shareholders the certificates,
instruments and documents referred to in Section 6.2, (c) the Seller will
deliver to the Buyer instruments transferring to the Buyer title to the
Acquired Assets free and clear of any Encumbrances or Taxes and (d) the Buyer
will pay and deposit the purchase price in accordance with Section 2.3.
3. Representations and Warranties.
3.1. Representations and Warranties of the Seller and the Shareholders.
The Seller and the Shareholders jointly and severally represent and warrant to
the Buyer that the statements contained in this Section 3.1 are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
then substituted for the date of this Agreement throughout this Section 3.1).
(a) Organization, Good Standing, Authority, Etc. The Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Oklahoma, and is not required to be qualified or
authorized to do business as a foreign corporation in any jurisdiction. The
Seller has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
This Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and unanimously
approved by the board of directors and shareholders of the Seller, and this
Agreement has been duly executed and delivered by the Seller. The Seller has
full corporate power and authority to execute, deliver and perform this
Agreement and the Other Seller Agreements to which the Seller is a party. Each
Shareholder and each relative or affiliate of the Seller or of a Shareholder
who is party to any Other Seller Agreement and Alicia Whitten has full and
absolute right, power, authority and legal capacity to execute, deliver and
perform this Agreement and all Other Seller Agreements to which such
Shareholder, relative, affiliate or Ms. Whitten is a party, and this Agreement
constitutes, and the Other Seller Agreements will when executed and delivered
constitute, the legal, valid and binding obligations of, and shall be
enforceable in accordance with their respective terms against, the Seller, Ms.
Whitten and each such Shareholder, relative, affiliate who is a party thereto.
(b) Ownership. Dean Callas and W. R. Merrill own,
beneficially and of record, free and clear of any Encumbrance or Tax, 490 and
510 shares, respectively, of the common stock, $1.00 par value, of the Seller,
and such shares constitute all outstanding shares of the capital stock of the
Seller. No other Person has any right to acquire any equity interest in the
Seller.
(c) No Violation. The execution, delivery and performance of
this Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any Legal
Requirement to which the Seller, any Shareholder, any relative or affiliate of
the Seller or of any Shareholder who is a party to any Other Seller Agreement
or Alicia Whitten is subject or any provision of the articles of incorporation
or bylaws of the Seller or of any such affiliate, or (ii) violate, with or
without the giving of notice or the lapse of time or both, or conflict with or
result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any
- 3 -
<PAGE> 7
obligation under, or result in the creation of any Encumbrance upon any
properties, assets or business of the Seller, of any Shareholder, or of any
such relative or affiliate or of Ms. Whitten pursuant to, any indenture,
mortgage, deed of trust, lien, lease, license, Permit, agreement, instrument or
other arrangement to which the Seller, any Shareholder, any such relative or
affiliate or Ms. Whitten is a party or by which the Seller, any Shareholder, or
any such relative or affiliate or Ms. Whitten or any of their respective assets
and properties is bound or subject. Except for notices that will be given and
consents that will be obtained by the Seller and the Shareholders prior to the
Closing (which are set forth in Exhibit 3.1(c)), neither the Seller, any
Shareholder, nor any such relative, or affiliate nor Ms. Whitten need give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement and the Other
Seller Agreements.
(d) Financial Statements. The unaudited balance sheets of the
Seller as of December 31, 1994, December 31, 1995 and December 31, 1996, the
related statements of income, shareholders' equity and cash flows for the
fiscal years then ended, the unaudited balance sheet of the Seller as of April
30, 1997 (the latter being referred to as the "Latest Balance Sheet"), and the
related statements of income, shareholders' equity and cash flows for the
4-month period then ended, have been prepared in accordance with good
accounting practices and on a consistent basis, are in accordance with the
books and records of the Seller (which books and records are complete and
correct), are accurate and fairly present the financial position and results of
operations of the Seller as of such dates and for each of the periods
indicated, do not list book values for the assets that are in excess of their
fair market values, and, except as set forth on Exhibit 3.1(d)(i), make
adequate provision for all Liabilities to which the Seller is subject. Copies
of the financial statements described in the first sentence in this Section are
attached as Exhibit 3.1(d)(ii). The expenses itemized on Exhibit 3.1(d)(iii)
and reflected in the Seller's financial performance for the 12-month period
ended December 31, 1996 will not be realized on an on-going basis, and
information sufficient to determine such financial performance for such
12-month period has been provided by the Seller to the Buyer prior to the date
of this Agreement.
(e) Absence of Certain Leases, Changes or Events. The Seller
is not, except as set forth on Exhibit 3.1(e)(i), a party to or otherwise bound
by any contract or agreement that has a term of three or more months pursuant
to which the Seller is obligated to furnish any equipment, products or
services, and no such contract or agreement has been prepaid with respect to
any period after the Closing Date. Since December 31, 1996, the Seller has not
(i) incurred any debt, indebtedness or other Liability, except current
Liabilities incurred in the ordinary course of business; (ii) delayed or
postponed the payment of accounts payable or other Liabilities or accelerated
the collection of any receivable beyond stated, normal terms; (iii) sold
(except as set forth on Exhibit 4.3 with respect to the period between December
31, 1996 and the date of this Agreement and as permitted by Section 4.3 with
respect to the period after the date of this Agreement and before the Closing
Date) or otherwise transferred any of its equipment or other assets or
properties; (iv) except as set forth on Exhibit 3.1(e)(ii) cancelled,
compromised, settled, released, waived, written-off or expensed any account or
note receivable, right, debt or claim involving more than $5,000 in the
aggregate; (v) changed in any significant manner the way in which it conducts
its business; (vi) made or granted any individual wage or salary increase in
excess of 10% or $1.00 per hour, any general wage or salary increase, or any
additional benefits of any kind or nature; (vii) except as otherwise expressly
permitted by this Section 3.1(e), (A) entered into any contracts or agreements,
or made any commitments, involving more than $5,000 individually or in the
aggregate or (B) accelerated, terminated, delayed, modified or cancelled any
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) involving more than $5,000 individually or in
the aggregate; (viii) suffered any adverse fact or
- 4 -
<PAGE> 8
change, including, without limitation, to or in its business, assets, financial
condition, prospects or customer or supplier relationships; (ix) made any
payment or transfer to or for the benefit of any shareholder, officer or
director or any relative or affiliate thereof or permitted any Person,
including, without limitation, any shareholder, officer, director or employee
or any relative or affiliate thereof, to withdraw assets from the Seller (other
than cash of the Seller distributed to its shareholders as set forth on Exhibit
3.1(e)(ii) and other than the payment to the Shareholders of the proportionate
monthly amount of their respective normal annualized salaries due and payable
during such period); (x) failed to make purchases of new or used equipment
necessary to maintain its rental/lease inventory at the level which is
reasonably necessary to maintain the revenue base experienced by the Seller
during the 12 months preceding such date; (xi) decreased its lease rate with
respect to any equipment by 10% or more from the applicable lease rate in
effect on December 31, 1996 or rented or leased any equipment or sold or
otherwise transferred any inventory, equipment or services at below-normal
rental or lease rates or margins; (xii) suffered any other significant
occurrence, event, incident, action, failure to act or transaction outside the
ordinary course of business; or (xiii) agreed to incur, take, enter into, make
or permit any of the matters described in clauses (i) through (xii).
(f) Tax Matters. Neither the Seller nor any of its
shareholders has ever filed (i) an election pursuant to Section 1362 of the
Code that the Seller be taxed as an "S" corporation, except as set forth on
Exhibit 3.1(f), or (ii) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. The Seller and the Shareholders will pay
all Taxes attributable to the Seller's business and activities, including all
Taxes attributable to the transactions contemplated by this Agreement, on or
before the due date. There are no Encumbrances on any of the assets of the
Seller that arose in connection with any failure (or alleged failure) to pay
any Tax. Exhibit 3.1(f) lists all federal, state and local income Tax Returns
filed with respect to the Seller for taxable periods ended on or after January
1, 1991, indicates those Tax Returns that have been audited and indicates those
Tax Returns that currently are the subject of audit. The Seller has delivered
to the Buyer correct and complete copies of all federal, state and local income
Tax Returns and examination reports of, and statements of deficiencies assessed
against or agreed to by, the Seller since January 1, 1991. The information
contained in the Seller's federal income Tax Returns for the years ended
December 31, 1994, December 31, 1995 and December 31, 1996 is true, accurate
and complete.
(g) Assets and Properties.
(i) As of the date of this Agreement, the Seller owns
all of the Acquired Assets (other than certain items of Shareholder Property),
free and clear of all Encumbrances (except for those Encumbrances which the
Seller shall cause to be terminated as of the Closing). As of the Closing, all
of the Acquired Assets (including all of the Shareholder Property) will be
owned by the Seller, free and clear of all Encumbrances, and the Seller will
have good and marketable title to all the Acquired Assets. The Acquired Assets
consist of (A) the tangible and intangible assets of the Seller (exclusive of
the Excluded Assets) in existence as of December 31, 1996 (except as set forth
on Exhibit 3.1(e)(ii) with respect to cash of the Seller which was distributed
to its shareholders and except for such changes in inventory and in accounts
receivable in the ordinary course of business as are not in violation of
Section 3.1(e)) or Section 4.3), increased by New Rental Equipment acquired
from and after the date of this Agreement, decreased by Current Rental
Equipment disposed of from and after the date of this Agreement in compliance
with Section 4.3, and decreased by Current Rental Equipment sold or otherwise
transferred on or after December 31, 1996 but before the date of this
Agreement as set forth on Exhibit 4.3 and (B) all tangible and intangible
assets, including, without limitation, all improvements, fixtures and fittings,
owned by any Shareholder, by any relative or affiliate thereof or of the Seller
or by Alicia Whitten which have been used in its business at any
- 5 -
<PAGE> 9
time on or after January 1, 1997 (the "Shareholder Property"), including,
without limitation, the tangible and intangible assets set forth on Exhibit
3.1(g)(i)(A) owned by any Shareholder, by any relative or affiliate thereof or
by Alicia Whitten. Between January 1, 1997 and the day before the date of
this Agreement, the Seller has purchased the New Rental Equipment and has sold,
for cash or a Current Rental Equipment Receivable only, the Current Rental
Equipment described on Exhibit 4.3, but has not otherwise sold, traded,
transferred or otherwise disposed of any Current Rental Equipment. In the case
of Acquired Assets consisting of a leasehold interest in equipment held by the
Seller as rental inventory ("Leased Rental Equipment"), the Seller has a valid
leasehold interest in the Leased Rental Equipment and the lessor thereof is not
a relative or affiliate of the Seller, any Shareholder or Alicia Whitten. In
the case of Acquired Assets consisting of Seller's interest under an
arrangement with the owner of equipment who makes such equipment available for
rental by Seller under a split rental or similar arrangement ("Consigned
Equipment"), such arrangement is in full force and effect and the owner of the
Consigned Equipment is not a relative or affiliate of the Seller, any
Shareholder or Alicia Whitten. The Acquired Assets, the Leased Rental
Equipment and the Consigned Equipment are all of the tangible and intangible
assets (other than the Excluded Assets and the Premises) used by the Seller in,
or necessary for the conduct of, its business. The Acquired Assets, the
Leased Rental Equipment and the Consigned Equipment encompass all equipment
used by the Seller to generate the income reflected in the financial statements
attached as Exhibit 3.1(d)(ii). The total cost to the Seller to lease the
Shareholder Property during the fiscal year ended December 31, 1996 and the
4-month period ended April 30, 1997 did not exceed $21,075 and $4,400,
respectively. The total cost to the Seller to use the Consigned Equipment as
part of its rental inventory during the fiscal year ended December 31, 1996 and
the 4-month period ended April 30, 1997 did not exceed $3,000 and $4,900,
respectively. Exhibit 3.1(g)(i)(B) lists all Leased Rental Equipment and all
Consigned Equipment as of the date of this Agreement. Except for items rented
or leased to customers, all of the tangible Acquired Assets, the Leased Rental
Equipment and the Consigned Equipment are located on the Premises.
(ii) The Premises constitute all of the real property,
buildings and improvements used by the Seller in its business. The Premises
are supplied with utilities and other services necessary for the operation
thereof. Except as set forth on Exhibit 3.1(g)(ii), the Premises are free from
defects, have been maintained in accordance with normal industry practice, are
in good operating condition and repair and are suitable for the purposes for
which they presently are used. To the best knowledge of the Seller and the
Shareholders, the Premises have received all approvals of Governmental
Authorities (including Permits) required in connection with the occupation and
operation thereof and have been occupied, operated and maintained in accordance
with applicable Legal Requirements. The Seller has not received notice of
violation of any Legal Requirement or Permit relating to its operations or its
owned or leased properties.
(iii) No party to any lease with respect to any
Premises has repudiated any provision thereof, and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
(h) Lists of Properties, Contracts and Other Data. Attached
as Exhibit 3.1(h)(ii) is a correct and complete list setting forth the items
identified on Exhibit 3.1(h)(i). True and complete copies of the items
referred to in Exhibit 3.1(h)(ii) have been delivered to the Buyer. All items
referred to in Exhibit 3.1(h)(ii) are valid, in full force and effect,
enforceable in accordance with their respective terms for the period stated
therein, and no party has repudiated any provision thereof and no action or
claim is pending or threatened to revoke, modify, terminate or render invalid
any of such items. Neither the Seller nor any other party thereto is in breach
or default in performance of any of its respective obligations under, and no
- 6 -
<PAGE> 10
event exists which, with the giving of notice or lapse of time or both, would
constitute a breach, default or event of default on the part of a party to, any
of the foregoing that is continuing unremedied.
(i) Litigation; Compliance with Applicable Laws and Rights.
(i) There is no outstanding Order against, nor,
except as set forth on Exhibit 3.1(i)(i), is there any litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or threatened against, the Seller, its properties or its business or
relating to the transactions contemplated by this Agreement, nor is there any
basis for any such action.
(ii) To the best knowledge of the Seller and the
Shareholders, except as set forth on Exhibit 3.1(i)(ii), neither the Seller nor
the Seller's assets (including its Premises, facilities, machinery and
equipment) are in violation of any applicable Legal Requirement or Right. The
Seller has not received notice from any Governmental Authority or other Person
of any violation or alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or is pending or threatened
against the Seller alleging any such violation.
(j) Accounts Receivable. The accounts receivable of the
Seller reflected on its Latest Balance Sheet, and all accounts receivable
arising prior to the Closing Date (including, without limitation, any Current
Rental Equipment Receivables in existence as of the Closing Date), arose and
will arise from bona fide transactions by the Seller in the ordinary course of
business, are valid receivables with trade customers subject to no setoffs or
counterclaims, and 90% of the aggregate amount thereof is current and
collectible.
(k) Product Quality, Warranty and Liability. All products and
services sold, rented, leased, provided or delivered by the Seller to customers
on or prior to the Closing Date conform to applicable contractual commitments,
express and implied warranties, product and service specifications and quality
standards, and the Seller has no Liability and there is no basis for any
Liability for replacement or repair thereof or other damages in connection
therewith. No product or service sold, rented, leased, provided or delivered
by the Seller to customers on or prior to the Closing is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale, rent or lease. The Seller has no Liability and there is no
basis for any Liability arising out of any injury to a Person or property as a
result of the ownership, possession, provision or use of any product or service
sold, rented, leased, provided or delivered by the Seller on or prior to the
Closing Date. All product or service liability claims that have been asserted
against the Seller since January 1, 1992, whether covered by insurance or not
and whether litigation has resulted or not, other than those listed and
summarized on Exhibit 3.1(i)(i), are listed and summarized on Exhibit 3.1(k).
(l) Insurance. The Seller has policies of insurance (i)
covering risk of loss on the Acquired Assets, Leased Rental Equipment and
Consigned Equipment, (ii) covering products and services liability and
liability for fire, property damage, personal injury and workers' compensation
coverage and (iii) for business interruption, all, to the best knowledge of the
Seller and the Shareholders, with responsible and financially sound insurance
carriers in adequate amounts and in compliance with governmental requirements
and in accordance with good industry practice. All such insurance policies are
valid, in full force and effect and enforceable in accordance with their
respective terms and no party has repudiated any provision thereof.
- 7 -
<PAGE> 11
All such policies will remain in full force and effect until the Closing Date.
Neither the Seller nor any other party to any such policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices) in the performance of any of their respective obligations thereunder,
and no event exists which, with the giving of notice or the lapse of time or
both, would constitute a breach, default or event of default, or permit
termination, modification or acceleration under any such policy. There are no
claims, actions, proceedings or suits arising out of or based upon any of such
policies nor, to the best knowledge of the Seller and the Shareholders, does
any basis for any such claim, action, suit or proceeding exist. All premiums
have been paid on such policies as of the date of this Agreement and will be
paid on such policies through the Closing Date. The Seller has been covered
during the five years prior to the date of this Agreement by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. All claims made during such five-year period
with respect to any insurance coverage of the Seller, other than those
described on Exhibit 3.1(k), are set forth on Exhibit 3.1(l).
(m) Pension and Employee Benefit Matters. The Buyer will not
suffer any Liability or Adverse Consequence from the Seller's administration or
termination of any of its Employee Benefit Plans or from any failure of any
pre-Closing or post-Closing distribution of benefits to employees of the Seller
to be made by the Seller in compliance with all applicable Legal Requirements.
The Buyer will have no obligation to employ any employee of the Seller or to
continue any Employee Benefit Plan, and will have no Liability under any plan
or arrangement maintained by the Seller for the benefit of any employee. The
Seller will remain liable for all costs of employee compensation, including
benefits and Taxes relating to employment and employees attributable to periods
through the Closing Date, whether reported by the Closing Date or thereafter,
and all group health plan continuation coverage to which any employee, former
employee or dependent is entitled because of a qualifying event (as defined in
Section 4980B(f)(3) of the Code) occurring through the Closing Date or as a
result of termination of employment with the Seller because of the transactions
contemplated by this Agreement and any benefit or excise tax liability or
penalty or other costs arising from any failure by the Seller to provide group
health plan continuation coverage. Except as set forth on Exhibit 3.1(m),
neither the Seller nor any Affiliated Group which includes the Seller (if any)
maintains, administers or contributes to, has maintained, administered or
contributed to, or has any Liability to contribute to, any Employee Benefit
Plan. Exhibit 3.1(m) lists each Employee Benefit Plan that is, or at any time
during the past six years was, maintained, administered, contributed to or
required to be contributed to by the Seller or any Affiliated Group (if any)
which includes or has included the Seller, and the date of termination of each
such Employee Benefit Plan (if any) which has been terminated. The Seller has
no Liability (and there is no basis for the assertion of any Liability) as a
result of the Seller's or any such Affiliated Group's maintenance,
administration or termination of, or contribution to, any Employee Benefit
Plan. Neither the Seller nor any member of any Affiliated Group (if any) which
includes or has included the Seller has ever been required to contribute to any
Multiemployer Plan (as defined in ERISA Section 3(37)) nor has incurred any
Liability under Title IV of ERISA.
(n) Employees and Labor. The Seller has not received any
notice, nor, to the best knowledge of the Seller and the Shareholders, is there
any reason to believe that any executive or key employee of the Seller or any
group of employees of the Seller has any plans to terminate his, her or its
employment with the Seller. No executive or key employee is subject to any
agreement, obligation, Order or other legal hindrance that impedes or might
impede such executive or key employee from devoting his or her full business
time to the affairs of the Seller prior to the Closing Date and, if such person
becomes an employee of the Buyer, to the affairs of the Buyer after the Closing
Date. The Seller will not be required to give any notice under the Worker
Adjustment and Retraining Notification Act, as amended, or any similar
- 8 -
<PAGE> 12
Legal Requirement as a result of this Agreement, the Other Seller Agreements or
the transactions contemplated hereby or thereby. The Seller does not have any
labor relations problems or disputes, nor has the Seller experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller is not a party to or bound by any collective
bargaining agreement, there is no union or collective bargaining unit at the
Seller's facilities, and no union organization effort has been threatened,
initiated or is in progress with respect to any employees of the Seller.
(o) Customer and Supplier Relationships. Exhibit 3.1(o)(i)
lists each customer that individually or with its affiliates was, based upon
the Seller's sales, rental or lease revenues during the fiscal years ended
December 31, 1996 and the 4-month period ended April 30, 1997, one of the
Seller's 10 largest customers during either such fiscal year or such 4-month
period (the "Principal Customers"). Exhibit 3.1(o)(ii) lists each supplier
that individually or with its affiliates was, based upon the Seller's purchases
of inventory or supplies during the fiscal year ended December 31, 1997 or the
4-month period ended April 30, 1997, one of the Seller's 10 largest suppliers
in either such fiscal year or such 4-month period (the "Principal Suppliers").
The Seller has good commercial working relationships with its Principal
Customers and Principal Suppliers and since December 31, 1996, no Principal
Customer or Principal Supplier has cancelled or otherwise terminated its
relationship with the Seller, materially decreased or limited its purchases,
rentals or leases from , or inventory or supplies supplied to, the Seller, or
threatened to take any such action. The Seller and the Shareholders have no
basis to anticipate any problems with the Seller's customer , supplier or
business relationships. To the best knowledge of the Seller and the
Shareholders, no Principal Customer or Principal Supplier has any plans to
reduce its purchases, rentals or leases from , or inventory or supplies
supplied to, the Seller below levels prevailing since December 31, 1996 and the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not adversely affect the relationship of
the Seller with any Principal Customer or Principal Supplier prior to the
Closing Date or of the Buyer with any Principal Customer or Principal Supplier
after the Closing Date.
(p) Resale Inventory. The resale inventory of the Seller
consists of goods which, in the aggregate, are merchantable, are fit for the
purposes for which they were procured and are held by the Seller, are usable in
the ordinary course of the Seller's business and are not obsolete.
(q) Condition, Adequacy and Type of Equipment. The
rental/lease inventory of the Seller consists of machinery, equipment and other
tangible personal property which are merchantable, are fit and suitable for the
purpose for which they were procured and are held by the Seller, useable in the
ordinary course of the Seller's business and are not obsolete. All of the
machinery, equipment and other tangible personal property included in the
Acquired Assets (including that held for rental, lease or sale), the Leased
Rental Equipment and the Consigned Equipment has been well maintained and is in
good repair and good operating condition. None of the machinery, equipment or
other tangible personal property included in the Acquired Assets (including
that held for rental, lease or sale), the Leased Rental Equipment and the
Consigned Equipment is damaged or defective, the Seller has not experienced
material problems or deficiencies with respect to such machinery, equipment and
other tangible personal property, and, to the best knowledge of the Seller and
the Shareholders, there is no basis to anticipate any such problems or
deficiencies.
- 9 -
<PAGE> 13
(r) Environmental Matters.
(i) The Seller is conducting and at all times has
conducted its business and operations, and has occupied, used and operated the
Premises and all other real property and facilities presently or previously
owned, occupied, used or operated by the Seller, in compliance with all
Environmental Obligations and so as not to give rise to Liability under any
Environmental Obligations or to any impact on the Seller's business or
activities. The Seller and the Shareholders do not have any knowledge of
pending or proposed changes to any Environmental Obligations which would
require any changes in any of the Seller's Premises, facilities, equipment,
operations or procedures or affect the Seller's business or its cost of
conducting its business as now conducted or as conducted immediately prior to
the Closing Date.
(ii) No conditions, circumstances or activities have
existed or currently exist, and neither the Seller nor any Shareholder has
engaged in any acts or omissions, with respect to the Premises or any other
real properties, facilities or business presently or previously owned,
occupied, used or operated by the Seller or any predecessor (including, without
limitation, off-site disposal or treatment of Hazardous Materials) which could
give rise to any Liability pursuant to any Environmental Obligation. Exhibit
3.1(r)(ii) identifies all real properties and facilities, including the
addresses thereof, which have been owned, occupied, used or operated by the
Seller or its predecessors at any time on or prior to the date of this
Agreement. There are no outstanding, pending or threatened Orders against the
Seller or any Shareholder, nor are there any current, pending or threatened
investigations of any kind against the Seller or any Shareholder, concerning
any Environmental Obligations. There are no actions, suits or administrative,
arbitral or other proceedings alleged, claimed, threatened, pending against or
affecting the Seller or any Shareholder at law or in equity with respect to any
Environmental Obligations, and neither the Seller nor any Shareholder has
knowledge of any existing grounds on which any such action, suit or proceedings
might be commenced.
(iii) Any chemicals and chemical compounds and mixtures
which are included among the assets of the Seller are integral to and required
for the conduct of the Seller's business, have not been and are not intended to
be discarded or abandoned, and are not waste or waste materials. Except as set
forth in the environmental studies attached as Exhibit 3.1(r)(iii)
(collectively, the "Environmental Study"), the Seller has not generated,
handled, used, transported or disposed of Hazardous Materials. All waste
materials which are generated as part of the business of the Seller are
handled, stored, treated and disposed of in accordance with applicable Legal
Requirements and Environmental Obligations.
(iv) Except as set forth in the Environmental Study,
no underground or above ground storage tanks are or have been located on the
Premises or any other real properties or any facilities presently or previously
owned, occupied, used or operated by the Seller or any predecessor. Except as
set forth in the Environmental Study, neither any of the Premises nor any other
real properties or facilities presently or previously owned, occupied, used or
operated by the Seller or any predecessor has been used at any time as a
gasoline service station or any facility for storing, pumping, dispensing or
producing gasoline or any other petroleum products (other than such storage,
pumping and dispensing of fuels and lubricants as is incidental to the Seller's
equipment rental/leasing business) or Hazardous Materials. No building or
other structure on any of the Premises contains asbestos-containing materials.
Except as set forth in the Environmental Study, there are not nor have there
been any incinerators, septic tanks, leach fields, cesspools or wells
(including without limitation dry, drinking, industrial, agricultural and
monitoring wells) on any of the Premises.
- 10 -
<PAGE> 14
(s) Intellectual Property. The Seller owns or has the legal
right to use and to transfer to the Buyer each item of Intellectual Property
required to be identified on Exhibit 3.1(h)(ii). The continued operation of
the business of the Seller as currently conducted will not interfere with,
infringe upon, misappropriate or conflict with any Intellectual Property rights
of another Person. To the best knowledge of the Seller and the Shareholders,
no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of the
Seller or any Intellectual Property included in the Shareholder Property.
Neither the Seller nor any owner of any Intellectual Property included in the
Shareholder Property has granted any license, sublicense or permission with
respect to any Intellectual Property owned or used in the Seller's business.
(t) Disclosure. None of the documents or information provided
to the Buyer by the Seller, any Shareholder or any agent or employee thereof in
the course of the Buyer's due diligence investigation and the negotiation of
this Agreement and Section 3.1 of this Agreement and the disclosure Exhibits
referred to therein, including the financial statements referred to above in
Section 3.1, contain any untrue statement of any material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact which materially adversely affects
the business, prospects, condition, affairs or operations of the Seller or any
of its properties or assets which has not been set forth in this Agreement or
such Exhibits, including such financial statements.
Nothing in the disclosure Exhibits referred to in Section 3.1
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable disclosure Exhibit identifies the
exception with particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Seller and the Shareholders acknowledge and agree that
the fact that they have made disclosures pursuant to Section 3.1 or otherwise
of matters, or did not have knowledge of matters, which result in Adverse
Consequences to the Buyer shall not relieve the Seller and the Shareholders of
their obligation pursuant to Article 7 to indemnify and hold the Buyer harmless
from all Adverse Consequences.
3.2. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller and the Shareholders that the statements contained
in this Section 3.2 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2).
(a) Organization, Good Standing, Power, Etc. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. This Agreement and the Other Buyer Agreements
and the transactions contemplated hereby and thereby have been duly approved by
all requisite corporate action. The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement and the Other Buyer
Agreements, and this Agreement constitutes, and the Other Buyer Agreements will
when executed and delivered constitute, the legal, valid and binding
obligations of the Buyer, and shall be enforceable in accordance with their
respective terms against the Buyer.
(b) No Violation of Agreements, Etc. The execution, delivery
and performance of this Agreement and the Other Buyer Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate any Legal Requirement to which the Buyer is subject or any provision of
the
- 11 -
<PAGE> 15
certificate of incorporation or bylaws of the Buyer or (ii) violate, with or
without the giving of notice or the lapse of time or both, or conflict with or
result in the breach or termination of any provision of, or constitute a
default under, or give any Person the right to accelerate any obligation under,
or result in the creation of any Encumbrance upon any properties, assets or
business of the Buyer pursuant to, any indenture, mortgage, deed of trust,
lien, lease, license, agreement, instrument or other arrangement to which the
Buyer is a party or which the Buyer or any of its assets and properties is
bound or subject. Except for notices and consents that will be given or
obtained by the Buyer prior to the Closing, the Buyer does not need to give any
notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental Authority or other Person in order for the parties
to consummate the transactions contemplated by this Agreement.
3.3. Survival of Representations. The representations and warranties
contained in Sections 3.1 and 3.2 and the Liabilities of the parties with
respect thereto shall survive any investigation thereof by the parties and
shall survive the Closing for four years, except that the Liabilities of the
Seller and the Shareholders with respect to the representations and warranties
set forth in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(f), 3.1(g), 3.1(m), 3.1(r),
3.1(s) and 3.1(t), and the Liabilities of the Buyer with respect to the
representations and warranties set forth in Sections 3.2(a) and 3.2(b), shall
survive without termination.
3.4. Representations as to Knowledge. The representations and
warranties contained in Article 3 hereof will in each and every case where an
exercise of discretion or a statement to the "best knowledge," "best of
knowledge" or "knowledge" is required on behalf of any party to this Agreement
be deemed to require that such exercise of discretion or statement be in good
faith after reasonable investigation, with due diligence, to the best efforts
of such party and be exercised always in a reasonable manner and within
reasonable times.
4. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
4.1. General. Each of the parties will use its best efforts to take
all actions necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in
Section 6) and the other agreements contemplated hereby. Without limiting the
foregoing, the Shareholders will, and will cause the Seller to, give any
notices, make any filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this Agreement.
4.2. Operation and Preservation of Business. The Seller will not, and
the Shareholders will not cause or permit the Seller to, engage in any
practice, take any action or enter into any transaction outside its ordinary
course of business; provided, however, that in no event will any action be
taken or fail to be taken or any transaction be entered into which would result
in a breach of any representation, warranty or covenant of the Seller or any
Shareholder. The Seller will, and the Shareholders will cause the Seller to,
keep its business and properties, including its current operations, physical
facilities, working conditions, and relationships with customers, suppliers,
lessors, licensors and employees, intact and, in connection therewith, to
continue to purchase new or used equipment necessary to maintain its
rental/lease inventory at the level specified in Section 3.1(e)(x).
4.3. Acquisitions and Dispositions of Rental Equipment. From the date
of this Agreement through the Closing Date, the Seller may purchase new or used
rental or lease equipment for use in the maintenance,
- 12 -
<PAGE> 16
growth and expansion of its business ("New Rental Equipment") or may sell (but
only for cash or a Current Rental Equipment Receivable) rental or lease
equipment owned by the Seller on or after December 31, 1996 ("Current Rental
Equipment"), but may not otherwise sell, trade, transfer or dispose of any
Current Rental Equipment; provided, however, that between the date of this
Agreement and the Closing Date, no Current Rental Equipment shall be sold
without the express prior written approval of an officer of the Buyer and
without the Shareholders' Agent and an officer of the Buyer expressly agreeing
on the amount by which the purchase price payable pursuant to Section 2.3(a)
shall be decreased in respect of such Current Rental Equipment sales ("Current
Rental Equipment Decreases"). Exhibit 4.3 sets forth New Rental Equipment
purchased between December 31, 1996 and the date of this Agreement. Exhibit
4.3 also sets forth Current Rental Equipment Decreases with respect to Current
Rental Equipment sold or otherwise transferred between December 31, 1996 and
the date of this Agreement, as agreed by the Shareholders' Agent and an officer
of the Buyer. If any New Rental Equipment purchases or Current Rental
Equipment sales or other transfers occur after the date hereof and before the
Closing Date, Exhibit 4.3 shall be amended to reflect such fact and any
Current Rental Equipment Decreases relating thereto.
4.4. Full Access. The Seller will permit the Buyer and its agents to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Seller, to all premises,
properties, personnel, books, records (including Tax records), contracts and
documents of or pertaining to the Seller.
4.5. Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development which occurs after the date of
this Agreement and affects the business, assets, Liabilities, financial
condition, operations, results of operations, future prospects,
representations, warranties, covenants or disclosure Exhibits of the Seller.
No such written notice, however, will be deemed to amend or supplement any
disclosure Exhibit or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
4.6. Exclusivity. Neither the Seller nor any Shareholder will, and the
Shareholders will not cause or permit the Seller to, (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any portion
of the assets of, the Seller (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. No Shareholder will vote shares of
the Seller's stock in favor of any such transaction. The Seller and
Shareholders will notify the Buyer immediately if the Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
4.7. Conveyance of Shareholder Property. Prior to the Closing Date,
the Shareholders shall convey, and shall cause Alicia Whitten and each relative
or affiliate of the Seller or of any Shareholder to convey, to the Seller, free
and clear of any Encumbrance or Tax, all of each Shareholder's, Ms. Whitten's
and each such relative's or affiliate's right, title and interest to the
Shareholder Property.
4.8. Announcements. Prior to the Closing, no party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties.
- 13 -
<PAGE> 17
4.9. Bulk Sales Laws. In reliance upon its indemnification rights set
forth in Section 7, the Buyer waives compliance by the Seller with the bulk
transfer law and any other similar law of any applicable jurisdiction in
respect to the transactions contemplated by this Agreement.
5. Post-Closing Covenants. The parties agree as follows with respect to the
period following the Closing.
5.1. Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 7).
5.2. Transition. Each of the Shareholders will assist with the
transition of the Seller's business to the Buyer during the first 6 months
following the Closing at no cost to the Buyer. Neither the Seller nor any
Shareholder will take any action at any time that is designed or intended to
have the effect of discouraging any customer, supplier, lessor, licensor or
other business associate of the Seller from establishing or continuing a
business relationship with the Buyer after the Closing.
5.3. Cooperation. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the Acquired Assets or the Seller's business, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 7).
5.4. Confidentiality. The Seller and the Shareholders will treat and
hold as confidential all Confidential Information concerning the Buyer, the
Seller's business or the Acquired Assets, refrain from using any such
Confidential Information and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all of such Confidential Information in its or
their possession.
5.5. Post-Closing Announcements. Following the Closing, neither the
Seller nor any Shareholder will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer.
5.6. Financial Statements. The Seller and the Shareholders will, upon
request of the Buyer, cooperate with the Buyer and render such assistance to
the Buyer and its accountants as may be required to produce such historical and
on- going financial statements and audits as the Buyer may request, all at the
sole cost and expense of the Buyer, but without additional consideration to the
Seller or the Shareholders. The Seller and the Shareholders acknowledge that
the Buyer may be required by applicable law to include audited financial
statements with respect to the Seller in reports filed with governmental
agencies and that the inability to audit the financial statements of the Seller
promptly after the Closing could have a material adverse effect on the Buyer.
The Seller and the Shareholders represent and warrant to the Buyer that the
- 14 -
<PAGE> 18
Seller's records with respect to its business are auditable in their current
form for at least three full fiscal years prior to the Closing.
5.7. Satisfaction of Liabilities. The Seller and the Shareholders will
pay and perform, as and when due, all Liabilities (other than the Assumed
Liabilities) relating to the Seller, the business of the Seller and the
Acquired Assets, including without limitation, all Taxes attributable to the
transactions contemplated by this Agreement and all accrued vacation and other
accrued employee benefits; provided, however, that accrued vacation and other
accrued employee benefits with respect to those persons who are employees of
the Seller as of immediately prior to the Closing Date and who become employees
of the Buyer effective as of the Closing will be satisfied as set forth in
Section 2.3(b). In addition, the Seller and the Shareholders will pay to the
Buyer an amount equal to the portion of the personal property taxes on the
Acquired Assets of the Seller attributable to the period from January 1, 1997
to the Closing Date (the "Pre-Closing Personal Property Tax Amount"). The
Pre-Closing Personal Property Tax Amount payable by the Shareholders and the
Seller will be determined by prorating personal property taxes on the Acquired
Assets of the Seller for 1997 in proportion to the number of days in the year
prior to the Closing Date compared to the number of days in the year remaining
after the date on which the Closing occurs. If the actual Pre-Closing Personal
Property Tax Amount exceeds the estimated Pre-Closing Personal Property Tax
Amount used for purposes of Section 2.3(a), the Seller and the Shareholders
shall pay such excess amount to the Buyer within five days after their receipt
of notice from the Buyer stating the amount payable by them and a copy of the
invoices from Governmental Authorities relating thereto. If the estimated
Pre-Closing Personal Property Tax Amount used for purposes of Section 2.3(a)
exceeds the actual Pre-Closing Personal Property Tax Amount, the Buyer shall
pay such excess amount to the Seller within five days of receipt of the
invoices from Governmental Authorities relating thereto. Further, the Seller
and the Shareholders, at their expense, promptly will take or cause to be taken
any action necessary to remedy any failure of the Premises or the acquired
business to comply at the Closing Date with any Legal Requirement, upon receipt
of notice from the Buyer at any time. The Buyer will pay and perform, as and
when due (except to the extent the validity thereof or the liability therefor
is being contested by the Buyer), the Assumed Liabilities.
5.8. Certain Post-Closing Environmental Matters. The Seller and the
Shareholders shall, within the time specified in Exhibit 5.8, take or cause to
be taken, in compliance with applicable Environmental Obligations, the actions
specified in Exhibit 5.8. The Seller and the Shareholders shall take such
actions at their expense. Nothing in this Section 5.8 shall relieve the Seller
or any Shareholder from any obligation or Liability under Section 7 of this
Agreement, obligate the Buyer to take any action or impose any Liability on the
Buyer.
5.9. Repurchase of Unpaid Receivables. The Seller and the Shareholders
jointly and severally guarantee that 90% of the aggregate amount of the Closing
Accounts Receivable will be fully paid to the Buyer in accordance with their
terms at their recorded amounts not later than 120 days from the Closing Date.
Upon demand by the Buyer at any time after 120 days from the Closing Date, the
Seller and the Shareholders shall jointly and severally pay to the Buyer the
full amount of any unpaid Closing Accounts Receivables which are the subject of
such demand. Upon such payment to the Buyer, the Closing Accounts Receivable
which are so paid for by the Seller and the Shareholders shall, without further
action of any party, become the property of the Seller.
- 15 -
<PAGE> 19
6. Conditions to Closing.
6.1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the purchase of the Acquired Assets and the consummation of
the other transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) the Seller's and each Shareholder's representations and
warranties shall be correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to the Buyer pursuant to Section 4.5
and the subject matter thereof shall be satisfactory to the Buyer;
(b) the Seller and the Shareholders shall have performed and
complied with all of their covenants hereunder through the Closing;
(c) the Seller and the Shareholders shall have given all
notices and procured all of the third-party consents, authorizations and
approvals required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to the Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person wherein an
unfavorable Order would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own the Acquired Assets or to conduct the
acquired business, and no such Order shall be in effect;
(e) there shall have been no adverse change in the Acquired
Assets or the Seller's business between the date of execution of this Agreement
and the Closing;
(f) the Seller shall have delivered to the Buyer (i) a
certificate to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, (ii) a certificate as
to the adoption of resolutions by the board of directors and shareholders of
the Seller authorizing the execution, delivery and performance of this
Agreement and the Other Seller Agreements and the consummation of the
transactions contemplated hereby and thereby and (iii) a good standing
certificate, dated within 10 days of the Closing, from the Secretary of State
of the State of the Seller's jurisdiction of incorporation and each other state
in which the Seller is qualified or authorized to do business as a foreign
corporation;
(g) the Buyer shall have completed its due diligence with
respect to the Seller, the Seller's business and the Acquired Assets with
results satisfactory to the Buyer.
(h) the Other Seller Agreements and documentation necessary to
accomplish the conveyance of the specific ownership tax and fee payments made
by the Seller prior to the Closing in respect of vehicles and mobile equipment
included in the Acquired Assets shall have been executed and delivered by the
Seller and the Shareholders, as applicable;
(i) the Premises Lease shall have been executed and delivered
by the parties thereto and the owners of the real property underlying the
Premises Lease, and each Person having an Encumbrance on
- 16 -
<PAGE> 20
such property, shall have executed and delivered estoppel, nondisturbance and
landlord waiver agreements relating thereto satisfactory to the Buyer;
(j) the Buyer shall have received from counsel to the Seller
and the Shareholders an opinion in form and substance as set forth in Exhibit
6.1(j) addressed to the Buyer and its debt and equity financing sources and
dated as of the Closing;
(k) financing necessary for the consummation of the
transactions contemplated hereby and the operation of the acquired business
shall be available to the Buyer on terms and conditions satisfactory to the
Buyer;
(l) a "Phase I" environmental study of each of the properties
comprising the Premises, and such additional environmental testing as the Buyer
shall request, shall have been completed at the Seller's expense and supplied
to the Buyer, and the contents and results thereof shall be satisfactory to the
Buyer;
(m) the Seller shall have delivered to the Buyer possession
and control of the Acquired Assets;
(n) the Seller and the Shareholders shall have executed and
delivered to the Buyer appropriate documentation to transfer to the Buyer
record ownership of the trade name "Duncan Rents All" and "Duncan Rents All,
Inc." and all other registered Intellectual Property and applications therefor;
and
(o) the Seller and the Shareholders shall have delivered, or
caused the Seller to deliver, to the Buyer such other instruments, certificates
and documents as are reasonably requested by the Buyer in order to consummate
the transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 at or prior to
the Closing.
6.2. Conditions to Obligation of the Seller and the Shareholders. The
obligation of the Seller and the Shareholders to consummate the sale of the
Acquired Assets is subject to satisfaction of the following conditions:
(a) the Buyer's representations and warranties shall be
correct and complete at and as of the Closing Date and the Closing;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder through the Closing Date;
(c) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in Sections 6.2(a)
and (b) is satisfied in all respects;
(d) the Other Buyer Agreements shall have been executed and
delivered by the Buyer;
- 17 -
<PAGE> 21
(e) the Seller and the Shareholders shall have received from
counsel to the Buyer an opinion in form and substance as set forth in Exhibit
6.2(e), addressed to the Seller and the Shareholders and dated as of the
Closing; and
(f) the Buyer shall have paid and deposited the purchase price
for the Acquired Assets pursuant to Section 2.3.
The Shareholders' Agent may waive any condition specified in this Section 6.2
at or prior to the Closing.
7. Remedies for Breaches of This Agreement.
7.1. Indemnification Provisions for Benefit of the Buyer.
(a) If the Seller or any Shareholder breaches (or if any
Person other than the Buyer alleges facts that, if true, would mean the Seller
or any Shareholder has breached) any of the representations or warranties of
the Seller or any Shareholder contained herein and the Buyer gives notice
thereof to the Shareholders' Agent within the Survival Period, or if the Seller
or any Shareholder breaches (or if any Person other than the Buyer alleges
facts that, if true, would mean the Seller or any Shareholder has breached) any
covenants of the Seller or any Shareholder contained herein or any
representations, warranties or covenants of the Seller or any Shareholder
contained in any Other Seller Agreement and the Buyer gives notice thereof to
the Shareholders' Agent, then the Seller and the Shareholders agree to jointly
and severally indemnify and hold harmless the Buyer from and against any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to or caused by any of the foregoing regardless of whether the Adverse
Consequences are suffered during or after the Survival Period. In determining
whether there has been a breach of any representation or warranty contained in
Section 3.1 and in determining for purposes of the preceding sentence the
amount of Adverse Consequences suffered by the Buyer, such representations and
warranties shall not be qualified (other than by (A) the reference to
"knowledge" set forth in the last sentence of Section 3.1(o) and (B) the
references to "material" set forth in Section 3.1(t)) by "material,"
"materiality," "in all material respects," "best knowledge," "best of
knowledge" or "knowledge" or words of similar import, or by any phrase using
any such terms or words. The Seller and the Shareholders also agree to jointly
and severally indemnify and hold harmless the Buyer from and against any
Adverse Consequences the Buyer may suffer which result from, arise out of,
relate to or are caused by (i) any Liability of the Seller or any Shareholder
not included in the Assumed Liabilities (including, without limitation, those
concerning Hazardous Materials or the failure of the Seller, any Shareholder or
any predecessor to comply with any Environmental Obligation or other Legal
Requirement), (ii) any act or omission of the Seller, any Shareholder or any
predecessor with respect to, or any event or circumstance related to, the
Seller's, any Shareholder's or any predecessor's ownership, occupation, use or
operation of any of the Acquired Assets, the Excluded Assets, the Premises or
any other assets or properties or the conduct of its or their business,
regardless, in the case of (i) or (ii), of (A) whether or not such Liability,
act, omission, event, circumstance or matter was known or disclosed to the
Buyer, was disclosed on any Exhibit hereto or is a matter with respect to which
the Seller or any Shareholder did or did not have knowledge, (B) when such
Liability, act, omission, event, circumstance or matter occurred, existed,
occurs or exists and (C) whether a claim with respect thereto was asserted
before or is asserted after the Closing Date, and (iii) any Liability resulting
from any failure of the parties to comply with any applicable bulk sales or
transfer Legal Requirement in connection with the transactions contemplated by
this Agreement. If any dispute arises concerning whether any indemnification
is owing which cannot be resolved by negotiation among the parties within 30
days of notice of claim for
- 18 -
<PAGE> 22
indemnification from the party claiming indemnification to the party against
whom such claim is asserted, the dispute will be resolved by arbitration
pursuant to this Agreement.
(b) Amounts needed to cover any indemnification claims
resolved in favor of the Buyer against the Seller or any Shareholder during the
Escrow Period will be paid to the Buyer first out of the funds escrowed
pursuant to the Escrow Agreement, along with interest from the date of the
Closing at the rate applicable to the escrowed funds. The Seller and the
Shareholders will have joint and several Liability for any additional amounts
needed to cover such claims, which amounts will be paid directly to the Buyer.
At the end of the Escrow Period amounts that may be needed to cover pending
indemnification claims made by the Buyer (such amounts to be determined by the
Buyer based upon the reasonable exercise of its business judgment) will be
retained in the Escrow Account until such claims are resolved, and any excess
on deposit therein, including any accrued interest, will be paid to the Seller.
Nothing in this Section 7.1(b) will be construed to limit the Buyer's right to
indemnification to amounts on deposit in the Escrow Account. The Buyer and the
Shareholders' Agent shall jointly give instructions to the Escrow Agent to
carry out the intent of this Section 7.1(b). Any disputes concerning the
escrowed funds will be settled by arbitration as provided in this Agreement.
The Buyer, on the one hand, and the Seller and the Shareholders jointly and
severally, on the other hand, shall each be responsible for one-half of the
fees, charges and expenses payable to the Escrow Agent pursuant to paragraph a.
of Article 2 of the Escrow Agreement and, except as otherwise determined
pursuant to Section 9.11 of this Agreement, one-half of any amounts payable
pursuant to paragraph b. of such Article 2.
7.2. Indemnification Provisions for Benefit of the Seller and the
Shareholders. If the Buyer breaches (or if any Person other than the Seller or
a Shareholder alleges facts that, if true, would mean the Buyer has breached)
any of its representations or warranties contained herein and the Shareholders'
Agent gives notice of a claim for indemnification against the Buyer within the
Survival Period, or if the Buyer breaches (or if any Person other than the
Seller or a Shareholder alleges facts that, if true, would mean the Buyer has
breached) any of its covenants contained herein or any of its representations,
warranties or covenants contained in any Other Buyer Agreement and the
Shareholders' Agent gives notice thereof to the Buyer, then the Buyer agrees to
indemnify and hold harmless the Seller and the Shareholders from and against
any Adverse Consequences the Seller and the Shareholders may suffer which
result from, arise out of, relate to, or are caused by the breach or alleged
breach, regardless of whether the Adverse Consequences are suffered during or
after the Survival Period. In determining whether there has been a breach of
any representation or warranty contained in Section 3.2 and in determining the
amount of Adverse Consequences suffered by the Seller and the Shareholders for
purposes of this Section, such representations and warranties shall not be
qualified by "material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of similar import, or
by any phrase using any such terms or words. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the parties within 30 days of notice of claim for indemnification from
the party claiming indemnification to the party against whom such claim is
asserted, the dispute will be resolved by arbitration pursuant to this
Agreement.
7.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including,
without limitation, any Governmental Authority) notifies any party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other party (the
"Indemnifying
- 19 -
<PAGE> 23
Party"), then the Indemnified Party will notify each Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying any Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense
or settlement of any Third Party Claim in the manner described above, it will
be bound by the results obtained by the Indemnified Party with respect to the
Third Party Claim.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.3(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 7.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
7.4. Right of Offset. The Buyer will have the right to offset any
Adverse Consequences it may suffer against any amounts payable pursuant to this
Agreement or any Other Seller Agreement to the Seller, any Shareholder or any
relative or affiliate of the Seller or any Shareholder at or after the Closing.
- 20 -
<PAGE> 24
7.5. Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any party may have.
8. Termination.
8.1. Termination of Agreement. The parties may terminate this
Agreement as provided below:
(a) the Buyer and the Shareholders' Agent may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Shareholders' Agent at any time prior to the Closing (i) in the
event the Seller or any Shareholder has breached any representation, warranty
or covenant contained in this Agreement in any material way, the Buyer has
notified the Shareholders' Agent of the breach, and the breach has not been
cured within 10 days after the notice of breach or (ii) if the Closing has not
occurred on or before July 31, 1997 because of the failure of any condition
precedent to the Buyer's obligations to consummate the Closing (unless the
failure results primarily from the Buyer breaching any representation, warranty
or covenant contained in this Agreement in any material way); or
(c) the Shareholders' Agent may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (i) if the
Buyer has breached any representation, warranty or covenant contained in this
Agreement in any material way, the Shareholders' Agent has notified the Buyer
of the breach, and the breach has not been cured within 10 days after the
notice of breach or (ii) if the Closing has not occurred on or before July 31,
1997 because of the failure of any condition precedent to the Seller's and the
Shareholders' obligations to consummate the Closing (unless the failure results
primarily from the Seller or any Shareholder breaching any representation,
warranty or covenant contained in this Agreement in any material way).
8.2. Effect of Termination. The termination of this Agreement by a
party pursuant to Section 8.1 will in no way limit any obligation or liability
of any other party based on or arising from a breach or default by such other
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, and the terminating party will be
entitled to seek all relief to which it is entitled under applicable law.
8.3. Confidentiality. If this Agreement is terminated, each party will
treat and hold as confidential all Confidential Information concerning the
other parties which it acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby.
9. Miscellaneous.
9.1. No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
9.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or
- 21 -
<PAGE> 25
representations by or among the parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
9.3. Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Neither the Seller nor any Shareholder may assign this
Agreement or any of their rights, interests or obligations hereunder without
the prior written approval of the Buyer. The Buyer may assign its rights and
obligations hereunder as permitted by law, including, without limitation, to
any debt or equity financing source.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the
execution of a counterpart of this Agreement.
9.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
9.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, or by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
If to the Seller or
the Shareholders: Copy to:
Addressed to the
Shareholders' Agent at: Ralph W. Newcombe, Esq.
Newcombe and Redman, Inc.
408 S.E. 40th 513 C Avenue
Lawton, Oklahoma 73501 Lawton, Oklahoma 73501
Telecopy: (___) ___-____ Telecopy (405) 355-8007
If to the Buyer: Copy to:
RentX Industries, Inc. Sherman & Howard L.L.C.
6000 East Evans, Suite 2-300 633 Seventeenth Street, Suite 3000
Denver, Colorado 80222 Denver, Colorado 80202
Attn: President Attn: Andrew L. Blair, Jr.
Telecopy: (303) 512-2028 Telecopy: (303) 298-0940
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and upon receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
- 22 -
<PAGE> 26
9.7. Governing Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
9.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by the Buyer
and the Shareholders' Agent. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in writing and
signed by the party against whom such waiver is asserted.
9.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10. Expenses. Except as otherwise provided in Section 8.2, (a) the
Buyer shall bear its own costs and expenses (including, without limitation,
legal fees and expenses) incurred either before or after the date of this
Agreement in connection with this Agreement or the transactions contemplated
hereby and (b) the Seller and the Shareholders will bear all costs and expenses
(including, without limitation, all legal, accounting and tax related fees and
expenses, all fees, commissions, expenses and other amounts payable to any
broker, finder or agent and the costs of any environmental study and additional
environmental testing contemplated by Section 6.1) incurred by the Seller or
any Shareholder either before or after the date of this Agreement in connection
with this Agreement or the transactions contemplated hereby.
9.11. Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY, BY SIGNING
THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING
THE RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, before a single arbitrator selected by the parties or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators, one
selected by the Buyer, one selected by the Shareholders' Agent and the third
selected by the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and other relief
available under this Agreement or applicable law, but shall have no authority
to add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and awards,
shall be confidential. The decision of the arbitrators will be final and
binding, and judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO ARBITRATE
WILL BE SPECIFICALLY ENFORCEABLE. The prevailing party or parties in any such
arbitration or in any action to enforce this Agreement will be entitled to all
reasonable costs and expenses, including fees and expenses of the arbitrators
and attorneys, incurred in connection therewith.
- 23 -
<PAGE> 27
9.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" will mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein will have independent significance. If any party
breaches any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
9.13. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
9.14. Seller's and Shareholders' Agent. The Seller and each Shareholder
hereby authorize and appoint the Shareholders' Agent to act as its, his or her
exclusive agent and attorney-in-fact to act on behalf of each of them with
respect to all matters which are the subject of this Agreement, including,
without limitation, (a) receiving or giving all notices, instructions, other
communications, consents or agreements that may be necessary, required or given
hereunder and (b) asserting, settling, compromising, or defending, or
determining not to assert, settle, compromise or defend, (i) any claims which
the Seller or any Shareholder may assert, or have the right to assert, against
the Buyer, or (ii) any claims which the Buyer may assert, or have the right to
assert, against the Seller or any Shareholder. The Shareholders' Agent hereby
accepts such authorization and appointment. Upon the receipt of written
evidence satisfactory to the Buyer to the effect that the Shareholders' Agent
has been substituted as agent of the Seller and the Shareholders by reason of
his death, disability or resignation, the Buyer shall be entitled to rely on
such substituted agent to the same extent as they were theretofore entitled to
rely upon the Shareholders' Agent with respect to the matters covered by this
Section 9.14. Neither the Seller nor any Shareholder shall act with respect to
any of the matters which are the subject of this Agreement except through the
Shareholders' Agent. The Seller and the Shareholders acknowledge and agree
that the Buyer may deal exclusively with the Shareholders' Agent in respect of
such matters, that the enforceability of this Section 9.14 is material to the
Buyer, and that the Buyer has relied upon the enforceability of this Section
9.14 in entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A. BERNSTEIN
---------------------------------
Name: ARNOLD A. BERNSTEIN
-------------------------------
Title: President
------------------------------
- 24 -
<PAGE> 28
SELLER:
MER-CAL ENTERPRISES, INC.
By: /s/ DEAN CALLAS
---------------------------------
Name: DEAN CALLAS
-------------------------------
Title: President
------------------------------
SHAREHOLDERS:
/s/ DEAN CALLAS
------------------------------------
Dean Callas
/s/ W. R. MERRILL
------------------------------------
W. R. Merrill
[SIGNATURE PAGE TO PURCHASE AGREEMENT.]
- 25 -
<PAGE> 1
EXHIBIT 10.21
RENTX INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN - JANUARY, 1997
ARTICLE 1: DEFINITIONS
1.1 COMPANY. The Company is RentX Industries, Inc., a Delaware corporation,
and its successors and assigns.
1.2 SUBSIDIARY. A Subsidiary is any corporation in which the Company owns at
least 80% of the total voting power and value of its stock.
1.3 BOARD. The Board is the board of directors of the Company.
1.4 STOCK. Stock is the authorized $.01 par value nonvoting Class B Common
Stock ("Class B Common") of the Company (or the authorized $.01 par value Class
A Common Stock ("Class A Common") of the Company if, pursuant to the Company's
certificate of incorporation, as amended, each share of the Company's issued
and outstanding Class B Common is reclassified and changed into one share of
Class A Common and the outstanding rights to receive Class B Common from the
Company become outstanding rights to acquire Class A Common on a share-for
share-basis), and includes Stock to be issued as outstanding shares pursuant to
exercise of a Stock Option.
1.5 PLAN. Any reference to the Plan is to this Nonqualified Stock Option Plan
of the Company, as it may be amended.
1.6 OPTIONEE. An Optionee is any key employee ("Key Employee") of, or key
consultant ("Key Consultant") to, the Company or any Subsidiary whose judgment,
initiative and continued efforts are expected to contribute to the successful
conduct of the business of the Company or any Subsidiary, as determined by the
Board, and to whom the Board has granted a Stock Option.
1.7 GRANT DATE. The Grant Date refers to the date and time when Stock is
offered for sale to an Optionee under a Stock Option, as determined under 4.3.
1.8 STOCK OPTION. A Stock Option is the right granted to an Optionee under
this Plan to acquire Stock pursuant to the Optionee's Stock Option Agreement.
1.9 STOCK OPTION PRICE. Stock Option Price is the exercise price established
by the Board with respect to an Optionee's Stock Option.
<PAGE> 2
1.10 STOCK OPTION AGREEMENT. A Stock Option Agreement is the contract under
which an Optionee is given the right to acquire Stock pursuant to this Plan.
1.11 CODE. The Internal Revenue Code of 1986, as it may be amended.
ARTICLE 2: PURPOSE AND TAX STATUS
2.1 PURPOSE. The purpose of this Plan is to give selected Key Employees and
Key Consultants an opportunity to acquire a proprietary interest in the
Company.
2.2 TAX STATUS. The Stock Options granted under this Plan are nonqualified
stock options (that is, options that do not qualify as incentive stock options
under the Code). Optionees are urged to consult with their own tax advisors
with respect to the federal and state income taxation of the grant, exercise
and disposition of Stock pursuant to a Stock Option.
2.3 INTERPRETATION. This Plan and any Stock Option Agreement, as well as all
questions arising thereunder, shall be interpreted and answered in the manner
consistent with the Code and applicable Treasury Regulations relating to
nonqualified stock options.
ARTICLE 3: ADMINISTRATION
3.1 BOARD OF DIRECTORS. The Plan shall be administered by the Board.
Directors of the Company, who are Key Employees or Key Consultants either
eligible for Stock Options or to whom Stock Options have been granted, may vote
on matters of Plan administration, including the granting of Stock Options.
3.2 AUTHORITY OF BOARD. The Board shall have full authority to administer
this Plan, including authority to interpret and construe any provision of this
Plan and to adopt such rules and regulations as it may deem necessary in order
to administer the Plan. Without limitation, the Board is authorized to:
[a] Direct the grant of Stock Options;
[b] Determine the identity of Key Employees and Key Consultants who shall be
granted Stock Options, the Grant Date, and the number of shares of Stock
to be covered by such Stock Options;
[c] Determine the Stock Option Price;
[d] Determine the nature and amount of consideration for the Stock;
-2-
<PAGE> 3
[e] Determine the manner and the times at which the Stock Options shall be
exercisable, including the discretion to accelerate the time of the
exercise of such Stock Options;
[f] Determine other conditions and limitations, if any, on each Stock Option
granted under this Plan (which need not be identical, but which shall
comply with the terms of this Plan);
[g] Prescribe the form or forms of the instruments evidencing the Stock
Options and any restrictions imposed on the Stock and of any other
instruments required under this Plan and to change such forms from time
to time;
[h] Waive compliance (either generally or in any one or more particular
instances) by an Optionee with the requirements of any rule or
regulation with respect to a Stock Option, subject to the terms of this
Plan;
[i] Impose restrictions, or waive any restrictions imposed, with respect to
the transferability or voting of stock acquired by the exercise of Stock
Options; and
[j] Decide all questions and settle all controversies and disputes which may
arise in connection with this Plan.
3.3 ACTIONS OF BOARD. All actions taken and all interpretations and
determinations made by the Board in good faith shall be final and binding upon
all Optionees, the Company and all other interested persons. In addition to
any other rights of indemnification, each Board member shall be indemnified by
the Company against reasonable expenses (including attorneys' fees) actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal) to which such person may be a
party by reason of an action taken, or any failure to act, in connection with
this Plan and any Stock Option granted under it. This indemnification shall
further extend to all amounts paid by any Board member either in a settlement
approved by independent legal counsel selected by the Board or pursuant to a
judgment in any such action, suit or proceeding, provided that the Board member
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the Company. Any action taken by the Board under this Plan
may be made without notice or meeting of the Board in a writing signed by all
members of the Board.
ARTICLE 4: GRANT OF STOCK OPTION
4.1 SHARES AVAILABLE. There shall be 37,099 shares of Stock available for
issuance under this Plan. All shares underlying Stock Options granted under
this Plan which for any reason are not exercised prior to option expiration, or
which are otherwise
-3-
<PAGE> 4
cancelled or forfeited, shall be available for granting of further Stock
Options under this Plan.
4.2 PARTICIPATION. Grants of Stock Options may be made to any Key Employee or
Key Consultant. In determining Optionees in its discretion, the Board shall
consider granting Stock Options to those individuals whose judgment, initiative
and continued efforts are expected to contribute to the successful conduct of
the business of the Company or any Subsidiary. Individuals who have been
granted Stock Options may, if otherwise eligible, be granted additional Stock
Options.
4.3 GRANT DATE. With respect to a Stock Option, the Grant Date is the date
and time the Company completes the corporate action constituting an offer of
Stock for sale to an Optionee under a Stock Option. Unless otherwise
specifically determined by the Board, the Stock shall be deemed offered to an
Optionee when the Board approves the Stock Option grant. If the Board
specifically determines that the Stock shall be offered to an Optionee at a
date and time subsequent to Board approval or if there is an unreasonable delay
in giving notice of the grant of a Stock Option to the Optionee, the date of
the offer to the Optionee shall be the Grant Date.
4.4 NOTICE. Notice of the grant of a Stock Option shall be given to the
Optionee within a reasonable time.
4.5 AGREEMENT. Each Stock Option shall be evidenced by a written Stock Option
Agreement, signed on behalf of the Company, containing such terms and
provisions as the Board may determine, subject to the provisions of this Plan.
If the Optionee fails to sign and deliver an original of the Stock Option
Agreement to the Company within thirty days after such agreement has been
delivered to the Optionee, the Stock Option granted by such Stock Option
Agreement shall automatically terminate at the end of such thirty-day period
(unless the Board otherwise determines).
4.6 PERIOD OF GRANT. No Stock Option shall be granted under this Plan after
ten years from the date this Plan is adopted by the Board or approved by the
shareholders of the Company (whichever is earlier). Stock Options outstanding
ten years or more after the effective date of the Plan shall continue to be
governed by the provisions of this Plan.
4.7 TERMS. The Board may impose such terms and conditions upon the exercise
of a Stock Option as the Board shall deem appropriate, in its discretion.
Without limitation, these provisions include all matters relating to granting,
vesting, exercise, payment and termination of any Stock Option. Any such
provision shall be set forth in the Stock Option Agreement between the Company
and an Optionee.
-4-
<PAGE> 5
ARTICLE 5: EXERCISE OF STOCK OPTIONS
5.1 TIME OF EXERCISE. Any Stock Option granted under this Plan shall be
exercisable at any time or times within the period specified in the Stock
Option Agreement, which period shall not be more than ten years from January
31, 1997. The provisions on exercise of the Stock Option, including any
provision on earlier termination, shall be as determined by the Board. If any
Stock Option is not exercised during the applicable exercise period, it shall
be deemed to have been forfeited as of the expiration of such period and shall
be of no further force or effect.
5.2 MANNER OF EXERCISE. Each exercise of a Stock Option, in whole or in part,
shall be made by the Optionee's delivery of written notice of such exercise to
the Company. Such notice shall be signed by the Optionee and shall set forth
the number of shares of Stock with respect to which the Stock Option is being
exercised and the Company's offer accepted, and shall specify the date on which
payment will be made. The date of payment shall be at least three, but no more
than five, days after the giving of such notice, unless an earlier date shall
have been agreed upon by the Optionee and the Company.
5.3 ENFORCEABLE CONTRACT. The Optionee's written notice of exercise shall
constitute the Optionee's acceptance of the Company's offer under this Plan,
and shall create personal liability on the Optionee with respect to such
person's contractual promise. Upon such acceptance by the Optionee, all legal
remedies to enforce such contractual promise shall be available to both the
Company and the Optionee, including rights to damages or specific performance.
5.4 CLOSING. On the date specified in the notice of exercise and conditioned
upon the Optionee's payment of the Stock Option Price for all Stock being
acquired and satisfaction by the Optionee of the other conditions to closing
set forth in 5.5, the Company shall deliver (or cause to be delivered) to the
Optionee a stock certificate for the number of shares of Stock with respect to
which the Stock Option is being exercised, which stock certificate shall
immediately be endorsed and delivered under the Voting Trust Agreement
described in 5.5 in exchange for a voting trust certificate delivered under
such Voting Trust Agreement. Unless the Stock Option Agreement otherwise
provides or unless the Board otherwise determines, the acquisition price shall
be paid by the Optionee in cash, either by personal check which clears in the
ordinary course, by bank cashier's check or by certified check (in all cases,
in immediately available funds). The shares, which shall be fully paid,
nonassessable and registered in the name of the Optionee, shall be delivered at
the office of the Company or at the office of its stock transfer agent, as the
Company may determine (subject to 5.5). The Stock Option shall continue with
respect to any remaining shares subject to the Stock Option as to which
exercise and payment has not yet been made, subject to the terms of the
applicable Stock Option Agreement.
5.5 STOCK ISSUANCE. Stock subject to a Stock Option shall be issued only upon
delivery by the Optionee to the Company of [a] full payment in consideration
for such Stock, as set forth in the Stock Option Agreement, [b] a Voting Trust
-5-
<PAGE> 6
Agreement signed by the Optionee, in such form as the Board may from time to
time determine, and [c] an investment letter signed by the Optionee, in such
form as the Board may from time to time determine. Notwithstanding the above,
the Company shall not be obligated to deliver any Stock unless and until, in
the opinion of the Company's counsel, there has been compliance with all
applicable federal and state laws and regulations and only when all other legal
matters in connection with the issuance and delivery of such Stock have been
approved by the Company's counsel. In addition, the Optionee must notify the
Company when such person makes any disposition of the Stock (whether by sale,
gift or otherwise). The Company shall use its best efforts to effect any such
compliance, and the Optionee shall take any such action reasonably requested by
the Company; provided, however, that in no event shall the Company be required
to file a registration statement under the Securities Act of 1933 or any state
securities law to satisfy its obligation to use its best efforts to effect such
compliance. An Optionee shall have the rights of a shareholder of the Company
only as to shares actually acquired by and issued to such person under this
Plan.
5.6 EMPLOYMENT TERMINATION. Every Stock Option granted under this Plan shall
terminate as set forth in the Optionee's Stock Option Agreement.
5.7 LEAVE OF ABSENCE: For purposes of this Plan, employment of an Optionee
shall be treated as continuing intact while such person is on sick leave,
military leave or other bona fide leave of absence if the period of such leave
does not exceed ninety days. If such person's leave exceeds ninety days,
employment shall be treated as terminated for purposes of this Plan on the
ninety-first day of such leave unless such person's right of continued
employment is guaranteed either by statute or contract.
ARTICLE 6: GENERAL PROVISIONS
6.1 CAPITAL CHANGES. The number of shares and purchase price of Stock
previously made subject to Stock Options and the aggregate number of shares
which may subsequently be made subject to Stock Options shall not change in the
event of any change to the shares of Stock or to any other class or series of
capital stock of the Company or any rights relating thereto, whether by reason
of recapitalization, change in conversion rates, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or
otherwise, except that appropriate adjustments shall be made by the Board in
the number of shares and purchase price of the Stock made subject to Stock
Options [a] prior to the first Qualified Public Offering (as defined in the
Stock Option Agreement) for any stock dividend, stock split or similar
transaction, as determined by the Board, declared or made with respect to all
shares of capital stock of the Company prior to, but in connection with, such
Qualified Public Offering, as determined by the Board, and [b] after the first
Qualified Public Offering for any stock dividend, stock split or similar
transaction, as determined by the Board. If any of the foregoing adjustments
shall result in a fractional share, the fraction shall be disregarded, and the
Company
-6-
<PAGE> 7
shall have no obligation to make any cash or other payment with respect to such
a fractional share.
6.2 Section 83(b) ELECTION. Whenever property is transferred to a taxpayer
in connection with performance of services, and such property is subject to a
substantial risk of forfeiture (as that term is defined under Section 83 of
the Code and applicable Treasury Regulations), the taxpayer may elect under
Section 83(b) of the Code to include in gross income (as compensation) the
excess, if any, of the fair market value of such property over the purchase
price. If this Section 83(b) election is made, no compensation income is
subsequently recognized when the risk of forfeiture lapses. Any Optionee who
makes a Section 83(b) election shall give timely notice to the Company of the
statement required by the Treasury Regulations under Section 83 of the Code.
6.3 WITHHOLDING. Whenever compensation income is recognized by an Optionee
with respect to a Stock Option, the Company may require (as a condition of
Option exercise) the Optionee to make a withholding tax payment to the Company.
The amount of such payment shall equal the amount of federal and state income
tax that the Company or any Subsidiary is required to withhold with respect to
the issuance of such Stock. To the extent the required withholding tax payment
is not timely made by the Optionee, the Company or any Subsidiary may either
withhold such payment from the Optionee's cash compensation or make such other
arrangements as the Board determines.
6.4 NO EMPLOYMENT RIGHT. Nothing in this Plan shall confer upon the Optionee
the right to continue in the employ of the Company or any Subsidiary, nor shall
it interfere in any way with the right of the Company or any Subsidiary to
discharge the Optionee at any time for any reason whatsoever, with or without
cause (subject to any employment agreement between the Company or any
Subsidiary and the Optionee). Neither the existence of this Plan, nor the
grant or termination of any Stock Option under it, shall be the basis of any
claim for damages or otherwise by an Optionee upon his or her termination of
employment.
6.5 NO SHAREHOLDER RIGHTS. Prior to exercise of the Stock Option and the
transfer of Stock to the Optionee, an Optionee shall have no rights as a
shareholder with respect to any shares of Stock subject to any Stock Option
granted to such person under this Plan. Except as provided in 6.1, no
adjustment shall be made in the number of shares of Stock issued to an
Optionee, or in any other rights of the Optionee upon exercise of a Stock
Option by reason of any dividend, distribution, or other right granted to
shareholders for which the record date is prior to the date of exercise of the
Optionee's Stock Option.
6.6 TRANSFERABILITY RESTRICTIONS; REPURCHASE RIGHTS. No Stock Option, and no
other rights acquired by an Optionee under this Plan, shall be assignable or
transferable by an Optionee and all such rights are exercisable, during such
person's lifetime, only by the Optionee; provided, however, that in the event
the Optionee's Stock Option Agreement expressly permits the Stock Option to be
exercised after the Optionee's death or disability, the Optionee's heirs or
legal representatives, as
-7-
<PAGE> 8
the case may be, may exercise the Stock Option in accordance with, and subject
to all of the terms and conditions of, this Plan and the Optionee's Stock
Option Agreement. Any assignment, transfer, pledge, hypothecation or other
disposition of any Stock Option contrary to the provisions of this Plan, and
any levy of any attachment or similar process upon a Stock Option, shall be
null and void and without effect. Upon the occurrence of such an event, the
Board may, in its discretion, terminate the Stock Option. The Company may
impose such transfer restrictions (not otherwise expressly provided for in this
Plan) and repurchase rights on the Stock as the Board may from time to time
deem appropriate. Such transfer restrictions and repurchase rights shall be
set forth in the Optionee's Stock Option Agreement or in another written
agreement between the Optionee and the Company.
6.7 DELIVERY. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following mailing by
U.S. certified mail, postage prepaid, return receipt requested, addressed to
the recipient's then current mailing address. Any corporate officer or other
authorized agent may receipt for any notice or document on behalf of the
Company.
6.8 AMENDMENT. The Board may from time to time alter, amend, suspend or
discontinue this Plan. However, no such action shall adversely affect the
rights and obligations with respect to Stock Options which are then outstanding
under this Plan.
6.9 EFFECTIVE DATE. This Plan has been adopted by the Board and became
effective on January 31, 1997.
-8-
<PAGE> 1
EXHIBIT 10.22
RENTX INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN - MAY, 1997
ARTICLE 1: DEFINITIONS
1.1 COMPANY. The Company is RentX Industries, Inc., a Delaware corporation,
and its successors and assigns.
1.2 SUBSIDIARY. A Subsidiary is any corporation in which the Company owns at
least 80% of the total voting power and value of its stock.
1.3 BOARD. The Board is the board of directors of the Company.
1.4 STOCK. Stock is the authorized $.01 par value nonvoting Class B Common
Stock ("Class B Common") of the Company (or the authorized $.01 par value Class
A Common Stock ("Class A Common") of the Company if, pursuant to the Company's
certificate of incorporation, as amended, each share of the Company's issued
and outstanding Class B Common is reclassified and changed into one share of
Class A Common and the outstanding rights to receive Class B Common from the
Company become outstanding rights to acquire Class A Common on a share-for
share-basis), and includes Stock to be issued as outstanding shares pursuant to
exercise of a Stock Option.
1.5 PLAN. Any reference to the Plan is to this Nonqualified Stock Option Plan
of the Company, as it may be amended.
1.6 OPTIONEE. An Optionee is any key employee ("Key Employee") of, or key
consultant ("Key Consultant") to, the Company or any Subsidiary whose judgment,
initiative and continued efforts are expected to contribute to the successful
conduct of the business of the Company or any Subsidiary, as determined by the
Board, and to whom the Board has granted a Stock Option.
1.7 GRANT DATE. The Grant Date refers to the date and time when Stock is
offered for sale to an Optionee under a Stock Option, as determined under 4.3.
1.8 STOCK OPTION. A Stock Option is the right granted to an Optionee under
this Plan to acquire Stock pursuant to the Optionee's Stock Option Agreement.
1.9 STOCK OPTION PRICE. Stock Option Price is the exercise price established
by the Board with respect to an Optionee's Stock Option.
<PAGE> 2
1.10 STOCK OPTION AGREEMENT. A Stock Option Agreement is the contract under
which an Optionee is given the right to acquire Stock pursuant to this Plan.
1.11 CODE. The Internal Revenue Code of 1986, as it may be amended.
ARTICLE 2: PURPOSE AND TAX STATUS
2.1 PURPOSE. The purpose of this Plan is to give selected Key Employees and
Key Consultants an opportunity to acquire a proprietary interest in the
Company.
2.2 TAX STATUS. The Stock Options granted under this Plan are nonqualified
stock options (that is, options that do not qualify as incentive stock options
under the Code). Optionees are urged to consult with their own tax advisors
with respect to the federal and state income taxation of the grant, exercise
and disposition of Stock pursuant to a Stock Option.
2.3 INTERPRETATION. This Plan and any Stock Option Agreement, as well as all
questions arising thereunder, shall be interpreted and answered in the manner
consistent with the Code and applicable Treasury Regulations relating to
nonqualified stock options.
ARTICLE 3: ADMINISTRATION
3.1 BOARD OF DIRECTORS. The Plan shall be administered by the Board.
Directors of the Company, who are Key Employees or Key Consultants either
eligible for Stock Options or to whom Stock Options have been granted, may vote
on matters of Plan administration, including the granting of Stock Options.
3.2 AUTHORITY OF BOARD. The Board shall have full authority to administer
this Plan, including authority to interpret and construe any provision of this
Plan and to adopt such rules and regulations as it may deem necessary in order
to administer the Plan. Without limitation, the Board is authorized to:
[a] Direct the grant of Stock Options;
[b] Determine the identity of Key Employees and Key Consultants who shall be
granted Stock Options, the Grant Date, and the number of shares of Stock
to be covered by such Stock Options;
[c] Determine the Stock Option Price;
[d] Determine the nature and amount of consideration for the Stock;
-2-
<PAGE> 3
[e] Determine the manner and the times at which the Stock Options shall be
exercisable, including the discretion to accelerate the time of the
exercise of such Stock Options;
[f] Determine other conditions and limitations, if any, on each Stock Option
granted under this Plan (which need not be identical, but which shall
comply with the terms of this Plan);
[g] Prescribe the form or forms of the instruments evidencing the Stock
Options and any restrictions imposed on the Stock and of any other
instruments required under this Plan and to change such forms from time
to time;
[h] Waive compliance (either generally or in any one or more particular
instances) by an Optionee with the requirements of any rule or
regulation with respect to a Stock Option, subject to the terms of this
Plan;
[i] Impose restrictions, or waive any restrictions imposed, with respect to
the transferability or voting of stock acquired by the exercise of Stock
Options; and
[j] Decide all questions and settle all controversies and disputes which may
arise in connection with this Plan.
3.3 ACTIONS OF BOARD. All actions taken and all interpretations and
determinations made by the Board in good faith shall be final and binding upon
all Optionees, the Company and all other interested persons. In addition to
any other rights of indemnification, each Board member shall be indemnified by
the Company against reasonable expenses (including attorneys' fees) actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal) to which such person may be a
party by reason of an action taken, or any failure to act, in connection with
this Plan and any Stock Option granted under it. This indemnification shall
further extend to all amounts paid by any Board member either in a settlement
approved by independent legal counsel selected by the Board or pursuant to a
judgment in any such action, suit or proceeding, provided that the Board member
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the Company. Any action taken by the Board under this Plan
may be made without notice or meeting of the Board in a writing signed by all
members of the Board.
ARTICLE 4: GRANT OF STOCK OPTION
4.1 SHARES AVAILABLE. There shall be 10,000 shares of Stock available for
issuance under this Plan. All shares underlying Stock Options granted under
this Plan which for any reason are not exercised prior to option expiration, or
which are otherwise
-3-
<PAGE> 4
cancelled or forfeited, shall be available for granting of further Stock
Options under this Plan.
4.2 PARTICIPATION. Grants of Stock Options may be made to any Key Employee or
Key Consultant. In determining Optionees in its discretion, the Board shall
consider granting Stock Options to those individuals whose judgment, initiative
and continued efforts are expected to contribute to the successful conduct of
the business of the Company or any Subsidiary. Individuals who have been
granted Stock Options may, if otherwise eligible, be granted additional Stock
Options.
4.3 GRANT DATE. With respect to a Stock Option, the Grant Date is the date
and time the Company completes the corporate action constituting an offer of
Stock for sale to an Optionee under a Stock Option. Unless otherwise
specifically determined by the Board, the Stock shall be deemed offered to an
Optionee when the Board approves the Stock Option grant. If the Board
specifically determines that the Stock shall be offered to an Optionee at a
date and time subsequent to Board approval or if there is an unreasonable delay
in giving notice of the grant of a Stock Option to the Optionee, the date of
the offer to the Optionee shall be the Grant Date.
4.4 NOTICE. Notice of the grant of a Stock Option shall be given to the
Optionee within a reasonable time.
4.5 AGREEMENT. Each Stock Option shall be evidenced by a written Stock Option
Agreement, signed on behalf of the Company, containing such terms and
provisions as the Board may determine, subject to the provisions of this Plan.
If the Optionee fails to sign and deliver an original of the Stock Option
Agreement to the Company within thirty days after such agreement has been
delivered to the Optionee, the Stock Option granted by such Stock Option
Agreement shall automatically terminate at the end of such thirty-day period
(unless the Board otherwise determines).
4.6 PERIOD OF GRANT. No Stock Option shall be granted under this Plan after
ten years from the date this Plan is adopted by the Board or approved by the
shareholders of the Company (whichever is earlier). Stock Options outstanding
ten years or more after the effective date of the Plan shall continue to be
governed by the provisions of this Plan.
4.7 TERMS. The Board may impose such terms and conditions upon the exercise
of a Stock Option as the Board shall deem appropriate, in its discretion.
Without limitation, these provisions include all matters relating to granting,
vesting, exercise, payment and termination of any Stock Option. Any such
provision shall be set forth in the Stock Option Agreement between the Company
and an Optionee.
-4-
<PAGE> 5
ARTICLE 5: EXERCISE OF STOCK OPTIONS
5.1 TIME OF EXERCISE. Any Stock Option granted under this Plan shall be
exercisable at any time or times within the period specified in the Stock
Option Agreement, which period shall not be more than ten years from May __,
1997. The provisions on exercise of the Stock Option, including any provision
on earlier termination, shall be as determined by the Board. If any Stock
Option is not exercised during the applicable exercise period, it shall be
deemed to have been forfeited as of the expiration of such period and shall be
of no further force or effect.
5.2 MANNER OF EXERCISE. Each exercise of a Stock Option, in whole or in part,
shall be made by the Optionee's delivery of written notice of such exercise to
the Company. Such notice shall be signed by the Optionee and shall set forth
the number of shares of Stock with respect to which the Stock Option is being
exercised and the Company's offer accepted, and shall specify the date on which
payment will be made. The date of payment shall be at least three, but no more
than five, days after the giving of such notice, unless an earlier date shall
have been agreed upon by the Optionee and the Company.
5.3 ENFORCEABLE CONTRACT. The Optionee's written notice of exercise shall
constitute the Optionee's acceptance of the Company's offer under this Plan,
and shall create personal liability on the Optionee with respect to such
person's contractual promise. Upon such acceptance by the Optionee, all legal
remedies to enforce such contractual promise shall be available to both the
Company and the Optionee, including rights to damages or specific performance.
5.4 CLOSING. On the date specified in the notice of exercise and conditioned
upon the Optionee's payment of the Stock Option Price for all Stock being
acquired and satisfaction by the Optionee of the other conditions to closing
set forth in 5.5, the Company shall deliver (or cause to be delivered) to the
Optionee a stock certificate for the number of shares of Stock with respect to
which the Stock Option is being exercised, which stock certificate shall
immediately be endorsed and delivered under the Voting Trust Agreement
described in 5.5 in exchange for a voting trust certificate delivered under
such Voting Trust Agreement. Unless the Stock Option Agreement otherwise
provides or unless the Board otherwise determines, the acquisition price shall
be paid by the Optionee in cash, either by personal check which clears in the
ordinary course, by bank cashier's check or by certified check (in all cases,
in immediately available funds). The shares, which shall be fully paid,
nonassessable and registered in the name of the Optionee, shall be delivered at
the office of the Company or at the office of its stock transfer agent, as the
Company may determine (subject to 5.5). The Stock Option shall continue with
respect to any remaining shares subject to the Stock Option as to which
exercise and payment has not yet been made, subject to the terms of the
applicable Stock Option Agreement.
5.5 STOCK ISSUANCE. Stock subject to a Stock Option shall be issued only upon
delivery by the Optionee to the Company of [a] full payment in consideration
for such Stock, as set forth in the Stock Option Agreement, [b] a Voting Trust
-5-
<PAGE> 6
Agreement signed by the Optionee, in such form as the Board may from time to
time determine, and [c] an investment letter signed by the Optionee, in such
form as the Board may from time to time determine. Notwithstanding the above,
the Company shall not be obligated to deliver any Stock unless and until, in
the opinion of the Company's counsel, there has been compliance with all
applicable federal and state laws and regulations and only when all other legal
matters in connection with the issuance and delivery of such Stock have been
approved by the Company's counsel. In addition, the Optionee must notify the
Company when such person makes any disposition of the Stock (whether by sale,
gift or otherwise). The Company shall use its best efforts to effect any such
compliance, and the Optionee shall take any such action reasonably requested by
the Company; provided, however, that in no event shall the Company be required
to file a registration statement under the Securities Act of 1933 or any state
securities law to satisfy its obligation to use its best efforts to effect such
compliance. An Optionee shall have the rights of a shareholder of the Company
only as to shares actually acquired by and issued to such person under this
Plan.
5.6 EMPLOYMENT TERMINATION. Every Stock Option granted under this Plan shall
terminate as set forth in the Optionee's Stock Option Agreement.
5.7 LEAVE OF ABSENCE: For purposes of this Plan, employment of an Optionee
shall be treated as continuing intact while such person is on sick leave,
military leave or other bona fide leave of absence if the period of such leave
does not exceed ninety days. If such person's leave exceeds ninety days,
employment shall be treated as terminated for purposes of this Plan on the
ninety-first day of such leave unless such person's right of continued
employment is guaranteed either by statute or contract.
ARTICLE 6: GENERAL PROVISIONS
6.1 CAPITAL CHANGES. The number of shares and purchase price of Stock
previously made subject to Stock Options and the aggregate number of shares
which may subsequently be made subject to Stock Options shall not change in the
event of any change to the shares of Stock or to any other class or series of
capital stock of the Company or any rights relating thereto, whether by reason
of recapitalization, change in conversion rates, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or
otherwise, except that appropriate adjustments shall be made by the Board in
the number of shares and purchase price of the Stock made subject to Stock
Options [a] prior to the first Qualified Public Offering (as defined in the
Stock Option Agreement) for any stock dividend, stock split or similar
transaction, as determined by the Board, declared or made with respect to all
shares of capital stock of the Company prior to, but in connection with, such
Qualified Public Offering, as determined by the Board, and [b] after the first
Qualified Public Offering for any stock dividend, stock split or similar
transaction, as determined by the Board. If any of the foregoing adjustments
shall result in a fractional share, the fraction shall be disregarded, and the
Company
-6-
<PAGE> 7
shall have no obligation to make any cash or other payment with respect to such
a fractional share.
6.2 Section 83(b) ELECTION. Whenever property is transferred to a taxpayer
in connection with performance of services, and such property is subject to a
substantial risk of forfeiture (as that term is defined under Section 83 of
the Code and applicable Treasury Regulations), the taxpayer may elect under
Section 83(b) of the Code to include in gross income (as compensation) the
excess, if any, of the fair market value of such property over the purchase
price. If this Section 83(b) election is made, no compensation income is
subsequently recognized when the risk of forfeiture lapses. Any Optionee who
makes a Section 83(b) election shall give timely notice to the Company of the
statement required by the Treasury Regulations under Section 83 of the Code.
6.3 WITHHOLDING. Whenever compensation income is recognized by an Optionee
with respect to a Stock Option, the Company may require (as a condition of
Option exercise) the Optionee to make a withholding tax payment to the Company.
The amount of such payment shall equal the amount of federal and state income
tax that the Company or any Subsidiary is required to withhold with respect to
the issuance of such Stock. To the extent the required withholding tax payment
is not timely made by the Optionee, the Company or any Subsidiary may either
withhold such payment from the Optionee's cash compensation or make such other
arrangements as the Board determines.
6.4 NO EMPLOYMENT RIGHT. Nothing in this Plan shall confer upon the Optionee
the right to continue in the employ of the Company or any Subsidiary, nor shall
it interfere in any way with the right of the Company or any Subsidiary to
discharge the Optionee at any time for any reason whatsoever, with or without
cause (subject to any employment agreement between the Company or any
Subsidiary and the Optionee). Neither the existence of this Plan, nor the
grant or termination of any Stock Option under it, shall be the basis of any
claim for damages or otherwise by an Optionee upon his or her termination of
employment.
6.5 NO SHAREHOLDER RIGHTS. Prior to exercise of the Stock Option and the
transfer of Stock to the Optionee, an Optionee shall have no rights as a
shareholder with respect to any shares of Stock subject to any Stock Option
granted to such person under this Plan. Except as provided in 6.1, no
adjustment shall be made in the number of shares of Stock issued to an
Optionee, or in any other rights of the Optionee upon exercise of a Stock
Option by reason of any dividend, distribution, or other right granted to
shareholders for which the record date is prior to the date of exercise of the
Optionee's Stock Option.
6.6 TRANSFERABILITY RESTRICTIONS; REPURCHASE RIGHTS. No Stock Option, and no
other rights acquired by an Optionee under this Plan, shall be assignable or
transferable by an Optionee and all such rights are exercisable, during such
person's lifetime, only by the Optionee; provided, however, that in the event
the Optionee's Stock Option Agreement expressly permits the Stock Option to be
exercised after the Optionee's death or disability, the Optionee's heirs or
legal representatives, as
-7-
<PAGE> 8
the case may be, may exercise the Stock Option in accordance with, and subject
to all of the terms and conditions of, this Plan and the Optionee's Stock
Option Agreement. Any assignment, transfer, pledge, hypothecation or other
disposition of any Stock Option contrary to the provisions of this Plan, and
any levy of any attachment or similar process upon a Stock Option, shall be
null and void and without effect. Upon the occurrence of such an event, the
Board may, in its discretion, terminate the Stock Option. The Company may
impose such transfer restrictions (not otherwise expressly provided for in this
Plan) and repurchase rights on the Stock as the Board may from time to time
deem appropriate. Such transfer restrictions and repurchase rights shall be
set forth in the Optionee's Stock Option Agreement or in another written
agreement between the Optionee and the Company.
6.7 DELIVERY. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following mailing by
U.S. certified mail, postage prepaid, return receipt requested, addressed to
the recipient's then current mailing address. Any corporate officer or other
authorized agent may receipt for any notice or document on behalf of the
Company.
6.8 AMENDMENT. The Board may from time to time alter, amend, suspend or
discontinue this Plan. However, no such action shall adversely affect the
rights and obligations with respect to Stock Options which are then outstanding
under this Plan.
6.9 EFFECTIVE DATE. This Plan has been adopted by the Board and became
effective on May 22, 1997.
-8-
<PAGE> 1
EXHIBIT 10.23
RENTX INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN - JUNE, 1997
ARTICLE 1: DEFINITIONS
1.1 COMPANY. The Company is RentX Industries, Inc., a Delaware corporation,
and its successors and assigns.
1.2 SUBSIDIARY. A Subsidiary is any corporation in which the Company owns at
least 80% of the total voting power and value of its stock.
1.3 BOARD. The Board is the board of directors of the Company.
1.4 STOCK. Stock is the authorized $.01 par value nonvoting Class B Common
Stock ("Class B Common") of the Company (or the authorized $.01 par value Class
A Common Stock ("Class A Common") of the Company if, pursuant to the Company's
certificate of incorporation, as amended, each share of the Company's issued
and outstanding Class B Common is reclassified and changed into one share of
Class A Common and the outstanding rights to receive Class B Common from the
Company become outstanding rights to acquire Class A Common on a share-for
share-basis), and includes Stock to be issued as outstanding shares pursuant to
exercise of a Stock Option.
1.5 PLAN. Any reference to the Plan is to this Nonqualified Stock Option Plan
of the Company, as it may be amended.
1.6 OPTIONEE. An Optionee is any key employee ("Key Employee") of, or key
consultant ("Key Consultant") to, the Company or any Subsidiary whose judgment,
initiative and continued efforts are expected to contribute to the successful
conduct of the business of the Company or any Subsidiary, as determined by the
Board, and to whom the Board has granted a Stock Option.
1.7 GRANT DATE. The Grant Date refers to the date and time when Stock is
offered for sale to an Optionee under a Stock Option, as determined under 4.3.
1.8 STOCK OPTION. A Stock Option is the right granted to an Optionee under
this Plan to acquire Stock pursuant to the Optionee's Stock Option Agreement.
1.9 STOCK OPTION PRICE. Stock Option Price is the exercise price established
by the Board with respect to an Optionee's Stock Option.
<PAGE> 2
1.10 STOCK OPTION AGREEMENT. A Stock Option Agreement is the contract under
which an Optionee is given the right to acquire Stock pursuant to this Plan.
1.11 CODE. The Internal Revenue Code of 1986, as it may be amended.
ARTICLE 2: PURPOSE AND TAX STATUS
2.1 PURPOSE. The purpose of this Plan is to give selected Key Employees and
Key Consultants an opportunity to acquire a proprietary interest in the
Company.
2.2 TAX STATUS. The Stock Options granted under this Plan are nonqualified
stock options (that is, options that do not qualify as incentive stock options
under the Code). Optionees are urged to consult with their own tax advisors
with respect to the federal and state income taxation of the grant, exercise
and disposition of Stock pursuant to a Stock Option.
2.3 INTERPRETATION. This Plan and any Stock Option Agreement, as well as all
questions arising thereunder, shall be interpreted and answered in the manner
consistent with the Code and applicable Treasury Regulations relating to
nonqualified stock options.
ARTICLE 3: ADMINISTRATION
3.1 BOARD OF DIRECTORS. The Plan shall be administered by the Board.
Directors of the Company, who are Key Employees or Key Consultants either
eligible for Stock Options or to whom Stock Options have been granted, may vote
on matters of Plan administration, including the granting of Stock Options.
3.2 AUTHORITY OF BOARD. The Board shall have full authority to administer
this Plan, including authority to interpret and construe any provision of this
Plan and to adopt such rules and regulations as it may deem necessary in order
to administer the Plan. Without limitation, the Board is authorized to:
[a] Direct the grant of Stock Options;
[b] Determine the identity of Key Employees and Key Consultants who shall be
granted Stock Options, the Grant Date, and the number of shares of Stock
to be covered by such Stock Options;
[c] Determine the Stock Option Price;
[d] Determine the nature and amount of consideration for the Stock;
-2-
<PAGE> 3
[e] Determine the manner and the times at which the Stock Options shall be
exercisable, including the discretion to accelerate the time of the
exercise of such Stock Options;
[f] Determine other conditions and limitations, if any, on each Stock Option
granted under this Plan (which need not be identical, but which shall
comply with the terms of this Plan);
[g] Prescribe the form or forms of the instruments evidencing the Stock
Options and any restrictions imposed on the Stock and of any other
instruments required under this Plan and to change such forms from time
to time;
[h] Waive compliance (either generally or in any one or more particular
instances) by an Optionee with the requirements of any rule or
regulation with respect to a Stock Option, subject to the terms of this
Plan;
[i] Impose restrictions, or waive any restrictions imposed, with respect to
the transferability or voting of stock acquired by the exercise of Stock
Options; and
[j] Decide all questions and settle all controversies and disputes which may
arise in connection with this Plan.
3.3 ACTIONS OF BOARD. All actions taken and all interpretations and
determinations made by the Board in good faith shall be final and binding upon
all Optionees, the Company and all other interested persons. In addition to
any other rights of indemnification, each Board member shall be indemnified by
the Company against reasonable expenses (including attorneys' fees) actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal) to which such person may be a
party by reason of an action taken, or any failure to act, in connection with
this Plan and any Stock Option granted under it. This indemnification shall
further extend to all amounts paid by any Board member either in a settlement
approved by independent legal counsel selected by the Board or pursuant to a
judgment in any such action, suit or proceeding, provided that the Board member
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the Company. Any action taken by the Board under this Plan
may be made without notice or meeting of the Board in a writing signed by all
members of the Board.
ARTICLE 4: GRANT OF STOCK OPTION
4.1 SHARES AVAILABLE. There shall be 6,000 shares of Stock available for
issuance under this Plan. All shares underlying Stock Options granted under
this Plan which for any
-3-
<PAGE> 4
reason are not exercised prior to option expiration, or which are otherwise
cancelled or forfeited, shall be available for granting of further Stock
Options under this Plan.
4.2 PARTICIPATION. Grants of Stock Options may be made to any Key Employee or
Key Consultant. In determining Optionees in its discretion, the Board shall
consider granting Stock Options to those individuals whose judgment, initiative
and continued efforts are expected to contribute to the successful conduct of
the business of the Company or any Subsidiary. Individuals who have been
granted Stock Options may, if otherwise eligible, be granted additional Stock
Options.
4.3 GRANT DATE. With respect to a Stock Option, the Grant Date is the date
and time the Company completes the corporate action constituting an offer of
Stock for sale to an Optionee under a Stock Option. Unless otherwise
specifically determined by the Board, the Stock shall be deemed offered to an
Optionee when the Board approves the Stock Option grant. If the Board
specifically determines that the Stock shall be offered to an Optionee at a
date and time subsequent to Board approval or if there is an unreasonable delay
in giving notice of the grant of a Stock Option to the Optionee, the date of
the offer to the Optionee shall be the Grant Date.
4.4 NOTICE. Notice of the grant of a Stock Option shall be given to the
Optionee within a reasonable time.
4.5 AGREEMENT. Each Stock Option shall be evidenced by a written Stock Option
Agreement, signed on behalf of the Company, containing such terms and
provisions as the Board may determine, subject to the provisions of this Plan.
If the Optionee fails to sign and deliver an original of the Stock Option
Agreement to the Company within thirty days after such agreement has been
delivered to the Optionee, the Stock Option granted by such Stock Option
Agreement shall automatically terminate at the end of such thirty-day period
(unless the Board otherwise determines).
4.6 PERIOD OF GRANT. No Stock Option shall be granted under this Plan after
ten years from the date this Plan is adopted by the Board or approved by the
shareholders of the Company (whichever is earlier). Stock Options outstanding
ten years or more after the effective date of the Plan shall continue to be
governed by the provisions of this Plan.
4.7 TERMS. The Board may impose such terms and conditions upon the exercise
of a Stock Option as the Board shall deem appropriate, in its discretion.
Without limitation, these provisions include all matters relating to granting,
vesting, exercise, payment and termination of any Stock Option. Any such
provision shall be set forth in the Stock Option Agreement between the Company
and an Optionee.
ARTICLE 5: EXERCISE OF STOCK OPTIONS
5.1 TIME OF EXERCISE. Any Stock Option granted under this Plan shall be
exercisable at any time or times within the period specified in the Stock
Option Agreement, which
-4-
<PAGE> 5
period shall not be more than ten years from June 5, 1997. The provisions on
exercise of the Stock Option, including any provision on earlier termination,
shall be as determined by the Board. If any Stock Option is not exercised
during the applicable exercise period, it shall be deemed to have been
forfeited as of the expiration of such period and shall be of no further force
or effect.
5.2 MANNER OF EXERCISE. Each exercise of a Stock Option, in whole or in part,
shall be made by the Optionee's delivery of written notice of such exercise to
the Company. Such notice shall be signed by the Optionee and shall set forth
the number of shares of Stock with respect to which the Stock Option is being
exercised and the Company's offer accepted, and shall specify the date on which
payment will be made. The date of payment shall be at least three, but no more
than five, days after the giving of such notice, unless an earlier date shall
have been agreed upon by the Optionee and the Company.
5.3 ENFORCEABLE CONTRACT. The Optionee's written notice of exercise shall
constitute the Optionee's acceptance of the Company's offer under this Plan,
and shall create personal liability on the Optionee with respect to such
person's contractual promise. Upon such acceptance by the Optionee, all legal
remedies to enforce such contractual promise shall be available to both the
Company and the Optionee, including rights to damages or specific performance.
5.4 CLOSING. On the date specified in the notice of exercise and conditioned
upon the Optionee's payment of the Stock Option Price for all Stock being
acquired and satisfaction by the Optionee of the other conditions to closing
set forth in 5.5, the Company shall deliver (or cause to be delivered) to the
Optionee a stock certificate for the number of shares of Stock with respect to
which the Stock Option is being exercised, which stock certificate shall
immediately be endorsed and delivered under the Voting Trust Agreement
described in 5.5 in exchange for a voting trust certificate delivered under
such Voting Trust Agreement. Unless the Stock Option Agreement otherwise
provides or unless the Board otherwise determines, the acquisition price shall
be paid by the Optionee in cash, either by personal check which clears in the
ordinary course, by bank cashier's check or by certified check (in all cases,
in immediately available funds). The shares, which shall be fully paid,
nonassessable and registered in the name of the Optionee, shall be delivered at
the office of the Company or at the office of its stock transfer agent, as the
Company may determine (subject to 5.5). The Stock Option shall continue with
respect to any remaining shares subject to the Stock Option as to which
exercise and payment has not yet been made, subject to the terms of the
applicable Stock Option Agreement.
5.5 STOCK ISSUANCE. Stock subject to a Stock Option shall be issued only upon
delivery by the Optionee to the Company of [a] full payment in consideration
for such Stock, as set forth in the Stock Option Agreement, [b] a Voting Trust
Agreement signed by the Optionee, in such form as the Board may from time to
time determine, and [c] an investment letter signed by the Optionee, in such
form as the Board may from time to time determine. Notwithstanding the above,
the Company shall not be obligated to deliver any Stock unless and until, in
the opinion of the Company's counsel, there has
-5-
<PAGE> 6
been compliance with all applicable federal and state laws and regulations and
only when all other legal matters in connection with the issuance and delivery
of such Stock have been approved by the Company's counsel. In addition, the
Optionee must notify the Company when such person makes any disposition of the
Stock (whether by sale, gift or otherwise). The Company shall use its best
efforts to effect any such compliance, and the Optionee shall take any such
action reasonably requested by the Company; provided, however, that in no event
shall the Company be required to file a registration statement under the
Securities Act of 1933 or any state securities law to satisfy its obligation to
use its best efforts to effect such compliance. An Optionee shall have the
rights of a shareholder of the Company only as to shares actually acquired by
and issued to such person under this Plan.
5.6 EMPLOYMENT TERMINATION. Every Stock Option granted under this Plan shall
terminate as set forth in the Optionee's Stock Option Agreement.
5.7 LEAVE OF ABSENCE: For purposes of this Plan, employment of an Optionee
shall be treated as continuing intact while such person is on sick leave,
military leave or other bona fide leave of absence if the period of such leave
does not exceed ninety days. If such person's leave exceeds ninety days,
employment shall be treated as terminated for purposes of this Plan on the
ninety-first day of such leave unless such person's right of continued
employment is guaranteed either by statute or contract.
ARTICLE 6: GENERAL PROVISIONS
6.1 CAPITAL CHANGES. The number of shares and purchase price of Stock
previously made subject to Stock Options and the aggregate number of shares
which may subsequently be made subject to Stock Options shall not change in the
event of any change to the shares of Stock or to any other class or series of
capital stock of the Company or any rights relating thereto, whether by reason
of recapitalization, change in conversion rates, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or
otherwise, except that appropriate adjustments shall be made by the Board in
the number of shares and purchase price of the Stock made subject to Stock
Options [a] prior to the first Qualified Public Offering (as defined in the
Stock Option Agreement) for any stock dividend, stock split or similar
transaction, as determined by the Board, declared or made with respect to all
shares of capital stock of the Company prior to, but in connection with, such
Qualified Public Offering, as determined by the Board, and [b] after the first
Qualified Public Offering for any stock dividend, stock split or similar
transaction, as determined by the Board. If any of the foregoing adjustments
shall result in a fractional share, the fraction shall be disregarded, and the
Company shall have no obligation to make any cash or other payment with respect
to such a fractional share.
6.2 Section 83(b) ELECTION. Whenever property is transferred to a taxpayer
in connection with performance of services, and such property is subject to a
substantial risk of forfeiture (as that term is defined under Section 83 of
the Code and applicable Treasury Regulations), the
-6-
<PAGE> 7
taxpayer may elect under Section 83(b) of the Code to include in gross income
(as compensation) the excess, if any, of the fair market value of such property
over the purchase price. If this Section 83(b) election is made, no
compensation income is subsequently recognized when the risk of forfeiture
lapses. Any Optionee who makes a Section 83(b) election shall give timely
notice to the Company of the statement required by the Treasury Regulations
under Section 83 of the Code.
6.3 WITHHOLDING. Whenever compensation income is recognized by an Optionee
with respect to a Stock Option, the Company may require (as a condition of
Option exercise) the Optionee to make a withholding tax payment to the Company.
The amount of such payment shall equal the amount of federal and state income
tax that the Company or any Subsidiary is required to withhold with respect to
the issuance of such Stock. To the extent the required withholding tax payment
is not timely made by the Optionee, the Company or any Subsidiary may either
withhold such payment from the Optionee's cash compensation or make such other
arrangements as the Board determines.
6.4 NO EMPLOYMENT RIGHT. Nothing in this Plan shall confer upon the Optionee
the right to continue in the employ of the Company or any Subsidiary, nor shall
it interfere in any way with the right of the Company or any Subsidiary to
discharge the Optionee at any time for any reason whatsoever, with or without
cause (subject to any employment agreement between the Company or any
Subsidiary and the Optionee). Neither the existence of this Plan, nor the
grant or termination of any Stock Option under it, shall be the basis of any
claim for damages or otherwise by an Optionee upon his or her termination of
employment.
6.5 NO SHAREHOLDER RIGHTS. Prior to exercise of the Stock Option and the
transfer of Stock to the Optionee, an Optionee shall have no rights as a
shareholder with respect to any shares of Stock subject to any Stock Option
granted to such person under this Plan. Except as provided in 6.1, no
adjustment shall be made in the number of shares of Stock issued to an
Optionee, or in any other rights of the Optionee upon exercise of a Stock
Option by reason of any dividend, distribution, or other right granted to
shareholders for which the record date is prior to the date of exercise of the
Optionee's Stock Option.
6.6 TRANSFERABILITY RESTRICTIONS; REPURCHASE RIGHTS. No Stock Option, and no
other rights acquired by an Optionee under this Plan, shall be assignable or
transferable by an Optionee and all such rights are exercisable, during such
person's lifetime, only by the Optionee; provided, however, that in the event
the Optionee's Stock Option Agreement expressly permits the Stock Option to be
exercised after the Optionee's death or disability, the Optionee's heirs or
legal representatives, as the case may be, may exercise the Stock Option in
accordance with, and subject to all of the terms and conditions of, this Plan
and the Optionee's Stock Option Agreement. Any assignment, transfer, pledge,
hypothecation or other disposition of any Stock Option contrary to the
provisions of this Plan, and any levy of any attachment or similar process upon
a Stock Option, shall be null and void and without effect. Upon the occurrence
of such an event, the Board may, in its discretion, terminate the Stock Option.
The Company may impose such transfer restrictions (not otherwise expressly
provided for in this Plan) and repurchase rights on
-7-
<PAGE> 8
the Stock as the Board may from time to time deem appropriate. Such transfer
restrictions and repurchase rights shall be set forth in the Optionee's Stock
Option Agreement or in another written agreement between the Optionee and the
Company.
6.7 DELIVERY. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following mailing by
U.S. certified mail, postage prepaid, return receipt requested, addressed to
the recipient's then current mailing address. Any corporate officer or other
authorized agent may receipt for any notice or document on behalf of the
Company.
6.8 AMENDMENT. The Board may from time to time alter, amend, suspend or
discontinue this Plan. However, no such action shall adversely affect the
rights and obligations with respect to Stock Options which are then outstanding
under this Plan.
6.9 EFFECTIVE DATE. This Plan has been adopted by the Board and became
effective on June 5, 1997.
-8-
<PAGE> 1
EXHIBIT 10.24
RENTX INDUSTRIES, INC.
STOCK OPTION PLAN FOR EMPLOYEES
ARTICLE 1: DEFINITIONS
1.1 BOARD. The Board is the board of directors of the Company.
1.2 CODE. The Code is the Internal Revenue Code of 1986, as it may be
amended.
1.3 COMMITTEE. The Committee is a committee of the Board consisting solely of
two or more Non-Employee Directors selected by the Board.
1.4 COMPANY. The Company is RentX Industries, Inc., a Delaware corporation,
and its successors and assigns.
1.5 FAIR MARKET VALUE. The Fair Market Value of a share of Stock is the
closing price of the Stock on the principal exchange on which the Stock is
traded, or, if the Stock is not traded on an exchange, as reported by NASDAQ,
or, if the closing price of the Stock is not reported by NASDAQ, the average of
the high bid and low asked prices for the Stock, as reported by NASDAQ or any
other accepted source selected by the Committee, or, if Fair Market Value
cannot be determined by any of the foregoing means, the fair market value of
the Stock as determined by the Committee in good faith by any reasonable means.
1.6 GRANT DATE. The Grant Date is the date when a Stock Option is granted, as
determined under 4.3.
1.7 INCENTIVE STOCK OPTION. An Incentive Stock Option means a Stock Option
designated as such at the time of grant and granted in accordance with the
requirements of Code Section 422.
1.8 KEY EMPLOYEE. A Key Employee is an employee of the Company or any
Subsidiary whose judgment, initiative and continued efforts are expected to
contribute to the successful conduct of the business of the Company or any
Subsidiary, as determined by the Committee. A Key Employee may be a member of
the Board who is also an employee of the Company or a Subsidiary.
1.9 NON-EMPLOYEE DIRECTOR. A Non-Employee Director is a member of the Board
who: (i) is not a current employee or officer of the Company or a parent or
Subsidiary of the Company, (ii) does not receive compensation in excess of
$60,000 during the taxable year (other than benefits under a tax-qualified
retirement plan), either directly or indirectly, from the Company or a parent
or Subsidiary of the Company for services rendered as a consultant or in any
other capacity, other than as a director, (iii) does not
<PAGE> 2
possess an interest in any other transaction involving the Company for which
disclosure would be required under Item 404(a) of Regulation S-K of the
Securities and Exchange Commission, and (iv) is not engaged in a business
relationship for which disclosure would be required under Item 404(b) of
Regulation S-K. Generally, if any relationship or transaction would prevent
such Board member from being an "outside director" with respect to the Company
for purposes of Code Section 162(m) and the regulations thereunder, such member
will not be considered a Non-Employee Director.
1.10 NON-STATUTORY STOCK OPTION. A Non-Statutory Stock Option means any Stock
Option other than an Incentive Stock Option.
1.11 OPTIONEE. An Optionee is a Key Employee to whom the Committee has
granted a Stock Option.
1.12 PARENT. A Parent is any corporation which owns, directly or indirectly,
at least 50% of the Company's outstanding Stock.
1.13 PLAN. The Plan is this Stock Option Plan for Employees of the Company,
as it may be amended.
1.14 SECURITIES ACT. The Securities Act in the Securities Act of 1933, as
from time to time amended, or any functional successor to that act, and the
regulations of the Securities and Exchange Commission thereunder.
1.15 STOCK. Stock is the authorized $.01 par value Common Stock of the
Company.
1.16 STOCK OPTION. A Stock Option is the right granted to an Optionee under
this Plan to acquire Stock pursuant to the Optionee's Stock Option Agreement.
1.17 STOCK OPTION AGREEMENT. A Stock Option Agreement is the contract under
which an Optionee is given the right to acquire Stock pursuant to this Plan.
1.18 STOCK OPTION PRICE. The Stock Option Price is the exercise price
established by the Committee with respect to an Optionee's Stock Option.
1.19 SUBSIDIARY. A Subsidiary is any corporation in which the Company owns,
directly or indirectly, at least 50% of the total voting power and value of its
stock.
-2-
<PAGE> 3
ARTICLE 2: PURPOSE AND TAX STATUS
2.1 PURPOSE. The purpose of this Plan is to enable the Company to attract and
retain Key Employees by giving them an opportunity to acquire a proprietary
interest in the Company and thereby create a more direct interest in the future
success of the Company.
2.2 TAX STATUS. The Stock Options granted under this Plan shall be either
Incentive Stock Options or Non-Statutory Stock Options, in the discretion of
the Committee. Each Stock Option Agreement shall specify whether the Stock
Options granted thereby are Incentive Stock Options or Non-Statutory Stock
Options. The Committee may grant either or both types of Stock Options to any
Optionee. If a Stock Option granted as an Incentive Stock Option fails for any
reason to qualify as such under the Code, in whole or in part, it shall be
deemed an Incentive Stock Option to the extent it does so qualify and a Non-
Statutory Option to the extent it does not so qualify.
2.3 INTERPRETATION. This Plan and any Stock Option Agreement, as well as all
questions arising thereunder, shall be interpreted and answered in the manner
consistent with the Code and applicable Treasury Regulations.
ARTICLE 3: ADMINISTRATION
3.1 COMMITTEE. The Plan shall be administered by the Committee.
3.2 AUTHORITY OF COMMITTEE. The Committee shall have full authority to
administer this Plan, including authority to interpret and construe any
provision of this Plan and to adopt such rules and regulations as it may deem
necessary in order to administer the Plan. Without limitation, but subject to
the provisions of the Plan, the Committee is authorized to:
[a] Direct the grant of Stock Options;
[b] Determine the identity of Key Employees who shall be granted Stock
Options, the Grant Date, and the number of shares of Stock to be covered
by such Stock Options;
[c] Determine the Stock Option Price, which shall not be less than 85% of
the Fair Market Value of the Stock on the Date of Grant;
[d] Determine the manner and the times at which the Stock Options shall be
exercisable, including the discretion to accelerate the exercisability
of any Stock Option at any time and for any reason;
-3-
<PAGE> 4
[e] Determine other conditions and limitations, if any, on each Stock Option
granted under this Plan (which need not be identical, but which shall
comply with the terms of this Plan);
[f] Prescribe the form or forms of the Stock Option Agreements and any
restrictions imposed on the Stock and of any other instruments required
under this Plan and to change such forms from time to time;
[g] Waive compliance (either generally or in any one or more particular
instances) by an Optionee with the requirements of any Stock Option
Agreement or any rule or regulation with respect to a Stock Option,
subject to the terms of this Plan;
[h] Impose restrictions, or waive any restrictions imposed, with respect to
the transferability or voting of Stock acquired by the exercise of Stock
Options; and
[i] Decide all questions and settle all controversies and disputes which may
arise in connection with this Plan or any Stock Option Agreement, and
cure any defect, supply any omission or reconcile any inconsistency
therein.
3.3 ACTIONS OF COMMITTEE. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. In addition
to any other rights of indemnification, each Committee member shall be
indemnified by the Company against reasonable expenses (including attorneys'
fees) actually and necessarily incurred in connection with the defense of any
action, suit or proceeding (or in connection with any appeal) to which such
person may be a party by reason of an action taken, or any failure to act, in
connection with this Plan and any Stock Option granted under it. This
indemnification shall further extend to all amounts paid by any Committee
member either in a settlement approved by independent legal counsel selected by
the Committee or pursuant to a judgment in any such action, suit or proceeding,
provided that the Committee member acted in good faith and in a manner he or
she reasonably believed to be in the best interests of the Company. Any action
taken by the Committee under this Plan may be made without notice or meeting of
the Committee in a writing signed by all members of the Committee.
ARTICLE 4: GRANT OF STOCK OPTION
4.1 SHARES AVAILABLE. There shall be 277,000 shares of Stock available for
issuance under this Plan. All shares underlying Stock Options granted under
this Plan which for any reason are not exercised prior to option expiration, or
which are otherwise cancelled or forfeited, shall be available for granting of
further Stock Options under this Plan.
4.2 PARTICIPATION. Grants of Stock Options may be made to any Key Employee.
In determining Key Employees and selecting Optionees in its discretion, the
Committee
-4-
<PAGE> 5
shall consider granting Stock Options to those individuals whose judgment,
initiative and continued efforts are expected to contribute to the successful
conduct of the business of the Company or any Subsidiary. Individuals who have
been granted Stock Options may, if otherwise eligible, be granted additional
Stock Options.
4.3 GRANT DATE. With respect to each Stock Option, the Grant Date is the date
when the Committee approves the Stock Option grant as specified in the
Committee resolution containing such approval.
4.4 NOTICE. Notice of the grant of a Stock Option shall be given to the
Optionee within a reasonable time.
4.5 AGREEMENT. Each Stock Option shall be evidenced by a written Stock Option
Agreement, signed on behalf of the Company, containing such terms and
provisions as the Committee may determine, subject to the provisions of this
Plan. Each Stock Option Agreement shall set forth the number of shares of
Stock that may be purchased upon exercise thereof, the Stock Option Price, the
duration of the Stock Option, the time or times at which or the events or
conditions upon the occurrence of which the Stock Option shall become
exercisable as to all or any portion of the shares of Stock covered thereby,
and any other terms and conditions determined by the Committee. If the
Optionee fails to sign and deliver an original of the Stock Option Agreement to
the Company within thirty days after such agreement has been delivered to the
Optionee, the Stock Option granted by such Stock Option Agreement shall
automatically terminate at the end of such thirty-day period (unless the
Committee otherwise determines).
4.6 PERIOD OF GRANT. No Stock Option shall be granted under this Plan after
ten years from the date this Plan is adopted by the Board or approved by the
stockholders of the Company (whichever is earlier). Stock Options outstanding
ten years or more after the effective date of the Plan shall continue to be
governed by the provisions of this Plan.
4.7 TERMS. The Committee may impose such terms and conditions upon the
exercise of a Stock Option as the Committee shall deem appropriate, in its
discretion. Without limitation, these provisions include all matters relating
to granting, vesting, exercise, payment and termination of any Stock Option.
Any such provision shall be set forth in the Stock Option Agreement between the
Company and an Optionee.
ARTICLE 5: EXERCISE OF STOCK OPTIONS
5.1 TIME OF EXERCISE. Any Stock Option granted under this Plan shall be
exercisable at any time or times within the period specified in the Stock
Option Agreement, which period shall not be more than ten years from the Date
of Grant. The provisions on exercise of the Stock Option, including any
provision on earlier termination, shall be as determined by the Committee. If
any Stock Option is not exercised during the applicable
-5-
<PAGE> 6
exercise period, it shall automatically expire as of the expiration of such
period and shall be of no further force or effect.
5.2 MANNER OF EXERCISE. Each exercise of a Stock Option, in whole or in part,
shall be made by the Optionee's delivery of written notice of such exercise to
the Company, a form of which shall be attached to each Stock Option Agreement.
Such notice shall be signed by the Optionee, shall specifically identify the
Stock Option being exercised and shall set forth the number of shares of Stock
with respect to which the Stock Option is being exercised. The notice of
exercise shall be accompanied by payment in full of the Stock Option Price by
any of the methods or any combination of the methods set forth in 5.3 below.
The Stock Option shall be deemed to have been exercised on the first day when
the Company has received both the notice of exercise and the Stock Option Price
and the Optionee has complied with the requirements of 5.4 and any other
requirements of the Stock Option Agreement. Within ten days after the exercise
of the Stock Option, the Company shall cause a certificate representing the
Stock issuable as a result of such exercise, registered in the name of the
Optionee, to be sent to the Optionee at the Optionee's address as reflected on
the records of the Company. The Stock Option shall continue with respect to
any remaining shares subject to the Stock Option as to which exercise and
payment has not yet been made, subject to the terms of the applicable Stock
Option Agreement.
5.3 PAYMENT OF STOCK OPTION PRICE. Unless the Stock Option Agreement otherwise
provides or unless the Committee otherwise determines, the Stock Option Price
shall be paid by the Optionee in cash, by bank cashier's check or by delivery
to the Company of certificates representing shares of Stock then owned by the
Optionee having a Fair Market Value as of the date the Stock Option is
exercised equal to the Stock Option Price of the Stock for which the Stock
Option is being exercised, duly endorsed for transfer to the Company. The
Company may, but shall not be required to, cooperate in such manner as the
Optionee may reasonably request to effect a broker-assisted cashless exercise
of a Stock Option, including delivering the certificates for the Stock issuable
upon exercise of the Stock Option to a broker designated by the Optionee and
entering into any agreement relating thereto.
5.4 STOCK ISSUANCE. If the Stock subject to a Stock Option has not been
registered under the Securities Act at the time the Stock Option is exercised,
such Stock shall be issued only upon delivery by the Optionee to the Company of
an investment letter signed by the Optionee, in such form as the Committee may
from time to time determine and containing such representations, warranties and
covenants as the Committee may deem necessary to establish the availability of
an exemption from the registration requirements of the Securities Act and all
applicable state securities laws. Notwithstanding any other provision of the
Plan or any Stock Option Agreement, the Company shall not be obligated to sell
any Stock pursuant to a Stock Option Agreement unless and until, in the opinion
of the Company's counsel, there has been compliance with all applicable federal
and state laws and regulations and only when all other legal matters in
connection with the issuance and delivery of such Stock have been approved by
the Company's counsel.
-6-
<PAGE> 7
The Company shall use its best efforts to effect any such compliance, and the
Optionee shall take any action reasonably requested by the Company in
connection therewith; provided, however, that in no event shall the Company be
required to file a registration statement under the Securities Act or any state
securities law to satisfy its obligation to use its best efforts to effect such
compliance.
5.5 EMPLOYMENT TERMINATION. Every Stock Option granted under this Plan shall
terminate as set forth in the Optionee's Stock Option Agreement.
5.6 LEAVE OF ABSENCE: For purposes of this Plan, employment of an Optionee
shall be treated as continuing intact while such person is on sick leave,
military leave or other Company-approved leave of absence if the period of such
leave does not exceed ninety days. If such person's leave exceeds ninety days,
employment shall be treated as terminated for purposes of this Plan on the
ninety-first day of such leave unless such person's right of continued
employment is guaranteed either by statute or contract.
ARTICLE 6: INCENTIVE STOCK OPTIONS
6.1 RESTRICTIONS ON TERMS. Notwithstanding any other provision of the Plan,
the terms of Incentive Stock Options shall be subject to the following
restrictions:
[a] The aggregate Fair Market Value of the Stock with respect to which
Incentive Stock Options are exercisable for the first time by any
Optionee in any calendar year, under the Plan and all other plans of the
Company or its Parent or Subsidiaries, shall not exceed $100,000. For
that purpose, Fair Market Value shall be determined as of the Date of
Grant of each Stock Option.
[b] The Stock Option Price of an Incentive Stock Option shall not be less
than: [i] in the case of an Incentive Stock Option issued to an Optionee
who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, 110% of the Fair Market
Value of the Stock on the Date of Grant and [ii] in all other cases, the
Fair Market value of the Stock on the Date of Grant.
[c] Any Incentive Stock Option granted to an Optionee who owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company must expire not later than five years
after the Date of Grant.
[d] Each Stock Option Agreement for an Incentive Stock Option shall provide
as follows with respect to the exercise of the Incentive Stock Option
upon the termination of employment, death or disability of the Optionee:
[i] if the Optionee dies or becomes disabled (within the meaning of Code
Section 22(e)) during the term of the Incentive Stock Option while still
employed, or within the three-month period referred to in clause [ii],
the Incentive Stock Option may be
-7-
<PAGE> 8
exercised by those entitled to do so under the Optionee's will or under
applicable law within twelve months following the Optionee's death or
disability, but not thereafter; provided that such exercise must occur
prior to the expiration of the Incentive Stock Option and the Incentive
Stock Option may be exercised only as to the shares of Stock for which
it had become exercisable on or before the date of the Optionee's death
or disability; and [ii] if the employment of the Optionee is terminated
(which for this purpose means that the Optionee is no longer employed by
the Company or by any Subsidiary) within the term of the Incentive Stock
Option for any reason other than the Optionee's death or disability, the
Incentive Stock Option may be exercised by the Optionee within three
months following the date of such termination, but not thereafter;
provided that such exercise must occur prior to the expiration of the
Incentive Stock Option and the Incentive Stock Option may be exercised
only as to the shares of Stock for which it had become exercisable on or
before the date of termination of the Optionee's employment.
ARTICLE 7: EFFECT OF CERTAIN CORPORATE ACTIONS
7.1 STOCK SPLITS. The number of shares and purchase price of Stock previously
made subject to Stock Options and the aggregate number of shares available for
issuance under the Plan shall be proportionately adjusted in the event of any
stock dividend, stock split, reverse stock split or other division or
combination of outstanding shares of Stock as determined by the Committee.
7.2 MERGERS. In the event of a merger or consolidation to which the Company is
a party and as a result of which the stockholders of the Company immediately
prior to the transaction will own less than a majority of the combined voting
power and ownership interest of the surviving corporation immediately after the
transaction [i] all outstanding Stock Options, whether or not otherwise
exercisable, shall become fully exercisable in respect of all Stock covered
thereby immediately prior to the effective time of the transaction, contingent
upon the consummation of the transaction, and [ii] any Stock Options not
exercised prior to the transaction shall automatically terminate at the
effective time of the transaction. The Committee shall make such arrangements
as it deems appropriate to allow Optionees to exercise their Stock Options
contingent upon the consummation of the transaction, including, without
limitation, establishing a cut-off date in advance of the effective time of the
transaction by which Stock Options must be exercised. In the event that the
transaction is not ultimately consummated, all exercises of Stock Options
pursuant to this provision shall be of no force or effect, the Company shall
return to the Optionees all notices of exercise, payments and other documents
received by it in connection with such exercise and all Stock Options shall be
exercisable only in accordance with their original terms.
7.3 SALE OF ASSETS; LIQUIDATION. In the event of a sale of all or
substantially all of the property of the Company, or the dissolution or
liquidation of the Company, the
-8-
<PAGE> 9
Committee may, in its discretion, take such action with respect to outstanding
Stock Options as it deems appropriate, including, without limitation [i]
accelerating the exercisability thereof, subject to such procedures and
conditions as it may determine, [ii] providing for the termination of all
unexercised Stock Options as of the effective date of the transaction, [iii]
providing for the conversion of outstanding Stock Options into options or other
rights to acquire stock or other securities or property of any entity acquiring
all or any portion of the Company's property in the transaction, or any
affiliate of such entity, for a price and on terms deemed reasonable by the
Committee in its sole discretion, or [iv] making cash payments to Optionees in
settlement of their Stock Option in an amount equal to the difference between
the Fair Market Value of the Stock for which they are then exercisable, or for
all of the Stock covered thereby, as the Committee may determine, and the Stock
Option Price thereof. The Committee shall not be required to take any of the
foregoing actions and shall not be required to treat all outstanding Stock
Options in the same manner.
7.4 FRACTIONAL SHARES. If, upon any exercise of a Stock Option, a fractional
share of Stock would otherwise be issuable, the Company shall, in lieu of
issuing the fractional share, pay the Optionee in cash the Fair Market Value
thereof as of the date the Stock Option was exercised.
ARTICLE 8: GENERAL PROVISIONS
8.1 Section 83(B) ELECTION. If the Stock issued upon exercise of a Stock
Option is, under the terms of the Stock Option Agreement, subject to a
substantial risk of forfeiture (as that term is defined under Section 83 of the
Code and applicable Treasury Regulations), and the Optionee makes an election
under Section 83(b) of the Code to include in gross income (as compensation)
the excess, if any, of the fair market value of such Stock over the Stock
Option Price, the Optionee shall give timely notice to the Company of the
statement required by the Treasury Regulations under Section 83 of the Code.
8.2 WITHHOLDING. Whenever compensation income is recognized by an Optionee
with respect to a Stock Option, the Company may require the Optionee to make a
withholding tax payment to the Company. The amount of such payment shall equal
the amount of federal and state income tax that the Company or any Subsidiary
is required to withhold with respect to the issuance of such Stock. The
Committee, in its sole discretion, may permit the Optionee to pay all or any
portion of such tax withholding by transferring to the Company, or directing
the Company to withhold from Stock otherwise issuable to such Optionee, shares
of Stock having a Fair Market Value equal to the amount to be so paid,
determined as of the date of exercise. To the extent the required withholding
tax payment is not timely made by the Optionee, the Company or any Subsidiary
may either withhold such payment from the Optionee's cash compensation or make
such other arrangements as the Committee determines.
-9-
<PAGE> 10
8.3 NO EMPLOYMENT RIGHT. Nothing in this Plan shall confer upon any Optionee
the right to continue in the employ of the Company or any Subsidiary, nor shall
it interfere in any way with the right of the Company or any Subsidiary to
discharge the Optionee at any time for any reason whatsoever, with or without
cause (subject to any employment agreement between the Company or any
Subsidiary and the Optionee). Neither the existence of this Plan, nor the
grant or termination of any Stock Option under it, shall be the basis of any
claim for damages or otherwise by an Optionee upon his or her termination of
employment.
8.4 NO STOCKHOLDER RIGHTS. Prior to the issuance or transfer of Stock to the
Optionee following the exercise of a Stock Option, an Optionee shall have no
rights as a stockholder with respect to any shares of Stock subject to any
Stock Option granted to such person under this Plan. Except as provided in
7.1, no adjustment shall be made in the number of shares of Stock issued to an
Optionee, or in any other rights of the Optionee upon exercise of a Stock
Option by reason of any dividend, distribution, or other right granted to
shareholders for which the record date is prior to the date of issuance of
Stock pursuant to a Stock Option.
8.5 TRANSFERABILITY RESTRICTIONS; REPURCHASE RIGHTS. No Stock Option, and no
other rights acquired by an Optionee under this Plan, shall be assignable or
transferable by an Optionee and all such rights are exercisable, during such
person's lifetime, only by the Optionee; provided, however, that (i) the
Committee may authorize the assignment or transfer of a Stock Option in its
sole discretion and subject to such terms, conditions and restrictions as it
deems appropriate and (ii) in the event the Optionee's Stock Option Agreement
expressly permits the Stock Option to be exercised after the Optionee's death
or disability, the Optionee's heirs or legal representatives, as the case may
be, may exercise the Stock Option in accordance with, and subject to all of the
terms and conditions of, this Plan and the Optionee's Stock Option Agreement.
Any assignment, transfer, pledge, hypothecation or other disposition of any
Stock Option contrary to the provisions of this Plan, and any levy of any
attachment or similar process upon a Stock Option, shall be null and void and
without effect. Upon the occurrence of such an event, the Committee may, in its
discretion, terminate the Stock Option. The Company may impose such transfer
restrictions (not otherwise expressly provided for in this Plan) and repurchase
rights on the Stock as the Committee may from time to time deem appropriate.
Such transfer restrictions and repurchase rights shall be set forth in the
Optionee's Stock Option Agreement or in another written agreement between the
Optionee and the Company.
8.6 OTHER EMPLOYEE BENEFITS. By acceptance of the grant of a Stock Option,
the Optionee shall be deemed to have agreed that such Stock Option is special
incentive compensation that will not be taken into account, in any manner, as
salary, compensation, or bonus in determining the amount of any payment under
any pension, retirement or other employee benefit plan, program or policy of
the Company or any Subsidiary. In addition, each beneficiary of a deceased
Optionee shall be deemed to have agreed that such Stock Option will not affect
the amount of any life insurance
-10-
<PAGE> 11
coverage, if any, provided by the Company or any Subsidiary on the life of the
Optionee which is payable to such beneficiary under any life insurance plan
covering employees of the Company or any Subsidiary.
8.7 NONEXCLUSIVITY OF PLAN. Neither the adoption of the Plan by the Board nor
the submission of the Plan to stockholders of the Company for approval shall be
construed as creating any limitation on the power or authority of the Board to
grant options to purchase Stock or other securities of the Company to any
employee of the Company outside the Plan.
8.8 SPECIAL GRANTS TO DIRECTORS. Notwithstanding any other provision of this
Plan, the Committee may grant a Non-Statutory Stock Option under the Plan to a
person who is or has been elected or appointed to become a member of the Board,
even though such person is not an employee of the Company or a Subsidiary. All
of the provisions of this Plan applicable to Non-Statutory Stock Options shall
apply to any such grant.
8.9 DELIVERY. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission).
8.10 AMENDMENT. The Board may from time to time alter, amend, suspend or
discontinue this Plan; provided, however, any amendment or modification that is
required to be approved by the stockholders to enable the Plan to satisfy any
applicable statutory or regulatory requirements shall be subject to such
approval as may be required by the statute or regulation. However, no such
action shall adversely affect the rights and obligations with respect to Stock
Options which are then outstanding under this Plan.
8.11 EFFECTIVE DATE. This Plan has been adopted by the Board on September 19,
1997 and became effective on _________ __, 1997.
-11-
<PAGE> 1
EXHIBIT 10.25
RENTX INDUSTRIES, INC.
STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
ARTICLE 1: DEFINITIONS
1.1 AFFILIATE. An Affiliate, as to any person, is another person who
controls, is controlled by or is under common control with such person.
1.2 ANNUAL OPTION. An Annual Option is a Stock Option granted on an
anniversary of a Non-Employee Director's election to the Board under Section
4.3.
1.3 BOARD. The Board is the board of directors of the Company.
1.4 COMMITTEE. The Committee is the body charged with administering the Plan.
At the option of the Board, the Committee shall consist either of the full
Board or the Compensation Committee of the Board.
1.5 COMPANY. The Company is RentX Industries, Inc., a Delaware corporation,
and its successors and assigns.
1.6 FAIR MARKET VALUE. The Fair Market Value of a share of Stock is the
closing price of the Stock on the principal exchange on which the Stock is
traded, or, if the Stock is not traded on an exchange, as reported by NASDAQ,
or, if the closing price of the Stock is not reported by NASDAQ, the average of
the high bid and low asked prices for the Stock, as reported by NASDAQ or any
other accepted source selected by the Committee, or, if Fair Market Value
cannot be determined by any of the foregoing means, the fair market value of
the Stock as determined by the Committee in good faith by any reasonable means.
1.7 GRANT DATE. The Grant Date is the date when a Stock Option is granted, as
determined under 4.6.
1.8 INITIAL OPTION. An Initial Option is a Stock Option granted upon a Non-
Employee Director's initial election to the Board under Section 4.2.
1.9 NON-EMPLOYEE DIRECTOR. A Non-Employee Director is a member of the Board
who: (i) is not a current employee or officer of the Company or a Parent or
Subsidiary of the Company and (ii) is not an employee, member, manager,
officer, director, stockholder or partner of BACE Investments, LLC, Mesirow
Capital Partners VI, The Edgewater Private Equity Fund II, L.P. or any
Affiliate of any thereof.
<PAGE> 2
1.10 OPTIONEE. An Optionee is a Non-Employee Director to whom a Stock Option
has been granted.
1.11 PARENT. A Parent is any corporation which owns, directly or indirectly,
at least 50% of the Company's outstanding Stock.
1.12 PLAN. The Plan is this Stock Option Plan for Non-Employee Directors of
the Company, as it may be amended.
1.13 SECURITIES ACT. The Securities Act in the Securities Act of 1933, as
from time to time amended, or any functional successor to that act, and the
regulations of the Securities and Exchange Commission thereunder.
1.14 STOCK. Stock is the authorized $.01 par value Common Stock of the
Company.
1.15 STOCK OPTION. A Stock Option is the right granted to an Optionee under
this Plan to acquire Stock pursuant to the Optionee's Stock Option Agreement.
1.16 STOCK OPTION AGREEMENT. A Stock Option Agreement is the contract under
which an Optionee is given the right to acquire Stock pursuant to this Plan.
1.17 STOCK OPTION PRICE. The Stock Option Price is the exercise price with
respect to an Optionee's Stock Option determined as provided in Section 4.4.
1.18 SUBSIDIARY. A Subsidiary is any corporation in which the Company owns,
directly or indirectly, at least 50% of the total voting power and value of its
stock.
ARTICLE 2: PURPOSE
The purpose of this Plan is to enable the Company to attract and retain
qualified Non-Employee Directors by giving them an opportunity to acquire a
proprietary interest in the Company and thereby create a more direct interest
in the future success of the Company.
ARTICLE 3: ADMINISTRATION
3.1 COMMITTEE. The Plan shall be administered by the Committee. Members of
the Committee to whom Stock Options have been granted may vote on matters of
Plan administration.
-2-
<PAGE> 3
3.2 AUTHORITY OF COMMITTEE. The Committee shall have full authority to
administer this Plan, including authority to interpret and construe any
provision of this Plan and to adopt such rules and regulations as it may deem
necessary in order to administer the Plan. Without limitation, but subject to
the provisions of the Plan, the Committee is authorized to:
[a] Prescribe the form or forms of the Stock Option Agreements and of any
other instruments required under this Plan and to change such forms from
time to time;
[b] Waive compliance (either generally or in any one or more particular
instances) by an Optionee with the requirements of any Stock Option
Agreement or any rule or regulation with respect to a Stock Option,
subject to the terms of this Plan, and accelerate the exercisability of
any Stock Option at any time and for any reason; and
[c] Decide all questions and settle all controversies and disputes which may
arise in connection with this Plan or any Stock Option Agreement, and
cure any defect, supply any omission or reconcile any inconsistency
therein.
3.3 ACTIONS OF COMMITTEE. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. In addition
to any other rights of indemnification, each Committee member shall be
indemnified by the Company against reasonable expenses (including attorneys'
fees) actually and necessarily incurred in connection with the defense of any
action, suit or proceeding (or in connection with any appeal) to which such
person may be a party by reason of an action taken, or any failure to act, in
connection with this Plan and any Stock Option granted under it. This
indemnification shall further extend to all amounts paid by any Committee
member either in a settlement approved by independent legal counsel selected by
the Committee or pursuant to a judgment in any such action, suit or proceeding,
provided that the Committee member acted in good faith and in a manner he or
she reasonably believed to be in the best interests of the Company. Any action
taken by the Committee under this Plan may be made without notice or meeting of
the Committee in a writing signed by all members of the Committee.
ARTICLE 4: GRANT OF STOCK OPTION
4.1 SHARES AVAILABLE. There shall be 25,000 shares of Stock available for
issuance under this Plan. All shares underlying Stock Options granted under
this Plan which for any reason are not exercised prior to option expiration, or
which are otherwise cancelled or forfeited, shall be available for granting of
further Stock Options under this Plan.
4.2 AUTOMATIC GRANTS OF INITIAL OPTIONS. Each Non-Employee Director shall
automatically be granted Initial Options to purchase 5,000 shares of Stock upon
his or
-3-
<PAGE> 4
her initial election to the Board. The Initial Options shall be immediately
exercisable as to 2,500 shares of Stock and shall become exercisable as to an
additional 500 shares of Stock on each of the first five anniversaries of the
Grant Date.
4.3 AUTOMATIC GRANTS OF ANNUAL OPTIONS. Each Non-Employee Director shall
automatically be granted Annual Options to purchase 2,500 shares of Stock on
each anniversary of his initial election to the Board, provided that he is then
still serving on the Board. The Annual Options shall become exercisable as to
500 shares of Stock on each of the first five anniversaries of the Grant Date.
4.4 STOCK OPTION PRICE. The Stock Option Price of each Stock Option shall be
the Fair Market Value of the Stock on the Grant Date.
4.5 TERMS OF STOCK OPTIONS. All Stock Options shall have a term of 10 years
from the Grant Date.
4.6 GRANT DATE. With respect to each Stock Option, the Grant Date is the date
when the Stock Option is automatically granted under Section 4.1 or 4.2, as the
case may be.
4.7 NOTICE. Notice of the grant of a Stock Option shall be given to the
Optionee within a reasonable time.
4.8 AGREEMENT. Each Stock Option shall be evidenced by a written Stock Option
Agreement, signed on behalf of the Company, containing such terms and
provisions as the Committee may determine, subject to the provisions of this
Plan. Each Stock Option Agreement shall set forth the number of shares of
Stock that may be purchased upon exercise thereof, the Stock Option Price, the
term of the Stock Option, the times at which the Stock Option shall become
exercisable and any other terms and conditions determined by the Committee,
subject to the provisions of the Plan. If the Optionee fails to sign and
deliver an original of the Stock Option Agreement to the Company within thirty
days after such agreement has been delivered to the Optionee, the Stock Option
granted by such Stock Option Agreement shall automatically terminate at the end
of such thirty-day period (unless the Committee otherwise determines).
4.9 TERM OF PLAN. No Stock Option shall be granted under this Plan after ten
years from the date this Plan is adopted by the Board. Stock Options
outstanding ten years or more after the effective date of the Plan shall
continue to be governed by the provisions of this Plan.
ARTICLE 5: EXERCISE OF STOCK OPTIONS
5.1 TIME OF EXERCISE. Any Stock Option granted under this Plan shall be
exercisable at any time and from time to time, in whole or in part, as to any
or all of the shares of Stock as to which it has become exercisable as provided
in Section 4.1 or 4.2, as the case
-4-
<PAGE> 5
may be. If any Stock Option is not exercised during the applicable exercise
period, it shall automatically expire as of the expiration of such period and
shall be of no further force or effect.
5.2 MANNER OF EXERCISE. Each exercise of a Stock Option, in whole or in part,
shall be made by the Optionee's delivery of written notice of such exercise to
the Company, a form of which shall be attached to each Stock Option Agreement.
Such notice shall be signed by the Optionee, shall specifically identify the
Stock Option being exercised and shall set forth the number of shares of Stock
with respect to which the Stock Option is being exercised. The notice of
exercise shall be accompanied by payment in full of the Stock Option Price by
any of the methods or any combination of the methods set forth in 5.3 below.
The Stock Option shall be deemed to have been exercised on the first day when
the Company has received both the notice of exercise and the Stock Option Price
and the Optionee has complied with the requirements of 5.4 and any other
requirements of the Stock Option Agreement. Within ten days after the exercise
of the Stock Option, the Company shall cause a certificate representing the
Stock issuable as a result of such exercise, registered in the name of the
Optionee, to be sent to the Optionee at the Optionee's address as reflected on
the records of the Company. The Stock Option shall continue with respect to
any remaining shares subject to the Stock Option as to which exercise and
payment have not yet been made, subject to the terms of the applicable Stock
Option Agreement.
5.3 PAYMENT OF STOCK OPTION PRICE. Unless the Stock Option Agreement otherwise
provides or unless the Committee otherwise determines, the Stock Option Price
shall be paid by the Optionee in cash, by bank cashier's check or by delivery
to the Company of certificates representing shares of Stock then owned by the
Optionee having a Fair Market Value as of the date the Stock Option is
exercised equal to the Stock Option Price of the Stock for which the Stock
Option is being exercised, duly endorsed for transfer to the Company. The
Company may, but shall not be required to, cooperate in such manner as the
Optionee may reasonably request to effect a broker-assisted cashless exercise
of a Stock Option, including delivering the certificates for the Stock issuable
upon exercise of the Stock Option to a broker designated by the Optionee and
entering into any agreement relating thereto.
5.4 STOCK ISSUANCE. If the Stock subject to a Stock Option has not been
registered under the Securities Act at the time the Stock Option is exercised,
such Stock shall be issued only upon delivery by the Optionee to the Company of
an investment letter signed by the Optionee, in such form as the Committee may
from time to time determine and containing such representations, warranties and
covenants as the Committee may deem necessary to establish the availability of
an exemption from the registration requirements of the Securities Act and all
applicable state securities laws. Notwithstanding any other provision of the
Plan or any Stock Option Agreement, the Company shall not be obligated to sell
any Stock pursuant to a Stock Option Agreement unless and until, in the opinion
of the Company's counsel, there has been compliance with all applicable federal
and state laws and regulations and only when all other legal matters in
connection with
-5-
<PAGE> 6
the issuance and delivery of such Stock have been approved by the Company's
counsel. The Company shall use its best efforts to effect any such compliance,
and the Optionee shall take any action reasonably requested by the Company in
connection therewith; provided, however, that in no event shall the Company be
required to file a registration statement under the Securities Act or any state
securities law to satisfy its obligation to use its best efforts to effect such
compliance.
5.5 TERMINATION OF SERVICE. If the Optionee dies or becomes disabled (as
determined by the Committee) during the term of the Stock Option while still a
member of the Board, or within the three-month period referred to in the
following sentence, the Stock Option may be exercised by those entitled to do
so under the Optionee's will or under applicable law within twelve months
following the Optionee's death or disability, but not thereafter; provided that
such exercise must occur prior to the expiration of the Stock Option and the
Stock Option may be exercised only as to the shares of Stock for which it had
become exercisable on or before the date of the Optionee's death or disability.
If the Optionee's service on the Board is terminated during the term of the
Stock Option for any reason other than the Optionee's death or disability, the
Stock Option may be exercised by the Optionee within three months following the
date of such termination, but not thereafter; provided that such exercise must
occur prior to the expiration of the Stock Option and the Stock Option may be
exercised only as to the shares of Stock for which it had become exercisable on
or before the date of termination of the Optionee's service on the Board.
ARTICLE 6: EFFECT OF CERTAIN CORPORATE ACTIONS
6.1 STOCK SPLITS. The number of shares and purchase price of Stock previously
made subject to Stock Options and the aggregate number of shares available for
issuance under the Plan shall be proportionately adjusted in the event of any
stock dividend, stock split, reverse stock split or other division or
combination of outstanding shares of Stock as determined by the Committee.
6.2 MERGERS. In the event of a merger or consolidation to which the Company is
a party and as a result of which the stockholders of the Company immediately
prior to the transaction will own less than a majority of the combined voting
power and ownership interest of the surviving corporation immediately after the
transaction [i] all outstanding Stock Options, whether or not otherwise
exercisable, shall become fully exercisable in respect of all Stock covered
thereby immediately prior to the effective time of the transaction, contingent
upon the consummation of the transaction, and [ii] any Stock Options not
exercised prior to the transaction shall automatically terminate at the
effective time of the transaction. The Committee shall make such arrangements
as it deems appropriate to allow Optionees to exercise their Stock Options
contingent upon the consummation of the transaction, including, without
limitation, establishing a cut-off date in advance of the effective time of the
transaction by which Stock Options must be exercised. In the event that the
transaction is not ultimately consummated, all exercises
-6-
<PAGE> 7
of Stock Options pursuant to this provision shall be of no force or effect, the
Company shall return to the Optionees all notices of exercise, payments and
other documents received by it in connection with such exercise and all Stock
Options shall be exercisable only in accordance with their original terms.
6.3 SALE OF ASSETS; LIQUIDATION. In the event of a sale of all or
substantially all of the property of the Company, the sale or exchange by the
Company or any one or more stockholders of the Company of Stock constituting
50% or more of the Stock outstanding immediately following such sale or
exchange, or the dissolution or liquidation of the Company, the Committee may,
in its discretion, take such action with respect to outstanding Stock Options
as it deems appropriate, including, without limitation [i] accelerating the
exercisability thereof, subject to such procedures and conditions as it may
determine, [ii] providing for the termination of all unexercised Stock Options
as of the effective date of the transaction or any other date established by
the Committee, [iii] providing for the conversion of outstanding Stock Options
into options or other rights to acquire stock or other securities or property
of any entity acquiring all or any portion of the Company's property or any
Stock in the transaction, or any Affiliate of such an entity, on terms deemed
reasonable by the Committee in its sole discretion, or [iv] making cash
payments to Optionees in settlement of their Stock Option in an amount equal to
the difference between the Fair Market Value of the Stock for which they are
then exercisable, or for all of the Stock covered thereby, as the Committee may
determine, and the Stock Option Price thereof. The Committee shall not be
required to take any of the foregoing actions and shall not be required to
treat all outstanding Stock Options in the same manner.
6.4 FRACTIONAL SHARES. If, upon any exercise of a Stock Option, a fractional
share of Stock would otherwise be issuable, the Company shall, in lieu of
issuing the fractional share, pay the Optionee in cash the Fair Market Value
thereof as of the date the Stock Option was exercised.
ARTICLE 7: GENERAL PROVISIONS
7.1 NO STOCKHOLDER RIGHTS. Prior to the issuance or transfer of Stock to the
Optionee following the exercise of a Stock Option, an Optionee shall have no
rights as a stockholder with respect to any shares of Stock subject to any
Stock Option granted to such person under this Plan. Except as provided in
6.1, no adjustment shall be made in the number of shares of Stock issued to an
Optionee, or in any other rights of the Optionee upon exercise of a Stock
Option by reason of any dividend, distribution, or other right granted to
shareholders for which the record date is prior to the date of issuance of
Stock pursuant to a Stock Option.
7.2 TRANSFERABILITY RESTRICTIONS; REPURCHASE RIGHTS. No Stock Option, and no
other rights acquired by an Optionee under this Plan, shall be assignable or
transferable by an Optionee and all such rights are exercisable, during such
person's lifetime, only by the
-7-
<PAGE> 8
Optionee; provided, however, that (i) the Committee may authorize the
assignment or transfer of a Stock Option in its sole discretion and subject to
such terms, conditions and restrictions as it deems appropriate and (ii) the
Optionee's heirs or legal representatives, as the case may be, may exercise the
Stock Option in accordance with, and subject to all of the terms and conditions
of, this Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of any Stock Option contrary to the provisions of this Plan, and
any levy of any attachment or similar process upon a Stock Option, shall be
null and void and without effect. Upon the occurrence of such an event, the
Committee may, in its discretion, terminate the Stock Option.
7.3 NONEXCLUSIVITY OF PLAN. The adoption of the Plan shall not be construed
as creating any limitation on the power or authority of the Board to grant
options to purchase Stock or other securities of the Company to any member of
the Board, including any Non-Employee Director, outside the Plan.
7.4 DELIVERY. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission).
7.5 AMENDMENT. The Board may from time to time alter, amend, suspend or
discontinue this Plan. However, no such action shall adversely affect the
rights and obligations with respect to Stock Options which are then outstanding
under this Plan.
7.6 EFFECTIVE DATE. This Plan has been adopted by the Board on September 19,
1997 and became effective on _________ __, 1997.
-8-
<PAGE> 1
EXHIBIT 10.26
RESTATED NONQUALIFIED STOCK OPTION AGREEMENT [MANAGEMENT]
This RESTATED NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made
effective as of the 11th day of November, 1996, between RENTX INDUSTRIES, INC.,
a Delaware corporation (the "Company"), and Arnold A. Bernstein (the
"Optionee"). In consideration of the mutual promises set forth in this
Agreement, we agree as follows:
1. OPTION GRANT. Pursuant to the letter agreement dated November 11, 1996
between the Company and the Optionee (the "Letter Agreement") and subject to
the terms and conditions of this Agreement (including, without limitation,
those relating to vesting set forth in Section 3 and those relating to
"community property" and related matters set forth in Section 17), the Company
grants to the Optionee the right and option (the "Option") to purchase an
aggregate of 64,984 shares (the "Optioned Shares") of its nonvoting Class B
Common Stock (the "Stock") pursuant to the terms set forth below; provided,
however, that if, pursuant to the Company's certificate of incorporation, as
amended, each share of the Company's issued and outstanding Class B Common
Stock is reclassified and changed into one share of Class A Common Stock and
the outstanding rights to receive Class B Common Stock from the Company become
outstanding rights to acquire Class A Common Stock on a share-for share-basis,
then the term "Stock" shall also refer to such shares of Class A Common Stock).
This Option grant is made as a matter of separate agreement and not in lieu of
regular salary. The date on which this Option was granted was November 11,
1996 (the "Grant Date"). On January 30, 1997, the Company's Certificate of
Incorporation was amended to increase the authorized number of shares of
nonvoting Class B Common Stock from 12,350 shares to 192,308 shares. The
Option and the number of Optioned Shares set forth in this Agreement have been
restated to reflect such amendment to the Company's Certificate of
Incorporation. As a result, the Optioned Shares represent shares of the
authorized nonvoting Class B Common Stock of the Company as it exists following
such amendment.
2. STOCK OPTION PRICE. The purchase price of the Optioned Shares is $8.00 per
share (the "Stock Option Price").
3. VESTING; TIME OF EXERCISE. The Optionee shall not have any right to
exercise the Option and acquire any of the Optioned Shares until January 31,
1999, at which time the Optionee's right to acquire 50% of the Optioned Shares
shall vest. Thereafter, on January 31 of each of 2000 and 2001, the Optionee's
right to acquire an additional 25% of the Optioned Shares shall vest.
Notwithstanding anything to the contrary contained in this Section 3, but
subject to Section 14, the Optionee's right to acquire 100% of the Optioned
Shares shall vest upon the earliest to occur of [a] immediately prior to the
closing of the sale by the Company of all or substantially all of its assets
(other than to any entity of which the majority of the voting power of the
ownership interests therein is held, immediately prior to or immediately after
such sale, by the persons who immediately prior to such transaction hold a
majority of the voting power of the ownership interests in the Company) (a
"Non-Affiliate Asset Sale"), [b] immediately prior to the closing of the sale
of the Company substantially in its entirety by merger or consolidation (other
than with an entity of which the majority of the voting power of the ownership
interests therein is held, immediately prior to or immediately after such
transaction, by the persons who immediately prior to such transaction hold a
majority of the voting power of the ownership interests in the Company) (a
"Non-Affiliate Merger"), or [c] immediately prior to the closing of the sale by
the stockholders of the Company of all of the outstanding capital
<PAGE> 2
stock (other than to any entity of which the majority of the voting power of
the ownership interests therein is held, immediately prior to or immediately
after such sale, by the persons who immediately prior to such transaction hold
a majority of the voting power of the ownership interests in the Company) (a
"Non-Affiliate Stock Sale") (each of [a], [b] and [c] being referred to herein
as a "Vesting Event"), but only if the Optionee is an employee of the Company
or any Subsidiary at the moment prior to the occurrence of the Vesting Event.
Subject to the vesting requirements set forth above and to the provisions of
Sections 13, 14 and 16, the Option may be exercised at any time or times prior
to 5:00 p.m., Colorado time, on November 11, 2006.
4. MANNER OF EXERCISE. The Option is exercisable by written notice to the
Company, signed by the Optionee. Such notice must set forth: [a] the election
to exercise the Option and accept the Company's offer, [b] the number of
Optioned Shares to which such exercise relates, and [c] a date at least three,
but no more than five, days after the giving of such notice on which payment of
the Stock Option Price will be made. Such notice must either be actually
delivered to the Company or sent by certified mail to the Company at 1522 Blake
Street, Denver, Colorado, 80202, Attn: Craig J. Zoellner, Vice President (or at
such other address as the Company may direct). Upon exercise of the Option by
giving written notice to the Company, the Optionee will be personally liable to
acquire the Optioned Shares as stated in such notice.
5. CLOSING ON SHARE ISSUANCE. On the date specified in the written notice of
exercise (the "Closing Date"), the Optionee will deliver to the Company [a] the
Stock Option Price for all Optioned Shares being acquired pursuant to the
Option, [b] the Optionee's signed investment letter in the form of the attached
Exhibit A (or in such form as the Board of Directors of the Company (the
"Board") may from time to time subsequently determine), [c] the Optionee's
signed Class B Common Stock Voting Trust Agreement in the form of the attached
Exhibit B (or in such form as the Board may from time to time subsequently
determine) and [d], upon issuance by the Company, the stock certificate
representing the Optioned Shares, duly endorsed for transfer to the trustee
under the Class B Common Stock Voting Trust Agreement (in return for which the
Optionee shall receive a Voting Trust Certificate representing the Optioned
Shares). All of the provisions of this Agreement, including, without
limitation, Sections 7 through 18, will apply to each Voting Trust Certificate
issued under the Class B Common Stock Voting Trust Agreement in respect of any
Shares (as defined below). Payment will be made in cash, either by personal
check which clears in the ordinary course, by bank cashier's check or by
certified check (in all cases, in immediately available funds). Any other
method of payment may be made only if acceptable to the Board, in its
discretion. Notwithstanding the above, the Company shall not be obligated to
deliver any Optioned Shares unless and until, in the opinion of the Company's
counsel, there has been compliance with all applicable federal and state laws
and regulations and only when all other legal matters in connection with the
issuance and delivery of such Optioned Shares have been approved by the
Company's counsel. The Company shall use its best efforts to effect any such
compliance, and the Optionee shall take any such action reasonably requested by
the Company; provided, however, that in no event shall the Company be required
to file a registration statement under the Securities Act of 1933 or any state
securities law to satisfy its obligation to use its best efforts to effect such
compliance. The Optionee shall have the rights of a shareholder of the Company
only as to shares actually acquired by and issued to the Optionee under this
Agreement.
-2-
<PAGE> 3
6. NONASSIGNABLE OPTION. Neither the Option nor any other rights acquired by
the Optionee under this Agreement are assignable or transferable by the
Optionee. Any sale, assignment, transfer, pledge or other disposition of any
Option contrary to the provisions of this Agreement, and any levy of any
attachment or similar process upon any Option, will be null and void. Upon the
occurrence of such an event, the Board may, in its discretion, terminate the
Option. The Option may be exercised only during the Employee's lifetime,
except as otherwise specifically provided in Section 13.
7. SHARE TRANSFER RESTRICTION. Except for Permitted Transfers (as defined in
Section 8) and unless a Release Event (as defined below) has occurred, none of
the Optioned Shares, any shares of capital stock of the Company issued in
respect of the Optioned Shares upon any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, change in
corporate structure or otherwise, nor any right, title or interest therein,
whether represented by the Voting Trust Certificate or otherwise (the Optioned
Shares, all such other shares, and all right, title and interest therein being
referred to collectively as the "Shares"), may be sold, assigned, transferred,
pledged, or otherwise disposed of or encumbered, voluntarily or involuntarily,
by act of the Optionee or the Optionee's Permitted Transferee or by operation
of law, including, without limitation, by bequest or the laws of descent and
distribution (any of such events being referred to as a "Transfer"), without
the Company's prior written consent and upon such terms and conditions as the
Company may determine. Any attempted transfer of any Shares contrary to the
preceding sentence will be null and void. Nevertheless, the restriction on
transfer of the Shares set forth in this Section 7 will terminate and be of no
further force and effect upon the occurrence of any of the following events
(each of which is referred to as a "Release Event"): [a] the closing of any
Qualified Public Offering (as defined below), [b] the closing of a Non-
Affiliate Asset Sale, or [c] the closing of the sale of the Company
substantially in its entirety by a Non-Affiliate Merger or by a Non-Affiliate
Stock Sale (or by any combination of the foregoing).
For purposes of this Agreement: [a] "Qualified Public Offering" means
the sale in an underwritten public offering or a series of public offerings,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
of Common Stock, which results in public ownership of not less than 25% of the
Fully Diluted Common Stock of the Company, which shares of Common Stock are
listed upon the New York Stock Exchange, the American Stock Exchange or are
approved for quotation on the NASDAQ National Market and which offerings shall
have resulted in the receipt by the Company of aggregate cash proceeds (after
deduction of underwriting discounts and the costs associated with the
offerings) of at least $8 million and with the average price in such offering
or offerings reflecting a valuation of the Fully Diluted Common Stock
(excluding shares being issued in the offering or offerings) aggregating at
least $30 million; [b] "Common Stock" means the Class A Common Stock and the
Class B Common Stock of the Company; [c] "Common Stock Equivalents" means
(without duplication with any other Common Stock or Common Stock Equivalents)
rights, warrants, options (including, without limitation, employee stock
options), convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock and securities convertible or
exchangeable into Common Stock, whether at the time of issuance or upon the
passage of time or the occurrence of some future event, including (without
limitation) the Series A Preferred Stock and the Series B Preferred Stock of
the Company; and [d] "Fully Diluted Common Stock" means, at any time, the then
outstanding Common Stock of the Company plus (without duplication) all shares
of Common Stock issuable, whether at such time or upon the passage of time
-3-
<PAGE> 4
or the occurrence of future events, upon the exercise, conversion or exchange
of all then outstanding Common Stock Equivalents.
8. PERMITTED TRANSFEREES. Any Optionee may transfer the Shares held by the
Optionee to the Optionee's spouse or children, to any other shareholder of the
Company, or to any employee of the Company or a Subsidiary of the Company, by
gift, by bequest, by the laws of descent and distribution, or by operation of
law in the case where the Optionee and the Optionee's Permitted Transferee (as
defined below) hold Shares as joint tenants with right of survivorship;
provided, however, that in all of the foregoing cases (each of which is
referred to as a "Permitted Transfer") the Optionee must first give notice to
the Company of such Transfer and the transferee (the "Permitted Transferee")
first must agree in writing to be a party to and bound by the terms and
conditions of this Agreement (including by execution of the signature page to
this Agreement) and an original of such writing must be delivered to the
Company. Each Permitted Transferee acknowledges and agrees that, upon
acceptance of Shares from the Optionee, the following provisions will apply:
[a] the transfer restrictions and other obligations applicable to the Optionee
under this Agreement, as well as the agreements and obligations of the Optionee
under the Class B Common Stock Voting Trust Agreement referred to in Section
5[c] will apply to and be assumed by such Permitted Transferee with respect to
the Shares owned by the Permitted Transferee, and [b] if, as a result of the
operation of Section 9, the Optionee is (or would be) required by this
Agreement to sell any Shares held by such Optionee the Permitted Transferee
agrees to sell the Shares in the same manner and under the same terms as are
applicable to the Optionee.
9. REPURCHASE RIGHT. If the Optionee's employment with the Company or any
Subsidiary is terminated for any or no reason (whether by voluntary or
involuntary act of the Optionee, the Company or any Subsidiary, including
retirement, firing, death or disability) before or after a Release Event, the
Company will have the right, but not the obligation, to purchase from the
Optionee and each Permitted Transferee all or any part of the Shares and all or
any part of the Optionee's right to acquire Optioned Shares, which immediately
prior to such termination, are vested (the Optionee's right to acquire Optioned
Shares which has so vested is referred to as the "Vested Options"), and the
Optionee and each Permitted Transferee must sell to the Company, if the Company
exercises such option, all of the Shares the Company desires to purchase and
all of the Vested Options the Company desires to purchase. The purchase price
will be determined under Section 10, and the closing will occur as provided in
Section 11.
10. PURCHASE PRICE. [a] The purchase price per share payable by the Company
for the Shares will be fixed as of the effective date of termination of the
Optionee's employment with the Company or any Subsidiary (the "Termination
Date") at an amount equal to the fair market value thereof (the "Per Share
Purchase Price") determined as set forth in Section 11[b]. The purchase price
per Vested Option payable by the Company for the Vested Options will be the Per
Share Purchase Price minus the Stock Option Price for the Optioned Share
underlying such Vested Option.
[b] If, at the time the Company's repurchase right
under Section 10 becomes operative, the Shares are registered under the
Securities Act of 1934, as amended (meaning the Shares are "publicly traded"),
then the Per Share Purchase Price payable by the Company for the Shares will be
fixed as of the Termination Date at a per Share price equal to the arithmetic
mean of the market prices of the class of stock of which the Shares are a part
(the "Stock") for the 20 trading
-4-
<PAGE> 5
days preceding the Termination Date. For this purpose, the market price of the
Stock on each such day shall be [i] the closing price of the Stock on the
principal national securities exchange on which it is then traded, or [ii] if
the Stock is not then traded on a national securities exchange, the closing
price of the Stock reported by the National Association of Securities Dealers,
Inc. National Market System or Automated Quotation System or its successors
("NASDAQ"), or [iii] if the closing price of the Stock is not then reported by
NASDAQ, the mean of the bid and asked prices of the Stock reported by NASDAQ,
or [iv], if bid and asked prices for the Stock are not then reported by NASDAQ,
the mean of the bid and asked prices of the Stock reported by the National
Quotation Bureau, Inc. or its successor. If, at the time the Company's
repurchase right under Section 10 becomes operative, the Shares are not
registered under the Securities Exchange Act of 1934, as amended, then the Per
Share Purchase Price payable by the Company for the Shares will be fixed as of
the Termination Date and determined in good faith by the Board of Directors
using any reasonable valuation method, with the Board's objective being to set
the price at the price at which a Share would change hands between a willing
buyer and a willing seller, neither being under any compulsion to buy or to
sell and both having reasonable knowledge of relevant facts including rights
and restrictions on the Shares or the class of stock of which they are a part.
11. CLOSING OF REPURCHASE. The closing of any purchase of Shares and/or
Vested Options by the Company under this Agreement will occur at a meeting of
the Company and the Optionee and/or the Permitted Assigns, as appropriate, on a
date selected by the Company and noticed to the Optionee and/or the Permitted
Assigns, as appropriate, which will be not later than the 120th day following
the Termination Date at 10:00 a.m. Colorado time at the Company's office in
Denver, Colorado (unless otherwise agreed by the Company and the Optionee
and/or the Permitted Transferees, as appropriate). At the meeting, the Company
will make payment for the Shares and/or Vested Options and the Optionee and/or
the Permitted Transferees, as appropriate, will deliver certificates
representing the Shares, duly endorsed for transfer. If the Shares so
purchased by the Company are then subject to the Class B Common Stock Voting
Trust Agreement, the Trustee thereunder is authorized and directed to deliver
to the Company stock certificates representing such Shares, against receipt of
payment therefor, and to deliver such payment to the Optionee upon delivery by
the Optionee to the Company of the Voting Trust Certificate representing such
Shares. Payment for the Shares and/or Vested Options will be made in cash or
by the Company's check or checks which clear in the ordinary course. All
notices under this Section to the Optionee or the Permitted Transferees, as
appropriate, will be in writing and will be deemed to have been duly given when
delivered in person (by express courier or otherwise), by telecopier or three
days after being deposited in the United States mail, certified mail, return
receipt requested, first class postage prepaid, to the Optionee or the
Permitted Transferees, as appropriate, at 1271 LAFAYETTE DENVER, CO. 80218 ,
or to such other address as the Optionee or the Permitted Transferees, as
appropriate, will have specified by notice in writing to the Company.
12. STOCK LEGEND. Except to the extent that the Board determines to add or
revise the restrictive legend, all stock and voting trust certificates
evidencing Shares will be legended as follows by the Company:
The shares represented by this certificate are subject to, and are
transferrable only on compliance with, a Nonqualified Stock Option
Agreement dated as of NOV 11TH,
-5-
<PAGE> 6
199_ between RentX Industries, Inc. and the shareholder named on the
face of this certificate, a copy of which is on file with, and may be
obtained from, RentX Industries, Inc.
13. EMPLOYMENT TERMINATION. If the Optionee's employment with the Company or
any Subsidiary is terminated for any or no reason (whether by voluntary or
involuntary act of the Optionee, the Company or any Subsidiary, including
retirement, firing, death or disability), the Option (including, without
limitation, any Vested Options) will terminate and be of no further force or
effect; provided, however, that any Vested Options shall remain exercisable for
60 days from such termination of employment; and, provided, further, that in
the event any Vested Options are exercised within such 60-day period, the
Optionee and the Optionee's heirs, legal representatives and any other person
entitled to exercise the Vested Options in the Optionee's stead shall, if and
to the extent the Company exercises its rights under Section 9, immediately
sell Shares and Vested Options to the Company in accordance with Section 9.
14. ACCELERATION OF EXPIRATION OF OPTION PERIOD. Notwithstanding anything to
the contrary contained in this Agreement, in the event [a] that the Company
proposes to engage in a Non-Affiliate Asset Sale, [b] that it is proposed that
the Company be sold substantially in its entirety by a Non-Affiliate Merger or
by a Non-Affiliate Stock Sale (or any combination of the events described in
this [b]), or [c] that any transaction is proposed that would result in a
change in the majority ownership of the Company (whether as a result of the
sale of outstanding stock or the issuance of new stock, other than in a public
offering registered under the Securities Act) (each of [a], [b] and [c] being
referred to herein as an "Acceleration Event"), the Company may, at its option,
notify the Optionee of such proposed Acceleration Event and require the
Optionee to elect, within 5 days after such notice, to either exercise the
Option (which exercise, if such Option is not then vested pursuant to Section
3, shall be made contingent upon the occurrence of a Vesting Event which is
also an Acceleration Event) or allow it to expire upon the closing of the
Acceleration Event. If the Optionee does not elect to exercise any portion of
the Option within that 5-day period, the unexercised portion of the Option
shall automatically expire upon such closing. If the Optionee elects to
exercise the Option within that 5-day period, in whole or in part, the Optionee
shall deliver to the Company all funds and documents required by such notice or
this Agreement to exercise such Option and the Company shall hold such funds
and documents and the certificate representing the shares issuable upon such
exercise until such closing and shall then deposit and collect the payment and
forward the certificate (or such other securities or property as the Optionee
may have become entitled to as a result of owning such shares on the closing)
to the Optionee (or, in the case of an Acceleration Event which involves the
acquisition or conversion of the outstanding capital stock of the Company, to
the acquiror of such stock). If the Acceleration Event is not consummated for
any reason, then [a] such exercise shall be of no force or effect, [b] no
acceleration of the vesting of the Optionee's right to acquire the Option
Shares shall be deemed to have occurred, [c] the unexercised portion of the
Option shall not expire and [d] the Company shall return to the Optionee such
funds and documents delivered to it by the Optionee in connection with such
exercise and shall cancel the related certificate. The notice originally given
to the Optionee of a proposed Acceleration Event shall describe the proposal
generally. No subsequent change in the proposal shall require a new notice or
extend or revive the 5-day exercise period.
-6-
<PAGE> 7
15. SHAREHOLDER/EMPLOYEE RIGHTS. The Optionee will have the rights of a
shareholder with respect to any Shares subject to the Option only after such
Shares are issued to such person following exercise of the Option. Nothing in
this Agreement confers on the Optionee any right to continue in the employ of
the Company or any Subsidiary or interferes in any way with the right of the
Company or any Subsidiary at any time to terminate or modify the terms or
conditions of the Optionee's employment.
16. COMMUNITY PROPERTY MATTERS. If the Optionee, on or after the Grant Date,
resides in a state or other jurisdiction the laws of which determine the
interests of spouses in property on a "community property" or similar basis,
the grant of the Option and the Optionee's rights hereunder shall not be
effective unless and until the Optionee's spouse executes and delivers a
counterpart to the signature page hereto to the Company. The Optionee's spouse
shall be bound by the terms and conditions of this Agreement, including,
without limitation, those set forth in Sections 5 through 17.
17. TAX MATTERS.
[a] Tax Status. The Option granted under this Agreement is for nonqualified
stock options (that is, options that do not qualify as incentive stock
options under the Internal Revenue Code of 1986, as amended (the
"Code"). The Optionee is urged to consult with his or her own tax
advisors with respect to the federal and state income taxation of the
grant, exercise and disposition of stock pursuant to the Option.
[b] Section 83(b) Election. Whenever property is transferred to a taxpayer
in connection with performance of services, and such property is subject
to a substantial risk of forfeiture (as that term is defined under
Section 83 of the Code and applicable Treasury Regulations), the
taxpayer may elect under Section 83(b) of the Code to include in gross
income (as compensation) the excess, if any, of the fair market value of
such property over the purchase price. If this Section 83(b) election
is made, no compensation income is subsequently recognized when the risk
of forfeiture lapses. If the Optionee makes a Section 83(b) election
he or she shall give timely notice to the Company of the statement
required by the Treasury Regulations under Section 83 of the Code.
[c] Withholding. Whenever compensation income is recognized by the Optionee
with respect to the Option, the Company may require (as a condition of
Option exercise) the Optionee to make a withholding tax payment to the
Company. The amount of such payment shall equal the amount of federal
and state income tax that the Company or any Subsidiary is required to
withhold with respect to the issuance of such stock. To the extent the
required withholding tax payment is not timely made by the Optionee, the
Company or any Subsidiary may either withhold such payment from the
Optionee's cash compensation or make such other arrangements as the
Board determines.
[d] Interpretation. This Agreement, as well as all questions arising
thereunder, shall be interpreted and answered in the manner consistent
with the Code and applicable Treasury Regulations relating to
nonqualified stock options.
-7-
<PAGE> 8
18. GENERAL PROVISIONS.
[a] Capital Changes. The number of shares and purchase price of the
Optioned Shares subject to the Option shall not change in the event of
any change to the shares of Stock or to any other class or series of
capital stock of the Company or any rights related thereto, whether by
reason of recapitalization, change in conversion rates, stock dividend,
stock split, combination of shares, exchange of shares, change in
corporate structure or otherwise, except that appropriate adjustments
shall be made by the Board in the number of shares and purchase price of
the Optioned Shares subject to the Option [i] prior to the first
Qualified Public Offering for any stock dividend, stock split or similar
transaction, as determined by the Board, declared or made with respect
to all shares of capital stock of the Company prior to, but in
connection with, such Qualified Public Offering, as determined by the
Board, and [ii] after the first Qualified Public Offering for any stock
dividend, stock split or similar transaction, as determined by the
Board. If any of the foregoing adjustments shall result in a fractional
share, the fraction shall be disregarded, and the Company shall have no
obligation to make any cash or other payment with respect to such a
fractional share.
[b] Leave of Absence. For purposes of this Agreement, employment of the
Optionee shall be treated as continuing intact while such person is on
sick leave, military leave or other bona fide leave of absence if the
period of such leave does not exceed ninety days. If such person's
leave exceeds ninety days, employment shall be treated as terminated for
purposes of this Agreement on the ninety-first day of such leave unless
such person's right of continued employment is guaranteed either by
statute or contract.
[c] Delivery. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following
mailing by U.S. certified mail, postage prepaid, return receipt
requested, addressed to the recipient's then current mailing address.
Any corporate officer or other authorized agent may receipt for any
notice or document on behalf of the Company.
[d] Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages
by reason of any breach of the provisions of this Agreement and to
exercise all other rights existing in its favor. The parties hereto
agree and acknowledge that money damages would not be an adequate remedy
for any breach of the provisions of this Agreement by the Optionee or
any Permitted Transferee, and the Company may in its sole discretion
apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief in order to enforce or
prevent any such breach of this Agreement, including, without
limitation, a breach of any provisions of the transfer restriction
contained in Section 7
[e] Actions of Board. Any determination by the Board as to any question
with respect to this Agreement will be final and binding on the
Optionee. All actions taken and all interpretations and determinations
made by the Board in good faith shall be final and binding upon the
Optionee, the Company and all other interested persons. In addition to
any other rights of indemnification, each Board member shall be
indemnified by the Company against reasonable expenses (including
attorneys' fees) actually and necessarily incurred in connection with
the
-8-
<PAGE> 9
defense of any action, suit or proceeding (or in connection with any
appeal) to which such person may be a party by reason of an action
taken, or any failure to act, in connection with this Agreement and the
Stock Option granted under it. This indemnification shall further
extend to all amounts paid by any Board member either in a settlement
approved by independent legal counsel selected by the Board or pursuant
to a judgment in any such action, suit or proceeding, provided that the
Board member acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Company. Any action taken
by the Board under this Agreement may be made without notice or meeting
of the Board in a writing signed by all members of the Board.
[f] Subsidiary. Any reference to a Subsidiary means any corporation in
which the Company owns at least 80% of the total voting power and value
of its stock.
[g] Amendment. This Agreement may be amended only by a written instrument
signed by both parties.
[h] Binding Effect. This Agreement is binding upon, and inures to the
benefit of, the parties and their respective heirs, legal
representatives and permitted successors and assigns.
[i] Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to its subject matter, and it supersedes all
prior written and oral agreements, including, without limitation, the
Letter Agreement.
[j] No Waiver. No waiver of any default under this Agreement will be
considered valid unless in writing, and no such waiver will be deemed a
waiver of any subsequent default of the same or similar nature.
[k] Indemnification. Each party hereby indemnifies and agrees to hold
harmless the other from any liability, cost or expense arising from or
related to any act or failure to act of such party which is in violation
of this Agreement.
[l] Counsel. Each party has had the opportunity to obtain separate counsel
of choice. The Company expressly disclaims that it is giving any tax
advice to the Optionee with respect to the grant or exercise of the
Option or to any disposition of the Optioned Shares or any Shares. The
Optionee acknowledges and accepts this disclaimer.
[m] Originals. This Agreement is signed in two original documents, one to
be delivered to each party.
[n] Governing Law. This Agreement will be construed and enforced in
accordance with the laws of the State of Colorado.
[o] 30-Day Requirement. This Agreement will automatically terminate if the
Optionee fails to deliver an original of this Agreement to the Company
within thirty days after it has been delivered to the Optionee (unless
the Board otherwise determines).
-9-
<PAGE> 10
The Company and the Optionee have signed this Agreement effective as of the
date first above written, notwithstanding the actual date of signing.
RENTX INDUSTRIES, INC.
February 18, 1997 By: /s/ [ILLEGIBLE]
- --------------------- -----------------------------------------
Date Title: EVP
---------------------------------------
OPTIONEE:
February 18, 1997 /s/ [ILLEGIBLE]
- --------------------- ---------------------------------------------
Date
- --------------------- ---------------------------------------------
Date Signature of Optionee's spouse (if Section
17 is applicable)
- --------------------- ---------------------------------------------
Date Signature of Permitted Transferee (pursuant
to Section 8)
-10-
<PAGE> 11
EXHIBIT A
INVESTMENT LETTER
[MANAGEMENT]
[See exhibit 10.27]
<PAGE> 12
EXHIBIT B
CLASS B COMMON STOCK
VOTING TRUST AGREEMENT
[MANAGEMENT]
[See exhibit 10.27]
<PAGE> 13
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is entered
into effective as of November 11, 1996 between RentX Industries, Inc., a
Delaware corporation (the "Employer"), and Arnold A. Bernstein (the
"Employee").
Recitals
The Employee is the President of the Employer. The execution
and delivery of this Agreement is a condition precedent to the Company
executing and delivering two Restated Stock Option Agreements dated of
approximately even date herewith (the "Option Agreements") and granting the
Employee stock options thereunder.
Agreement
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the parties agree
as follows:
I. DEFINITIONS
In addition to the terms defined elsewhere in this Agreement,
the following terms will have the meanings set forth below:
1.1. "Affiliate" means, with respect to any Person, (i) any
Person in which such Person directly or indirectly holds an equity or profits
interest, (ii) any Person controlling, controlled by or under common control
with such Person, (iii) any director, executive officer, partner or trustee of
such Person, (iv) any member of the immediate family of such Person, (v) any
trust in which a substantial portion of the beneficial interest is held by one
or a combination of the foregoing Persons or (vi) any Person to whom such
Person provides or has provided financial assistance. As used in this
definition, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
1.2. "Business" means (i) the businesses conducted or planned
to be conducted by the Employer at any time during the Employee's employment by
the Employer and (ii) any business reasonably related or incident to, or
constituting a reasonable extension of, such businesses, whether or not the
Employer has been engaged therein prior to, or is engaged therein as of, the
date on which the Employee's employment by the Employer terminates so long as
on such date the Employer has plans to thereafter conduct such business.
1.3. "Person" means any natural person, corporation, trust,
partnership, limited liability company, joint venture, unincorporated
organization, government or governmental agency, or other entity.
<PAGE> 14
II. NONCOMPETITION; CONFIDENTIALITY
2.1. Noncompetition.
(i) The Employee acknowledges that the Employer's
business is intended to be nationwide, and agrees that any activity by the
Employee anywhere in the United States within the scope of the Business would
unfairly damage the Employer and the Business. Therefore, the Employee
covenants and agrees that during the term of the Employee's employment
hereunder and for a period ending two years after the Employee's employment
with the Employer terminates, neither the Employee nor any of the Employee's
Affiliates will engage, anywhere in the United States, directly or indirectly,
as an owner of a voting, equity or profits interest (or any option or right to
acquire a voting, equity or profits interest), director, officer, employee,
consultant, principal, agent, lender or guarantor of indebtedness or otherwise,
in any activity relating to any business that is competitive with the Business
or that is similar in any material respect to the Business.
(ii) (A) Notwithstanding the provisions of Section
2.1(i), this Agreement will not be deemed to prohibit the Employee or the
Employee's Affiliates from "beneficially owning" (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended) equity securities
of another Person engaged in an activity that, if engaged in by the Employee or
the Employee's Affiliates, would be prohibited by Section 2.1(i), so long as
the equity securities so owned by the Employee and the Employee's Affiliates
(including any such equity securities owned by any "associate" of the Employee
and the Employee's Affiliates within the meaning of Rule 12b-2 under the
Securities Exchange Act of 1934, as amended) are of a class of equity security
registered under the Securities Exchange Act of 1934, as amended, and do not
represent, in the aggregate, more than 2% of the voting power of all
outstanding equity securities of, or more than 2% of the profits interest in,
the issuer thereof so long as neither the Employee nor the Employee's
Affiliates has any other involvement with such other Person.
(B) Notwithstanding the provisions of Section
2.1(i), this Agreement will not be deemed to prohibit any child of the Employee
from being employed by any business that is competitive with the Business or
that is similar in any material respect to the Business. Any child so employed
shall not be subject to Section 2.3.
(iii) The Employee and the Employer intend that the
covenant contained in Section 3.1(i) be deemed to be a series of separate
covenants made by the Employee, one for each state of the United States and
each identical to the terms of the covenant contained in Section 2.1(i).
2.2. No Competitive Hiring. The Employee covenants and agrees
that during the term of the Employee's employment hereunder and for a period of
two years after the date the Employee's employment with the Employer
terminates, the Employee will not, and will cause each of the Employee's
Affiliates not to, directly or indirectly solicit for employment any employee,
officer or agent of the Employer (except any employee whose employment by the
Employer has terminated) without the Employer's prior written consent.
2.3. Corporate Opportunities. The Employee covenants and
agrees that during the term of the Employee's employment by the Employer and
for a period of one year after the date the
2
<PAGE> 15
Employee's employment with the Employer terminates, the Employee will, and will
cause the Employee's Affiliates to, promptly refer to the Employer any
information or inquiry received by the Employee or any of the Employee's
Affiliates concerning any potential business opportunity involving the
Business.
2.4. Confidential Information. The Employee acknowledges that
information, observations and data obtained by the Employee and the Employee's
Affiliates concerning the Business or the business or affairs of the Employer
constitute confidential information, are trade secrets, are the property of the
Employer and are essential and confidential components of the Employer's
business. The Employee will not, and will cause the Employee's Affiliates not
to, directly or indirectly disclose to any Person or use any of such
information, observations or data, except to the extent that (i) any such
information, observations or data becomes generally known to and available for
use by the public other than as a result of disclosure by any Person owing a
duty of confidentiality to the Employer or (ii) the Employee or the Employee's
Affiliates are required to do so by applicable law, regulation or order of a
governmental agency or court of competent jurisdiction. Immediately upon
termination of the Employee's employment with the Employer, the Employee will
deliver to the Employer all memoranda, notes, plans, records, reports, and
other documents and information and all copies thereof in any tangible form
relating to the Business or the business and affairs of the Employer which the
Employee may then possess or have under the Employee's control and will destroy
all of such information in intangible form which is in the Employee's
possession or under the Employee's control.
2.5. Inventions. For purposes of this Section 2.5,
"Invention" means any invention, improvement, discovery or idea (whether
patentable or not, and including those which may be subject to copyright
protection) relating to the Business which are generated, conceived or reduced
to practice by the Employee alone or in conjunction with others, during or
after normal business hours, whether before or during the term of this
Agreement, and all associated rights to patents, copyrights and applications
therefor. The Employee agrees promptly to disclose to the Employer in writing
all Inventions. All Inventions will be the exclusive property of the Employer
and hereby are assigned to the Employer. The Employee will, at the Employer's
reasonable expense, provide the Employer with all assistance it requires to
protect, perfect and use its rights to and its interest in Inventions anywhere
in the world and to vest in the Employer such rights and interest.
2.6. Return of Documents, Etc. All documents and tangible
items provided to the Employee by the Employer or created by the Employee in
connection with the Employee's employment, together with all copies,
recordings, abstracts, notes or reproductions of any kind made from or about
such documents and tangible items or the information they contain, are the
property of the Employer and promptly will be returned to the Employer
immediately upon termination of the Employee's employment.
III. MISCELLANEOUS
3.1. Specific Performance. The Employer and the Employee
acknowledge and agree that any breach of the Employee's covenants set forth in
Section II hereof will result in irreparable damage to the Employer for which
there will be no adequate remedy at law. Therefore, the Employer and the
Employee agree that the Employer may in its sole discretion seek temporary
3
<PAGE> 16
and permanent court orders enjoining any breach of such covenants, without
prejudice to any other right or remedy to which the Employer may be entitled at
law, in equity or under this Agreement.
3.2. Arbitration. Except as set forth in Section 3.1, any
disputes arising under or in connection with this Agreement, including, without
limitation, those involving claims for specific performance or other equitable
relief, will be submitted to binding arbitration under the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA Rules")
under the authority of federal and state arbitration statutes, and shall not be
the subject of litigation in any forum. EXCEPT AS SET FORTH IN SECTION 3.1,
EACH PARTY, BY SIGNING THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY
WAIVES ANY RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR
OTHER FORUMS, INCLUDING THE RIGHT TO JURY TRIAL. The arbitration will be
conducted only in Denver, Colorado, before a single arbitrator from the staff
of the Judicial Arbiter Group, Inc. ("JAG") selected by the parties to such
arbitration (or, if JAG is no longer in existence, before a single arbitrator
selected by the parties in accordance with the AAA Rules) or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators selected
from the staff of JAG (or, if JAG is no longer in existence, before a panel of
three arbitrators selected in accordance with the AAA Rules), one selected by
the Employee, one selected by the Employer and the third selected by the other
two arbitrators. The arbitrators shall have full authority to order specific
performance and award damages and other relief available under this Agreement
or applicable law, but shall have no authority to add to, detract from, change
or amend the terms of this Agreement (except as otherwise contemplated by
Section 3.5) or existing law. All arbitration proceedings, including
settlements and awards, shall be confidential. The decision of the arbitrators
will be final and binding, and judgment on the award by the arbitrators may be
entered in any court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT
TO ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE.
3.3. Attorneys' Fees and Costs. The prevailing party or
parties in any arbitration or in any other action to enforce this Agreement
will be entitled to all reasonable costs and expenses, including attorneys'
fees and fees and expenses of the arbitrators, incurred in connection
therewith.
3.4. Binding Contract. The mutual reliance by the Employer
and the Employee upon the existence of this Agreement as a condition precedent
to their obligations to consummate the transaction contemplated by the Option
Agreements will constitute sufficient consideration for the validity and
enforceability of each of its provisions.
3.5. Severability. The Employer and the Employee agree that
the terms of this Agreement, and in particular the restrictions on the Employee
set forth in Section II, are reasonable and fair in light of the transactions
contemplated hereby and by the Option Agreements. Whenever possible each
provision of this Agreement will be interpreted so as to be fully effective and
valid under applicable law. If any provision of this Agreement is determined to
be invalid, illegal or unenforceable in any respect as written, such provision
will be automatically modified only to the minimum extent necessary to make it
enforceable and the provision as so modified will be enforced, without
invalidating any other provision of this Agreement (it being the intent of the
parties that, if Section 2.1(i) is not enforceable as written, Section 2.1(i)
shall be enforceable with respect to each state of the United States in which
the Employer owns rental equipment stores as of the date on which the
Employee's employment by the Employer terminates). If any provision contained
in this
4
<PAGE> 17
Agreement is determined to be void or unenforceable against the Employee in
whole or in part, it will not be deemed to affect or impair the validity of any
other provision of this Agreement or the validity thereof with respect to any
other party. This Agreement constitutes a fully negotiated agreement between
the parties, each with the aid and assistance of legal counsel. The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent and will be construed and interpreted as though
drafted by all the parties to this Agreement.
3.6. Extension of Periods. The periods of time set forth in
Section II of this Agreement will be extended by any period of time during
which the Employee or any of the Employee's Affiliates is in breach of any term
of this Agreement.
3.7. Waiver. Any failure by the Employer to insist upon
strict compliance with any term, covenant or condition hereof will not be
deemed to be a waiver of such term, covenant or condition, nor will the
relinquishment of any right or power hereunder by the Employer at any one or
more times be deemed a waiver or relinquishment of such right or power by the
Employer at any other time or times.
3.8. Assignment. This Agreement will inure to the benefit of
and be enforceable by the parties and their successors and assigns, but will
not be assignable or delegable in whole or in part by the Employee.
3.9. Headings. The headings contained in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
3.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original but all
of which together shall constitute but one agreement.
3.11. Complete Agreement. This Agreement embodies the
complete agreement and understanding between the parties and supersedes and
preempts any prior understandings, agreements or representations by the
parties, written or oral, which may relate to the subject matter hereof.
3.12. CHOICE OF LAW. THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF THE
STATE OF COLORADO WITHOUT REFERENCE TO ANY CONFLICT OF LAW PRINCIPLES.
3.13. Notices. All notices hereunder shall be in writing. Any
notice hereunder shall be deemed duly given if it is sent by registered or
certified mail, return receipt requested, postage prepaid, or by courier,
telecopy or facsimile, and addressed to the intended recipient as follows: (i)
if to the Employee: 1271 LAFATYEET DENVER, CO. 80218, Telecopy (303) 512-2028;
or (ii) if to the Employer: RentX Industries, Inc., 1522 Blake Street, Denver,
Colorado 80202, Attn: Craig J. Zoellner, Telecopy: (303) 620-9016. Notices will
be deemed given three days after mailing if sent by certified mail, when
delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Either party may change
the address to
5
<PAGE> 18
which notices hereunder are to be delivered by giving the other party notice in
the manner herein set forth.
IN WITNESS WHEREOF, the parties have hereunto set their hands
effective as of the date first above written, notwithstanding the actual date
of signing.
RENTX INDUSTRIES, INC.
Dated: February 18, 1997 By: /s/ Gary J. Kulesza
-- ----------------------------
Name: Gary J. Kulesza
---------------------------
Title: EVP
--------------------------
Dated: February 17, 1997 /s/ Arnold A. Bernstein
-- ---------------------------------
Arnold A. Bernstein
6
<PAGE> 1
EXHIBIT 10.27
RESTATED NONQUALIFIED STOCK OPTION AGREEMENT [MANAGEMENT-VESTED]
This RESTATED NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made
effective as of the 11th day of November, 1996, between RENTX INDUSTRIES, INC.,
a Delaware corporation (the "Company"), and Arnold A. Bernstein (the
"Optionee"). In consideration of the mutual promises set forth in this
Agreement, we agree as follows:
1. OPTION GRANT. Pursuant to the letter agreement dated November 11, 1996
between the Company and the Optionee (the "Letter Agreement") and subject to
the terms and conditions of this Agreement (including, without limitation those
relating to "community property" and related matters set forth in Section 17),
the Company grants to the Optionee the right and option (the "Option") to
purchase an aggregate of 38,462 shares (the "Optioned Shares") of its nonvoting
Class B Common Stock (the "Stock") pursuant to the terms set forth below;
provided, however, that if, pursuant to the Company's certificate of
incorporation, as amended, each share of the Company's issued and outstanding
Class B Common Stock is reclassified and changed into one share of Class A
Common Stock and the outstanding rights to receive Class B Common Stock from
the Company become outstanding rights to acquire Class A Common Stock on a
share-for share-basis, then the term "Stock" shall also refer to such shares of
Class A Common Stock). This Option grant is made as a matter of separate
agreement and not in lieu of regular salary. The date on which this Option was
granted was November 11, 1996 (the "Grant Date"). On January 30, 1997, the
Company's Certificate of Incorporation was amended to increase the authorized
number of shares of nonvoting Class B Common Stock from 12,350 shares to
192,308 shares. The Option and the number of Optioned Shares set forth in this
Agreement have been restated to reflect such amendment to the Company's
Certificate of Incorporation. As a result, the Optioned Shares represent
shares of the authorized nonvoting Class B Common Stock of the Company as it
exists following such amendment.
2. STOCK OPTION PRICE. The purchase price of the Optioned Shares is $0.15 per
share (the "Stock Option Price").
3. VESTING; TIME OF EXERCISE. The Optionee's right to exercise the Option and
acquire 100% of the Optioned Shares is fully vested as of the Grant Date.
Subject to the provisions of Sections 13, 14 and 16, the Option may be
exercised at any time or times prior to 5:00 p.m., Colorado time, on November
11, 2006.
4. MANNER OF EXERCISE. The Option is exercisable by written notice to the
Company, signed by the Optionee. Such notice must set forth: [a] the election
to exercise the Option and accept the Company's offer, [b] the number of
Optioned Shares to which such exercise relates, and [c] a date at least three,
but no more than five, days after the giving of such notice on which payment of
the Stock Option Price will be made. Such notice must either be actually
delivered to the Company or sent by certified mail to the Company at 1522 Blake
Street, Denver, Colorado, 80202, Attn: Craig J. Zoellner, Vice President (or at
such other address as the Company may direct). Upon exercise of the Option by
giving written notice to the Company, the Optionee will be personally liable to
acquire the Optioned Shares as stated in such notice.
5. CLOSING ON SHARE ISSUANCE. On the date specified in the written notice of
exercise (the "Closing Date"), the Optionee will deliver to the Company [a] the
Stock Option Price for all
<PAGE> 2
Optioned Shares being acquired pursuant to the Option, [b] the Optionee's
signed investment letter in the form of the attached Exhibit A (or in such form
as the Board of Directors of the Company (the "Board") may from time to time
subsequently determine), [c] the Optionee's signed Class B Common Stock Voting
Trust Agreement in the form of the attached Exhibit B (or in such form as the
Board may from time to time subsequently determine) and [d], upon issuance by
the Company, the stock certificate representing the Optioned Shares, duly
endorsed for transfer to the trustee under the Class B Common Stock Voting
Trust Agreement (in return for which the Optionee shall receive a Voting Trust
Certificate representing the Optioned Shares). All of the provisions of this
Agreement, including, without limitation, Sections 7 through 18, will apply to
each Voting Trust Certificate issued under the Class B Common Stock Voting
Trust Agreement in respect of any Shares (as defined below). Payment will be
made in cash, either by personal check which clears in the ordinary course, by
bank cashier's check or by certified check (in all cases, in immediately
available funds). Any other method of payment may be made only if acceptable
to the Board, in its discretion. Notwithstanding the above, the Company shall
not be obligated to deliver any Optioned Shares unless and until, in the
opinion of the Company's counsel, there has been compliance with all applicable
federal and state laws and regulations and only when all other legal matters in
connection with the issuance and delivery of such Optioned Shares have been
approved by the Company's counsel. The Company shall use its best efforts to
effect any such compliance, and the Optionee shall take any such action
reasonably requested by the Company; provided, however, that in no event shall
the Company be required to file a registration statement under the Securities
Act of 1933 or any state securities law to satisfy its obligation to use its
best efforts to effect such compliance. The Optionee shall have the rights of
a shareholder of the Company only as to shares actually acquired by and issued
to the Optionee under this Agreement.
6. NONASSIGNABLE OPTION. Neither the Option nor any other rights acquired by
the Optionee under this Agreement are assignable or transferable by the
Optionee. Any sale, assignment, transfer, pledge or other disposition of any
Option contrary to the provisions of this Agreement, and any levy of any
attachment or similar process upon any Option, will be null and void. Upon the
occurrence of such an event, the Board may, in its discretion, terminate the
Option. The Option may be exercised only during the Employee's lifetime,
except as otherwise specifically provided in Section 13.
7. SHARE TRANSFER RESTRICTION. Except for Permitted Transfers (as defined in
Section 8) and unless a Release Event (as defined below) has occurred, none of
the Optioned Shares, any shares of capital stock of the Company issued in
respect of the Optioned Shares upon any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, change in
corporate structure or otherwise, nor any right, title or interest therein,
whether represented by the Voting Trust Certificate or otherwise (the Optioned
Shares, all such other shares, and all right, title and interest therein being
referred to collectively as the "Shares"), may be sold, assigned, transferred,
pledged, or otherwise disposed of or encumbered, voluntarily or involuntarily,
by act of the Optionee or the Optionee's Permitted Transferee or by operation
of law, including, without limitation, by bequest or the laws of descent and
distribution (any of such events being referred to as a "Transfer"), without
the Company's prior written consent and upon such terms and conditions as the
Company may determine. Any attempted transfer of any Shares contrary to the
preceding sentence will be null and void. Nevertheless, the restriction on
transfer of the Shares set forth in this Section 7 will terminate and be of no
further force and effect upon the occurrence of any of the following events
(each of which is
-2-
<PAGE> 3
referred to as a "Release Event"): [a] the closing of any Qualified Public
Offering (as defined below), [b] the closing of the sale by the Company of all
or substantially all of its assets (other than to any entity of which the
majority of the voting power of the ownership interests therein is held,
immediately prior to or immediately after such sale, by the persons who
immediately prior to such transaction hold a majority of the voting power of
the ownership interests in the Company) (a "Non-Affiliate Asset Sale"), or [c]
the closing of the sale of the Company substantially in its entirety by [i]
merger or consolidation (other than with an entity of which the majority of the
voting power of the ownership interests therein is held, immediately prior to
or immediately after such transaction, by the persons who immediately prior to
such transaction hold a majority of the voting power of the ownership interests
in the Company) (a "Non- Affiliate Merger") or [ii] the sale by the
stockholders of the Company of all of the outstanding capital stock (other than
to any entity of which the majority of the voting power of the ownership
interests therein is held, immediately prior to or immediately after such sale,
by the persons who immediately prior to such transaction hold a majority of the
voting power of the ownership interests in the Company) (a "Non-Affiliate Stock
Sale") (or by any combination of the foregoing).
For purposes of this Agreement: [a] "Qualified Public Offering" means
the sale in an underwritten public offering or a series of public offerings,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
of Common Stock, which results in public ownership of not less than 25% of the
Fully Diluted Common Stock of the Company, which shares of Common Stock are
listed upon the New York Stock Exchange, the American Stock Exchange or are
approved for quotation on the NASDAQ National Market and which offerings shall
have resulted in the receipt by the Company of aggregate cash proceeds (after
deduction of underwriting discounts and the costs associated with the
offerings) of at least $8 million and with the average price in such offering
or offerings reflecting a valuation of the Fully Diluted Common Stock
(excluding shares being issued in the offering or offerings) aggregating at
least $30 million; [b] "Common Stock" means the Class A Common Stock and the
Class B Common Stock of the Company; [c] "Common Stock Equivalents" means
(without duplication with any other Common Stock or Common Stock Equivalents)
rights, warrants, options (including, without limitation, employee stock
options), convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock and securities convertible or
exchangeable into Common Stock, whether at the time of issuance or upon the
passage of time or the occurrence of some future event, including (without
limitation) the Series A Preferred Stock and the Series B Preferred Stock of
the Company; and [d] "Fully Diluted Common Stock" means, at any time, the then
outstanding Common Stock of the Company plus (without duplication) all shares
of Common Stock issuable, whether at such time or upon the passage of time or
the occurrence of future events, upon the exercise, conversion or exchange of
all then outstanding Common Stock Equivalents.
8. PERMITTED TRANSFEREES. Any Optionee may transfer the Shares held by the
Optionee to the Optionee's spouse or children, to any other shareholder of the
Company, or to any employee of the Company or a Subsidiary of the Company, by
gift, by bequest, by the laws of descent and distribution, or by operation of
law in the case where the Optionee and the Optionee's Permitted Transferee (as
defined below) hold Shares as joint tenants with right of survivorship;
provided, however, that in all of the foregoing cases (each of which is
referred to as a "Permitted Transfer") the Optionee must first give notice to
the Company of such
-3-
<PAGE> 4
Transfer and the transferee (the "Permitted Transferee") first must agree in
writing to be a party to and bound by the terms and conditions of this
Agreement (including by execution of the signature page to this Agreement) and
an original of such writing must be delivered to the Company. Each Permitted
Transferee acknowledges and agrees that, upon acceptance of Shares from the
Optionee, the following provisions will apply: [a] the transfer restrictions
and other obligations applicable to the Optionee under this Agreement, as well
as the agreements and obligations of the Optionee under the Class B Common
Stock Voting Trust Agreement referred to in Section 5[c] will apply to and be
assumed by such Permitted Transferee with respect to the Shares owned by the
Permitted Transferee, and [b] if, as a result of the operation of Section 9,
the Optionee is (or would be) required by this Agreement to sell any Shares
held by such Optionee the Permitted Transferee agrees to sell the Shares in the
same manner and under the same terms as are applicable to the Optionee.
9. REPURCHASE RIGHT. If the Optionee's employment with the Company or any
Subsidiary is terminated for any or no reason (whether by voluntary or
involuntary act of the Optionee, the Company or any Subsidiary, including
retirement, firing, death or disability) before or after a Release Event, the
Company will have the right, but not the obligation, to purchase from the
Optionee and each Permitted Transferee all or any part of the Shares and all or
any part of the Optionee's right to acquire Optioned Shares (the Optionee's
right to acquire Optioned Shares, which is fully vested as of the date hereof,
is also referred to as the "Vested Options"), and the Optionee and each
Permitted Transferee must sell to the Company, if the Company exercises such
option, all of the Shares the Company desires to purchase and all of the Vested
Options the Company desires to purchase. The purchase price will be determined
under Section 10, and the closing will occur as provided in Section 11.
10. PURCHASE PRICE. [a] The purchase price per share payable by the
Company for the Shares will be fixed as of the effective date of termination of
the Optionee's employment with the Company or any Subsidiary (the "Termination
Date") at an amount equal to the fair market value thereof (the "Per Share
Purchase Price") determined as set forth in Section 11[b]. The purchase price
per Vested Option payable by the Company for the Vested Options will be the Per
Share Purchase Price minus the Stock Option Price for the Optioned Share
underlying such Vested Option.
[b] If, at the time the Company's repurchase
right under Section 10 becomes operative, the Shares are registered under the
Securities Act of 1934, as amended (meaning the Shares are "publicly traded"),
then the Per Share Purchase Price payable by the Company for the Shares will be
fixed as of the Termination Date at a per Share price equal to the arithmetic
mean of the market prices of the class of stock of which the Shares are a part
(the "Stock") for the 20 trading days preceding the Termination Date. For this
purpose, the market price of the Stock on each such day shall be [i] the
closing price of the Stock on the principal national securities exchange on
which it is then traded, or [ii] if the Stock is not then traded on a national
securities exchange, the closing price of the Stock reported by the National
Association of Securities Dealers, Inc. National Market System or Automated
Quotation System or its successors ("NASDAQ"), or [iii] if the closing price of
the Stock is not then reported by NASDAQ, the mean of the bid and asked prices
of the Stock reported by NASDAQ, or [iv], if bid and asked prices for the Stock
are not then reported by NASDAQ, the mean of the bid and asked prices of the
Stock reported by the National Quotation Bureau, Inc. or its successor.
-4-
<PAGE> 5
If, at the time the Company's repurchase right under Section 10 becomes
operative, the Shares are not registered under the Securities Exchange Act of
1934, as amended, then the Per Share Purchase Price payable by the Company for
the Shares will be fixed as of the Termination Date and determined in good
faith by the Board of Directors using any reasonable valuation method, with
the Board's objective being to set the price at the price at which a Share
would change hands between a willing buyer and a willing seller, neither being
under any compulsion to buy or to sell and both having reasonable knowledge of
relevant facts including rights and restrictions on the Shares or the class of
stock of which they are a part.
11. CLOSING OF REPURCHASE. The closing of any purchase of Shares and/or
Vested Options by the Company under this Agreement will occur at a meeting of
the Company and the Optionee and/or the Permitted Assigns, as appropriate, on a
date selected by the Company and noticed to the Optionee and/or the Permitted
Assigns, as appropriate, which will be not later than the 120th day following
the Termination Date at 10:00 a.m. Colorado time at the Company's office in
Denver, Colorado (unless otherwise agreed by the Company and the Optionee
and/or the Permitted Transferees, as appropriate). At the meeting, the Company
will make payment for the Shares and/or Vested Options and the Optionee and/or
the Permitted Transferees, as appropriate, will deliver certificates
representing the Shares, duly endorsed for transfer. If the Shares so
purchased by the Company are then subject to the Class B Common Stock Voting
Trust Agreement, the Trustee thereunder is authorized and directed to deliver
to the Company stock certificates representing such Shares, against receipt of
payment therefor, and to deliver such payment to the Optionee upon delivery by
the Optionee to the Company of the Voting Trust Certificate representing such
Shares. Payment for the Shares and/or Vested Options will be made in cash or
by the Company's check or checks which clear in the ordinary course. All
notices under this Section to the Optionee or the Permitted Transferees, as
appropriate, will be in writing and will be deemed to have been duly given when
delivered in person (by express courier or otherwise), by telecopier or three
days after being deposited in the United States mail, certified mail, return
receipt requested, first class postage prepaid, to the Optionee or the
Permitted Transferees, as appropriate, at 1271 Lafayette, Denver, CO 80218,
or to such other address as the Optionee or the Permitted Transferees, as
appropriate, will have specified by notice in writing to the Company.
12. STOCK LEGEND. Except to the extent that the Board determines to add or
revise the restrictive legend, all stock and voting trust certificates
evidencing Shares will be legended as follows by the Company:
The shares represented by this certificate are subject to, and are
transferrable only on compliance with, a Nonqualified Stock Option
Agreement dated as of November 11, 1996 between RentX Industries, Inc.
and the shareholder named on the face of this certificate, a copy of
which is on file with, and may be obtained from, RentX Industries,
Inc.
13. EMPLOYMENT TERMINATION. If the Optionee's employment with the Company or
any Subsidiary is terminated for any or no reason (whether by voluntary or
involuntary act of the Optionee, the Company or any Subsidiary, including
retirement, firing, death or disability), the Option will terminate and be of
no further force or effect; provided, however, that the Option
-5-
<PAGE> 6
shall remain exercisable for 60 days from such termination of employment; and,
provided, further, that in the event the Option is exercised within such 60-day
period, the Optionee and the Optionee's heirs, legal representatives and any
other person entitled to exercise the Option in the Optionee's stead shall, if
and to the extent the Company exercises its rights under Section 9, immediately
sell Shares and Vested Options to the Company in accordance with Section 9.
14. ACCELERATION OF EXPIRATION OF OPTION PERIOD. Notwithstanding anything to
the contrary contained in this Agreement, in the event [a] that the Company
proposes to engage in a Non-Affiliate Asset Sale, [b] that it is proposed that
the Company be sold substantially in its entirety by a Non-Affiliate Merger or
by a Non-Affiliate Stock Sale (or any combination of the events described in
this [b]), or [c] that any transaction is proposed that would result in a
change in the majority ownership of the Company (whether as a result of the
sale of outstanding stock or the issuance of new stock, other than in a public
offering registered under the Securities Act) (each of [a], [b] and [c] being
referred to herein as an "Acceleration Event"), the Company may, at its option,
notify the Optionee of such proposed Acceleration Event and require the
Optionee to elect, within 5 days after such notice, to either exercise the
Option or allow it to expire upon the closing of the Acceleration Event. If
the Optionee does not elect to exercise any portion of the Option within that
5-day period, the unexercised portion of the Option shall automatically expire
upon such closing. If the Optionee elects to exercise the Option within that
5-day period, in whole or in part, the Optionee shall deliver to the Company
all funds and documents required by such notice or this Agreement to exercise
such Option and the Company shall hold such funds and documents and the
certificate representing the shares issuable upon such exercise until such
closing and shall then deposit and collect the payment and forward the
certificate (or such other securities or property as the Optionee may have
become entitled to as a result of owning such shares on the closing) to the
Optionee (or, in the case of an Acceleration Event which involves the
acquisition or conversion of the outstanding capital stock of the Company, to
the acquiror of such stock). If the Acceleration Event is not consummated for
any reason, then [a] such exercise shall be of no force or effect, [b] the
unexercised portion of the Option shall not expire and [c] the Company shall
return to the Optionee such funds and documents delivered to it by the Optionee
in connection with such exercise and shall cancel the related certificate. The
notice originally given to the Optionee of a proposed Acceleration Event shall
describe the proposal generally. No subsequent change in the proposal shall
require a new notice or extend or revive the 5-day exercise period.
15. SHAREHOLDER/EMPLOYEE RIGHTS. The Optionee will have the rights of a
shareholder with respect to any Shares subject to the Option only after such
Shares are issued to such person following exercise of the Option. Nothing in
this Agreement confers on the Optionee any right to continue in the employ of
the Company or any Subsidiary or interferes in any way with the right of the
Company or any Subsidiary at any time to terminate or modify the terms or
conditions of the Optionee's employment.
16. COMMUNITY PROPERTY MATTERS. If the Optionee, on or after the Grant Date,
resides in a state or other jurisdiction the laws of which determine the
interests of spouses in property on a "community property" or similar basis,
the grant of the Option and the Optionee's rights hereunder shall not be
effective unless and until the Optionee's spouse executes and delivers a
counterpart to the signature page hereto to the Company. The Optionee's spouse
shall be
-6-
<PAGE> 7
bound by the terms and conditions of this Agreement, including, without
limitation, those set forth in Sections 5 through 17.
17. TAX MATTERS.
[a] Tax Status. The Option granted under this Agreement is for
nonqualified stock options (that is, options that do not qualify as
incentive stock options under the Internal Revenue Code of 1986, as
amended (the "Code"). The Optionee is urged to consult with his or
her own tax advisors with respect to the federal and state income
taxation of the grant, exercise and disposition of stock pursuant to
the Option.
[b] Section 83(b) Election. Whenever property is transferred to a
taxpayer in connection with performance of services, and such property
is subject to a substantial risk of forfeiture (as that term is
defined under Section 83 of the Code and applicable Treasury
Regulations), the taxpayer may elect under Section 83(b) of the Code
to include in gross income (as compensation) the excess, if any, of
the fair market value of such property over the purchase price. If
this Section 83(b) election is made, no compensation income is
subsequently recognized when the risk of forfeiture lapses. If the
Optionee makes a Section 83(b) election he or she shall give timely
notice to the Company of the statement required by the Treasury
Regulations under Section 83 of the Code.
[c] Withholding. Whenever compensation income is recognized by the
Optionee with respect to the Option, the Company may require (as a
condition of Option exercise) the Optionee to make a withholding tax
payment to the Company. The amount of such payment shall equal the
amount of federal and state income tax that the Company or any
Subsidiary is required to withhold with respect to the issuance of
such stock. To the extent the required withholding tax payment is not
timely made by the Optionee, the Company or any Subsidiary may either
withhold such payment from the Optionee's cash compensation or make
such other arrangements as the Board determines.
[d] Interpretation. This Agreement, as well as all questions arising
thereunder, shall be interpreted and answered in the manner consistent
with the Code and applicable Treasury Regulations relating to
nonqualified stock options.
18. GENERAL PROVISIONS.
[a] Capital Changes. The number of shares and purchase price of the
Optioned Shares subject to the Option shall not change in the event of
any change to the shares of Stock or to any other class or series of
capital stock of the Company or any rights related thereto, whether by
reason of recapitalization, change in conversion rates, stock
dividend, stock split, combination of shares, exchange of shares,
change in corporate structure or otherwise, except that appropriate
adjustments shall be made by the Board in the number of shares and
purchase price of the Optioned Shares subject to the Option [i] prior
to the first Qualified Public Offering for any stock dividend, stock
split or similar transaction, as determined by the Board, declared or
made with respect to all shares of capital stock of the Company prior
to, but in connection with, such Qualified Public Offering, as
determined by the Board, and [ii] after the first Qualified Public
-7-
<PAGE> 8
Offering for any stock dividend, stock split or similar transaction,
as determined by the Board. If any of the foregoing adjustments shall
result in a fractional share, the fraction shall be disregarded, and
the Company shall have no obligation to make any cash or other payment
with respect to such a fractional share.
[b] Leave of Absence. For purposes of this Agreement, employment of the
Optionee shall be treated as continuing intact while such person is on
sick leave, military leave or other bona fide leave of absence if the
period of such leave does not exceed ninety days. If such person's
leave exceeds ninety days, employment shall be treated as terminated
for purposes of this Agreement on the ninety-first day of such leave
unless such person's right of continued employment is guaranteed
either by statute or contract.
[c] Delivery. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following
mailing by U.S. certified mail, postage prepaid, return receipt
requested, addressed to the recipient's then current mailing address.
Any corporate officer or other authorized agent may receipt for any
notice or document on behalf of the Company.
[d] Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover
damages by reason of any breach of the provisions of this Agreement
and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages would not be an
adequate remedy for any breach of the provisions of this Agreement by
the Optionee or any Permitted Transferee, and the Company may in its
sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any such breach of this Agreement,
including, without limitation, a breach of any provisions of the
transfer restriction contained in Section 7.
[e] Actions of Board. Any determination by the Board as to any question
with respect to this Agreement will be final and binding on the
Optionee. All actions taken and all interpretations and
determinations made by the Board in good faith shall be final and
binding upon the Optionee, the Company and all other interested
persons. In addition to any other rights of indemnification, each
Board member shall be indemnified by the Company against reasonable
expenses (including attorneys' fees) actually and necessarily incurred
in connection with the defense of any action, suit or proceeding (or
in connection with any appeal) to which such person may be a party by
reason of an action taken, or any failure to act, in connection with
this Agreement and the Stock Option granted under it. This
indemnification shall further extend to all amounts paid by any Board
member either in a settlement approved by independent legal counsel
selected by the Board or pursuant to a judgment in any such action,
suit or proceeding, provided that the Board member acted in good faith
and in a manner he or she reasonably believed to be in the best
interests of the Company. Any action taken by the Board under this
Agreement may be made without notice or meeting of the Board in a
writing signed by all members of the Board.
-8-
<PAGE> 9
[f] Subsidiary. Any reference to a Subsidiary means any corporation in
which the Company owns at least 80% of the total voting power and
value of its stock.
[g] Amendment. This Agreement may be amended only by a written instrument
signed by both parties.
[h] Binding Effect. This Agreement is binding upon, and inures to the
benefit of, the parties and their respective heirs, legal
representatives and permitted successors and assigns.
[i] Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to its subject matter, and it
supersedes all prior written and oral agreements, including, without
limitation, the Letter Agreement.
[j] No Waiver. No waiver of any default under this Agreement will be
considered valid unless in writing, and no such waiver will be deemed
a waiver of any subsequent default of the same or similar nature.
[k] Indemnification. Each party hereby indemnifies and agrees to hold
harmless the other from any liability, cost or expense arising from or
related to any act or failure to act of such party which is in
violation of this Agreement.
[l] Counsel. Each party has had the opportunity to obtain separate
counsel of choice. The Company expressly disclaims that it is giving
any tax advice to the Optionee with respect to the grant or exercise
of the Option or to any disposition of the Optioned Shares or any
Shares. The Optionee acknowledges and accepts this disclaimer.
[m] Originals. This Agreement is signed in two original documents, one to
be delivered to each party.
[n] Governing Law. This Agreement will be construed and enforced in
accordance with the laws of the State of Colorado.
[o] 30-Day Requirement. This Agreement will automatically terminate if
the Optionee fails to deliver an original of this Agreement to the
Company within thirty days after it has been delivered to the Optionee
(unless the Board otherwise determines).
-9-
<PAGE> 10
The Company and the Optionee have signed this Agreement effective as
of the date first above written, notwithstanding the actual date of signing.
RENTX INDUSTRIES, INC.
By:
- ---------------------------------- -----------------------------
Date Title:
---------------------------
OPTIONEE:
- --------------------------------- ---------------------------------
Date
- --------------------------------- ---------------------------------
Date Signature of Optionee's spouse
(if Section 17 is applicable)
- --------------------------------- ---------------------------------
Date Signature of Permitted Transferee
(pursuant to Section 8)
-10-
<PAGE> 11
EXHIBIT A
INVESTMENT LETTER
[MANAGEMENT]
RentX Industries, Inc.
Gentlemen:
I am an Optionee under a Restated Nonqualified Stock Option Agreement
dated ____________________ (the "Agreement") between me and RentX Industries,
Inc. I understand that RentX and its directors and officers are relying upon
the accuracy and completeness hereof in complying with their obligations under
applicable securities laws in connection with the offer, sale and issuance to
me of RentX nonvoting Class B Common Stock, $.01 par value (the "Stock").
Accordingly, I represent and warrant to and agree with RentX that:
1. I have either (please initial alternative (a) or (b) as
appropriate; if alternatives (a) and (b) are both appropriate, please initial
both and take the time to provide the information requested below as to both
alternatives so as to assist RentX in establishing exemptions from the
registration requirements of applicable securities laws):
_____ (a) a preexisting personal or business relationship with
RentX or any of its directors, officers or controlling persons; or
_____ (b) such business or financial experience either alone or
with my professional advisor(s) (see definitions below) who is/are not
affiliated with (see definitions below) or compensated by RentX or any
affiliate (see definitions below) of RentX, directly or indirectly, so as to
have the capacity to protect my own interests in connection with my acquisition
of the Stock.
For purposes of alternative (a) above, the term "preexisting personal
or business relationship" includes any relationship consisting of personal or
business contacts of a nature and duration such as would enable a reasonably
prudent purchaser to be aware of the character, business acumen and general
business and financial circumstances of the person with whom such relationship
exists. If I initialled alternative (a) above, I represent that my preexisting
personal or business relationship with RentX or any of its directors, officers
or controlling persons is as
<PAGE> 12
RentX Industries, Inc.
Page 2
follows (please describe relationship in reasonable detail, including
relationship, if any, existing outside of the employer-employee relationship):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If I have initialled alternative (b) above, I represent that (please
initial alternative (i) or (ii), as appropriate, and provide the requested
information):
_____ (i) I, without my professional advisor(s), possess the
requisite business or financial experience so as to have the capacity to
protect my own interests in connection with my acquisition of the Stock based
upon any or all of the following:
(A) My educational background, which is as
follows (please set forth names of colleges or universities attended, dates of
attendance, fields of study and degrees received, as well as any other
pertinent related information):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(B) My training and experience in business or
financial matters, which is as follows (set forth employment history during at
least the past five years, including employer, title, principal
responsibilities and years of service, as well as any other pertinent related
information):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(C) My experience in other securities
investments, which is as follows (set forth pertinent information):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 13
RentX Industries, Inc.
Page 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
_____ (ii) I, with my professional advisor(s) identified below,
possess the requisite business or financial experience so as to have the
capacity to protect my interests in connection with my acquisition of the
Stock. The professional advisor(s) (see definitions below) not affiliated with
(see definitions below) or compensated by RentX or any affiliate (see
definitions below) of RentX, directly or indirectly, whose services I have used
in evaluating the merits and risks involved in my acquisition of the Stock
is/are as follows, each of whom I hereby designate as my professional advisor
(set forth the name and address of such professional advisor(s) and describe,
based on the definition of "professional advisor" set forth below, how each
falls within such definition):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I understand that RentX may require my professional advisor(s) to provide it
with information regarding such advisor(s).
The following definitions apply to this paragraph 1:
(a) The term "professional advisor" means a person who,
as a regular part of such person's business, is customarily relied upon by
others for investment recommendations or decisions, and who is customarily
compensated for such services, either specifically or by way of compensation
for related professional services, and attorneys and certified public
accountants. The term includes but is not limited to, persons licensed or
registered as broker-dealers, agents, investment advisers, banks and savings
and loan associations.
(b) The term "affiliate" when used with respect to an
issuer of securities (in this case RentX) means a person controlling,
controlled by or under common control with, such issuer. A person controls
another person within the meaning of this definition through the possession,
direct or indirect, of the power to direct or cause the direction of the
management, policies or actions of such other person.
(c) The relationships which will render a person not
"unaffiliated" include (1) a present or intended relationship of employment,
either as an employee, employer, independent contractor or principal, (2) any
relationship within the definition of the term
<PAGE> 14
RentX Industries, Inc.
Page 4
"affiliate" or as an officer or director of an affiliate, and (3) the
beneficial ownership by the professional advisor of securities of the issuer
(in this case RentX) or its affiliates or selling agent, except that the
ownership of 1% or less of such securities shall not render a professional
advisor not unaffiliated.
2. I, and my professional advisor(s) (if applicable), have
reviewed and read the information set forth on Appendix I hereto (the
"Information"). I, and my professional advisor(s) (if applicable), understand
and am/are familiar with the Information and understand the risks inherent in
an investment in the Stock. I, and my professional advisor(s) (if applicable),
have been given a reasonable opportunity to ask questions of and receive
answers from RentX, and all persons acting on its behalf, concerning the terms
and conditions of the Agreement, the Stock and the Voting Trust Agreement,
RentX and other related matters and to obtain any additional information which
RentX possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of the Information so provided. I, and my
professional advisor(s) (if applicable), have availed myself/ourselves of such
opportunity to the full extent desired. I, and my professional advisor(s) (if
applicable), have relied upon the Information and independent investigation
made by or for me in making a decision to exercise my option and acquire the
Stock and have received no representations or warranties from RentX or any of
its officers, directors, employees or agents which are in any way inconsistent
with those contained in the Information.
3. I understand (a) that the Stock has not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of any state or other jurisdictions, (b) that the Stock is
being offered, sold and issued in reliance upon the exemptions from the
registration requirements of the Securities Act provided by Rule 701
promulgated thereunder and by exemptions from the registration requirements of
applicable state securities laws, and (c) that neither the Stock nor any
interest therein may be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Securities Act and
all applicable securities laws or pursuant to an exemption from the
registration requirements of the Securities Act and such laws, the availability
of which must be established to the satisfaction of RentX. I also understand
(a) that neither the Stock nor any interest therein can be transferred except
in accordance with the terms of, and in the limited manner described in, the
Agreement, (b) that the Stock is subject to RentX's repurchase right as set
forth in the Agreement, and (c) that the Stock is subject to the terms of the
Voting Trust Agreement. I understand that RentX has no obligation or intention
to register any of the Stock under the Securities Act or any state securities
laws and that I must bear the economic risk of holding the Stock for an
indefinite period of time. I understand that any certificate representing the
Stock and the stock transfer records of RentX will be noted indicating the
restrictions on transfer described above.
<PAGE> 15
RentX Industries, Inc.
Page 5
4. I am acquiring the Stock for investment for my own account,
and with no view to distribute the Stock or any interest therein, in whole or
in part and of record or beneficially, to any other person. I have no present
intent, agreement, understanding or arrangement to subdivide, sell, assign or
transfer all or any part of the Stock, or any interest therein, to any other
person.
5. I am an employee of RentX or its
Subsidiary,___________________, holding the position of _____________________ .
I have adequate means for providing for my current needs and possible personal
contingencies, I have no need for liquidity in my investment represented by the
Stock, and can bear the economic risk of losing the entire investment
represented by the Stock.
6. I am a resident of the State of _______________.
7. I understand that the offer, sale and issuance of the Stock to
me will be based upon my representations, warranties and agreements set forth
herein. I agree to indemnify RentX and each of its officers, directors and
shareholders for any loss, liability, damage, cost or expense (including
reasonable attorneys' fees) which is or may be incurred by any of them in
connection with the breach of any such representation, warranty or covenant by
me.
Signature:
--------------------------
Print name:
-------------------------
Date:
-------------------------------
SIGNATURE BLOCK FOR OPTIONEE'S
SPOUSE, JOINT TENANT OR OTHER
PERMITTED TRANSFEREE (PURSUANT TO THE
AGREEMENT)
Signature:
--------------------------
Print name:
-------------------------
Date:
-------------------------------
<PAGE> 16
EXHIBIT B
CLASS B COMMON STOCK
VOTING TRUST AGREEMENT
[MANAGEMENT]
THIS CLASS B COMMON STOCK VOTING TRUST AGREEMENT (the "Agreement") is
among RentX Industries, Inc., a Delaware corporation ("RentX"), Richard M.
Tyler, RentX's Vice President and Secretary who is acting under this Agreement
as the voting trustee (the "Trustee"), and the undersigned holder of RentX's
nonvoting Class B Common Stock, $.01 par value (the "Class B Stock")
("Shareholder").
Recitals
A. Simultaneously with the Shareholder's execution and delivery
of this Agreement the Shareholder is acquiring from RentX, pursuant to the
exercise of a stock option under the Restated Nonqualified Stock Option
Agreement between RentX and the Shareholder (the "Option Agreement"), the
number of shares (the "Shares") of Class B Stock set forth below such
Shareholder's name on the signature page hereto. The execution and delivery of
this Agreement is a condition to the Shareholder's acquisition of the Shares.
B. RentX's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), provides, in the manner permitted by the
Delaware General Corporation Law (the "Delaware Law"), that the Class B Stock
is nonvoting capital stock of RentX. However, in limited situations, the
Delaware Law may require the affirmative vote of the Class B Stock for approval
of certain corporate actions. In order to facilitate RentX's ability to take
all such corporate action, RentX, the Trustee and the Shareholder are entering
into this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the mutual promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Voting Trust Shares. The Shareholder's Shares shall
initially be subject to the voting trust created by this Agreement, as shall
any shares of RentX's capital stock issued in respect of the Shares upon any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares, change in corporate structure or otherwise (collectively, the
"Voting Trust Shares").
Section 2. Exchange of Voting Trust Shares for Voting Trust
Certificates. Concurrently with the Shareholder's execution and delivery of
this Agreement, RentX is delivering to the Trustee the certificate representing
all the Voting Trust Shares initially made subject to this Agreement,
registered in the name of the Trustee. The Trustee acknowledges its receipt of
such
<PAGE> 17
stock certificates and agrees to hold the Voting Trust Shares subject to the
provisions of this Agreement. Concurrently with the execution and delivery of
this Agreement, the Trustee is executing and delivering to the Shareholder a
Voting Trust Certificate in the form of attached Exhibit A, properly completed
with respect to the Voting Trust Shares. The Shareholder acknowledges receipt
of such Voting Trust Certificate. In the event the Shareholder shall, after
the Shareholder's execution and delivery of this Agreement, become entitled to
receive from RentX any additional Voting Trust Shares, RentX shall deliver to
the Trustee share certificates representing such Voting Trust Shares registered
in the name of the Trustee and the Trustee shall deliver to the Shareholder a
Voting Trust Certificate properly completed with respect to such additional
Voting Trust Shares.
Section 3. Recordkeeping. The Trustee shall maintain a record
of Voting Trust Certificates containing the name and address of the Shareholder
and the number of Voting Trust Shares represented by each certificate during
the term of this Agreement and for a period of one year thereafter. Such
record shall be open to inspection and copying during normal business hours by
holders of Voting Trust Certificates and representatives of RentX.
Section 4. Issuance of New Certificates to Trustee. The Trustee
shall surrender to the proper officer of RentX for cancellation the
certificates delivered to the Trustee from time to time pursuant to Section 2,
and shall request new certificates to be issued to it as Trustee under this
Agreement. Such certificates and the RentX stock ledger shall state that they
are issued pursuant to this Agreement. If at any time RentX capital stock
ceases to be evidenced by share certificates, the issuance of stock to the
Trustee under this Agreement shall be evidenced on the stock records of RentX
with a notation that such shares are issued pursuant to this Agreement.
Section 5. Voting and Other Rights Conferred. By executing and
delivering this Agreement, the Shareholder confers upon the Trustee the
exclusive right to exercise all voting rights pertaining to all the Voting
Trust Shares at all times prior to the termination of this Agreement. Such
voting rights may be exercised at any annual, regular or special meeting of the
shareholders of RentX and by giving written consents whenever it may be
desirable or convenient for shareholders of RentX to act by written consent
rather than at a meeting and in all proceedings in which the vote or consent,
written or otherwise, of the holders of Voting Trust Shares may be required or
authorized by law. The Trustee shall vote the Voting Trust Shares in
accordance with this Agreement and (a) in the same manner in which a majority
of the outstanding shares of RentX capital stock entitled to vote which are not
Voting Trust Shares vote with respect to matters on which RentX's outstanding
Preferred Stock votes with RentX's outstanding Common Stock as a single class
as provided in RentX's Certificate of Incorporation and (b) in the manner in
which a majority of the outstanding shares of RentX capital stock which are not
Voting Trust Shares deem appropriate on all other matters (all as determined on
an as-converted basis pursuant to RentX's Certificate of Incorporation). By
executing and delivering this Agreement, the Shareholder authorizes and directs
the Trustee to deliver to RentX stock certificates representing all Voting
Trust Shares purchased by RentX pursuant to the Option Agreement, against
receipt of payment for such Voting Trust Shares as provided in Section 11 of
the Option Agreement. The Trustee will deliver such payment to the Shareholder
upon delivery pursuant
-2-
<PAGE> 18
to the Option Agreement by the Shareholder to RentX of the Voting Trust
Certificate representing the purchased Voting Trust Shares. The Trustee is
authorized and empowered to construe this Agreement and the Trustee's
construction of the same, made in good faith, shall be final, conclusive, and
binding upon all Shareholders and all other parties interested. The Trustee
may, in the Trustee's discretion, consult with counsel to be selected and
employed by the Trustee, and the reasonable fees and expenses of such counsel
shall be an expense for which the Trustee is entitled to indemnity hereunder.
The Trustee shall incur no liability for the manner in which the Trustee
exercises or omits to exercise any of the voting rights conferred under this
Agreement, except for willful violations of the specific provisions of this
Agreement. Other than the rights specifically granted hereunder, the Trustee
shall have no legal or beneficial interest in the Voting Trust Shares.
Section 6. Indemnity, Etc. The Trustee shall be indemnified
from and against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation or other proceeding, commenced or threatened, or any claims
whatsoever) (the "Indemnified Claims") arising out of or based upon this
Agreement, or the actions or failures to act of the Trustee hereunder, except
to the extent such loss, liability, claim, damage or expense is caused by or
results from the Trustee's gross negligence or willful misconduct (as
determined by a final and unappealable order of a court of competent
jurisdiction). The Shareholder agrees that such Shareholder will indemnify and
hold harmless the Trustee from and against any Indemnified Claims resulting
from claims asserted or litigation or other proceedings commenced or threatened
by such Shareholder. In all other cases, RentX will indemnify and hold
harmless the Trustee from and against any Indemnified Claims. The
Shareholder's obligation hereunder shall survive the transfer of all or any
portions of such Shareholder's Voting Trust Shares, the termination of the
Voting Trust created herein, or the resignation or removal of the Trustee, as
shall the obligation of RentX hereunder. The Trustee shall be entitled to the
prompt reimbursement for the Trustee's out-of-pocket expenses (including
reasonable attorneys' fees and expenses) incurred in investigating, preparing
or defending against any litigation or other proceeding, commenced or
threatened, arising out of or based upon this Agreement or the actions or
failures to act of the Trustee hereunder, without regard to the outcome of such
litigation or other proceeding; provided, however, that the Trustee shall be
obligated to return any such reimbursement if the Trustee is subsequently
determined by a final and unappealable order of a court of competent
jurisdiction that the Trustee was grossly negligent or engaged in willful
misconduct in the matter in question.
Section 7. Dividends. If RentX pays or issues dividends or
makes other distributions or payments of any kind on the Voting Trust Shares,
the Trustee shall accept and receive such dividends, distributions or payments.
Upon receipt, the Trustee shall pay the same to the Shareholder, less any taxes
or other charges that the Trustee is required to pay or withhold.
Section 8. Termination and Expiration. Unless extended by a
written instrument executed by the parties to this Agreement in accordance with
the Delaware General Corporation Law, this Agreement shall terminate on the
first to occur of the following: (a) the date on which RentX
-3-
<PAGE> 19
successfully completes a Qualified Public Offering (as defined in the Option
Agreement); (b) the date on which RentX closes a Non-Affiliate Asset Sale (as
defined in the Option Agreement); or (c) the date on which a Non-Affiliate
Merger or a Non-Affiliate Stock Sale (each as defined in the Option Agreement)
closes. Upon the expiration of this Agreement, the Shareholder shall deliver
to the Trustee all the then outstanding Voting Trust Certificates issued to the
Shareholder under this Agreement. Upon receipt of such Voting Trust
Certificates, the Trustee shall deliver to the Shareholder the certificates
representing all of such Shareholder's Voting Trust Shares then held in the
name of the Trustee under this Agreement, properly endorsed or accompanied by
stock powers properly completed for transfer to the Shareholder upon the stock
ownership records of RentX.
Section 9. Trustee Ownership. Nothing contained herein shall prevent
the Trustee, in the Trustee's individual capacity, from owning shares of any
class of RentX capital stock or from exercising any rights incident to such
ownership.
Section 10. Notices. Any notice or other communication with
respect to this Agreement shall be in writing and shall be delivered either
personally, by telecopy or by United States certified mail, postage prepaid,
addressed to the parties as follows:
RentX: RentX Industries, Inc.
6000 East Evans, Suite 2-300
Denver, Colorado 80222
Attention: President
Telecopy: (303) 512-2000
Trustee: Richard M. Tyler
BACE Industries, LLC
1522 Blake Street
Denver, Colorado 80202
Telecopy: (303) 620-9016
The Shareholder: To the Shareholder as set forth below the
Shareholder's name on the signature pages
hereto
Any party may change its address for the purpose of this Agreement by giving
notice to the other parties in the manner stated in this Section.
Section 11. Successors and Assigns. This Agreement shall inure
to the benefit of and shall be binding upon the respective successors and
assigns of the parties and their personal representatives. In the event the
Trustee, or any successor Trustee, dies, refuses or becomes unable to act or
ceases to be employed or is removed as Trustee by RentX, each as determined by
the Board of Directors of RentX, the Board shall appoint a successor who shall
be vested with all the rights, powers, duties, and obligations of the Trustee.
RentX shall give notice to the Shareholder of the
-4-
<PAGE> 20
identity and address of the successor Trustee. This Agreement shall not
terminate, lapse or be otherwise effected by any of the events or actions
contemplated by this Section and the successor Trustee shall for all purposes
be the record owner of the Voting Trust Shares, even though they may continue
to be registered in the name of a former Trustee.
Section 12. Filing of Agreement. Immediately following the
execution of this Agreement the Trustee shall file a copy thereof in the
registered office of RentX in Delaware.
Section 13. Choice of Forum. The parties irrevocably agree that
all litigation, proceedings, actions, claims, disputes and differences arising
out of or relating to this Agreement shall be litigated in a state or federal
court of competent jurisdiction sitting within the area comprising the State of
Delaware, and the parties submit to the exclusive jurisdiction of any state or
federal court of competent jurisdiction sitting within the area comprising the
State of Delaware in relation to any such litigation, proceeding, action,
claim, dispute or difference.
Section 14. Entire Agreement; Modification. This Agreement and
its Exhibit A constitute the entire agreement among the parties and supersede
all prior negotiations, agreements and understandings, oral and written, among
the parties hereto with respect to the subject matters hereof. No modification
of this Agreement shall be valid unless made in writing and signed by the
parties hereto.
Section 15. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
INTERPRETED AND THE RIGHTS GRANTED HEREIN GOVERNED BY THE INTERNAL LAW, AND NOT
THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
-5-
<PAGE> 21
This Agreement is dated, with respect to a particular Shareholder, as
of the date set forth opposite such Shareholder's name below.
RentX Industries, Inc.
Dated: By:
---------------------------- -----------------------------------
Its:
-------------------------------
TRUSTEE
Dated:
---------------------------- --------------------------------------
----------------------
SHAREHOLDER:
Dated:
---------------------------- --------------------------------------
Name:
---------------------------------
No. of Shares:
------------------------
Address, including telecopy if applicable:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
-6-
<PAGE> 22
EXHIBIT A
VOTING TRUST CERTIFICATE
RENTX INDUSTRIES, INC.,
A DELAWARE CORPORATION
Voting Trust __________ Shares of
Certificate No. __________ Class B Common Stock
This certifies that ____________ has transferred ____________ shares
of nonvoting Class B Common Stock, $.01 par value, of RentX Industries, Inc., a
Delaware corporation ("RentX"), to ____________________, as trustee (the
"Trustee"), under and subject to the provisions of the Voting Trust Agreement
dated ________________, _____ among RentX, the Trustee (or the Trustee's
predecessor), and the Shareholder (as defined in the Voting Trust Agreement).
The holder of this Certificate takes this Certificate and the interests it
represents subject to all the terms and conditions of the Voting Trust
Agreement, and acknowledges that no voting rights shall pass to the holder
hereof by virtue of the ownership of this Certificate. The Voting Trust
Agreement is available for inspection at RentX's registered office,
_______________________________, Delaware during normal business hours.
This Certificate and the shares and interests it represents are
subject to, and are transferable only on compliance with, a Nonqualified Stock
Option Agreement dated as of _______________, 199_ between RentX and the
Certificate holder, a copy of which is on file with, and may be obtained from
RentX. Further, this Certificate and the shares and interests it represents
are transferable only on the books maintained by the Trustee for such purpose
at the principal office of the Trustee by the holder of this Certificate, in
person or by duly authorized attorney, upon the presentation and surrender of
this Certificate; and until so transferred the Trustee may treat the registered
holder of this Certificate as the absolute owner hereof for all purposes. Upon
the termination of the Voting Trust Agreement this Certificate shall be
surrendered to the Trustee by the holder hereof in exchange for the transfer to
such holder of the number of shares of stock represented by this Certificate as
provided in the Voting Trust Agreement.
RentX will furnish to the Certificate holder, upon request and without
charge, a full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of RentX stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights, so far as the same have been fixed and determined.
The securities represented by this Certificate have not been
registered under the Securities Act of 1933 or under any state securities laws.
Such securities may not be offered for sale, sold, or otherwise transferred
except pursuant to an effective registration statement under such Act and all
applicable state securities laws or pursuant to an exemption from registration
under such Act and all applicable state securities laws, the availability of
which is to be established to the satisfaction of RentX, by opinion of counsel
or otherwise.
The Trustee has executed this Certificate on , .
-------- -- ----
---------------------------------------------
(Signature of Trustee)
---------------------------------------------
(Name of Trustee)
<PAGE> 23
[FORM OF ASSIGNMENT FOR REVERSE OF VOTING TRUST CERTIFICATE]
For valued received, _______________________________ hereby sells,
assigns and transfers unto __________________________________, the within
Voting Trust Certificate and all rights and interests represented thereby, and
does hereby irrevocably constitute and appoint _______________________ attorney
to transfer such Voting Trust Certificate on the books of the within named
Trustee with full power of substitution in the premises.
DATED:
-----------------------------------------------:
-----------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.28
RESTATED NONQUALIFIED STOCK OPTION AGREEMENT [MANAGEMENT]
This RESTATED NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made
effective as of the 1st day of April, 1996, between RENTX INDUSTRIES, INC., a
Delaware corporation (the "Company"), and Gary J. Kulesza (the "Optionee"). In
consideration of the mutual promises set forth in this Agreement, we agree as
follows:
1. OPTION GRANT. Pursuant to the letter agreement dated April 1, 1996 between
the Company and the Optionee (the "Letter Agreement") and subject to the terms
and conditions of this Agreement (including, without limitation, those relating
to vesting set forth in Section 3 and those relating to "community property"
and related matters set forth in Section 17), the Company grants to the
Optionee the right and option (the "Option") to purchase an aggregate of 32,532
shares (the "Optioned Shares") of its nonvoting Class B Common Stock (the
"Stock") pursuant to the terms set forth below; provided, however, that if,
pursuant to the Company's certificate of incorporation, as amended, each share
of the Company's issued and outstanding Class B Common Stock is reclassified
and changed into one share of Class A Common Stock and the outstanding rights
to receive Class B Common Stock from the Company become outstanding rights to
acquire Class A Common Stock on a share-for share-basis, then the term "Stock"
shall also refer to such shares of Class A Common Stock). This Option grant is
made as a matter of separate agreement and not in lieu of regular salary. The
date on which this Option was granted was April 1, 1996 (the "Grant Date"). On
January 30, 1997, the Company's Certificate of Incorporation was amended to
increase the authorized number of shares of nonvoting Class B Common Stock from
12,350 shares to 192,308 shares. The Option and the number of Optioned Shares
set forth in this Agreement have been restated to reflect such amendment to the
Company's Certificate of Incorporation. As a result, the Optioned Shares
represent shares of the authorized nonvoting Class B Common Stock of the
Company as it exists following such amendment.
2. STOCK OPTION PRICE. The purchase price of the Optioned Shares is $8.00 per
share (the "Stock Option Price").
3. VESTING; TIME OF EXERCISE. The Optionee shall not have any right to
exercise the Option and acquire any of the Optioned Shares until January 31,
1999, at which time the Optionee's right to acquire 50% of the Optioned Shares
shall vest. Thereafter, on January 31 of each of 2000 and 2001, the Optionee's
right to acquire an additional 25% of the Optioned Shares shall vest.
Notwithstanding anything to the contrary contained in this Section 3, but
subject to Section 14, the Optionee's right to acquire 100% of the Optioned
Shares shall vest upon the earliest to occur of [a] immediately prior to the
closing of the sale by the Company of all or substantially all of its assets
(other than to any entity of which the majority of the voting power of the
ownership interests therein is held, immediately prior to or immediately after
such sale, by the persons who immediately prior to such transaction hold a
majority of the voting power of the ownership interests in the Company) (a
"Non-Affiliate Asset Sale"), [b] immediately prior to the closing of the sale
of the Company substantially in its entirety by merger or consolidation (other
than with an entity of which the majority of the voting power of the ownership
interests therein is held, immediately prior to or immediately after such
transaction, by the persons who immediately prior to such transaction hold a
majority of the voting power
<PAGE> 2
of the ownership interests in the Company) (a "Non-Affiliate Merger"), or [c]
immediately prior to the closing of the sale by the stockholders of the Company
of all of the outstanding capital stock (other than to any entity of which the
majority of the voting power of the ownership interests therein is held,
immediately prior to or immediately after such sale, by the persons who
immediately prior to such transaction hold a majority of the voting power of
the ownership interests in the Company) (a "Non-Affiliate Stock Sale") (each of
[a], [b] and [c] being referred to herein as a "Vesting Event"), but only if
the Optionee is an employee of the Company or any Subsidiary at the moment
prior to the occurrence of the Vesting Event. Subject to the vesting
requirements set forth above and to the provisions of Sections 13, 14 and 16,
the Option may be exercised at any time or times prior to 5:00 p.m., Colorado
time, on April 1, 2006.
4. MANNER OF EXERCISE. The Option is exercisable by written notice to the
Company, signed by the Optionee. Such notice must set forth: [a] the election
to exercise the Option and accept the Company's offer, [b] the number of
Optioned Shares to which such exercise relates, and [c] a date at least three,
but no more than five, days after the giving of such notice on which payment of
the Stock Option Price will be made. Such notice must either be actually
delivered to the Company or sent by certified mail to the Company at 1522 Blake
Street, Denver, Colorado, 80202, Attn: Craig J. Zoellner, Vice President (or at
such other address as the Company may direct). Upon exercise of the Option by
giving written notice to the Company, the Optionee will be personally liable to
acquire the Optioned Shares as stated in such notice.
5. CLOSING ON SHARE ISSUANCE. On the date specified in the written notice of
exercise (the "Closing Date"), the Optionee will deliver to the Company [a] the
Stock Option Price for all Optioned Shares being acquired pursuant to the
Option, [b] the Optionee's signed investment letter in the form of the attached
Exhibit A (or in such form as the Board of Directors of the Company (the
"Board") may from time to time subsequently determine), [c] the Optionee's
signed Class B Common Stock Voting Trust Agreement in the form of the attached
Exhibit B (or in such form as the Board may from time to time subsequently
determine) and [d], upon issuance by the Company, the stock certificate
representing the Optioned Shares, duly endorsed for transfer to the trustee
under the Class B Common Stock Voting Trust Agreement (in return for which the
Optionee shall receive a Voting Trust Certificate representing the Optioned
Shares). All of the provisions of this Agreement, including, without
limitation, Sections 7 through 18, will apply to each Voting Trust Certificate
issued under the Class B Common Stock Voting Trust Agreement in respect of any
Shares (as defined below). Payment will be made in cash, either by personal
check which clears in the ordinary course, by bank cashier's check or by
certified check (in all cases, in immediately available funds). Any other
method of payment may be made only if acceptable to the Board, in its
discretion. Notwithstanding the above, the Company shall not be obligated to
deliver any Optioned Shares unless and until, in the opinion of the Company's
counsel, there has been compliance with all applicable federal and state laws
and regulations and only when all other legal matters in connection with the
issuance and delivery of such Optioned Shares have been approved by the
Company's counsel. The Company shall use its best efforts to effect any such
compliance, and the Optionee shall take any such action reasonably requested by
the Company; provided, however, that in no event shall the Company be required
to file a registration statement under the Securities Act
-2-
<PAGE> 3
of 1933 or any state securities law to satisfy its obligation to use its best
efforts to effect such compliance. The Optionee shall have the rights of a
shareholder of the Company only as to shares actually acquired by and issued to
the Optionee under this Agreement.
6. NONASSIGNABLE OPTION. Neither the Option nor any other rights acquired by
the Optionee under this Agreement are assignable or transferable by the
Optionee. Any sale, assignment, transfer, pledge or other disposition of any
Option contrary to the provisions of this Agreement, and any levy of any
attachment or similar process upon any Option, will be null and void. Upon the
occurrence of such an event, the Board may, in its discretion, terminate the
Option. The Option may be exercised only during the Employee's lifetime,
except as otherwise specifically provided in Section 13.
7. SHARE TRANSFER RESTRICTION. Except for Permitted Transfers (as defined in
Section 8) and unless a Release Event (as defined below) has occurred, none of
the Optioned Shares, any shares of capital stock of the Company issued in
respect of the Optioned Shares upon any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, change in
corporate structure or otherwise, nor any right, title or interest therein,
whether represented by the Voting Trust Certificate or otherwise (the Optioned
Shares, all such other shares, and all right, title and interest therein being
referred to collectively as the "Shares"), may be sold, assigned, transferred,
pledged, or otherwise disposed of or encumbered, voluntarily or involuntarily,
by act of the Optionee or the Optionee's Permitted Transferee or by operation
of law, including, without limitation, by bequest or the laws of descent and
distribution (any of such events being referred to as a "Transfer"), without
the Company's prior written consent and upon such terms and conditions as the
Company may determine. Any attempted transfer of any Shares contrary to the
preceding sentence will be null and void. Nevertheless, the restriction on
transfer of the Shares set forth in this Section 7 will terminate and be of no
further force and effect upon the occurrence of any of the following events
(each of which is referred to as a "Release Event"): [a] the closing of any
Qualified Public Offering (as defined below), [b] the closing of a Non-
Affiliate Asset Sale, or [c] the closing of the sale of the Company
substantially in its entirety by a Non-Affiliate Merger or by a Non-Affiliate
Stock Sale (or by any combination of the foregoing).
For purposes of this Agreement: [a] "Qualified Public Offering" means
the sale in an underwritten public offering or a series of public offerings,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
of Common Stock, which results in public ownership of not less than 25% of the
Fully Diluted Common Stock of the Company, which shares of Common Stock are
listed upon the New York Stock Exchange, the American Stock Exchange or are
approved for quotation on the NASDAQ National Market and which offerings shall
have resulted in the receipt by the Company of aggregate cash proceeds (after
deduction of underwriting discounts and the costs associated with the
offerings) of at least $8 million and with the average price in such offering
or offerings reflecting a valuation of the Fully Diluted Common Stock
(excluding shares being issued in the offering or offerings) aggregating at
least $30 million; [b] "Common Stock" means the Class A Common Stock and the
Class B Common Stock of the Company; [c] "Common Stock Equivalents" means
(without duplication with any other Common Stock or Common Stock Equivalents)
rights, warrants, options
-3-
<PAGE> 4
(including, without limitation, employee stock options), convertible securities
or indebtedness, exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock and securities convertible or exchangeable into Common Stock,
whether at the time of issuance or upon the passage of time or the occurrence
of some future event, including (without limitation) the Series A Preferred
Stock and the Series B Preferred Stock of the Company; and [d] "Fully Diluted
Common Stock" means, at any time, the then outstanding Common Stock of the
Company plus (without duplication) all shares of Common Stock issuable, whether
at such time or upon the passage of time or the occurrence of future events,
upon the exercise, conversion or exchange of all then outstanding Common Stock
Equivalents.
8. PERMITTED TRANSFEREES. Any Optionee may transfer the Shares held by the
Optionee to the Optionee's spouse or children, to any other shareholder of the
Company, or to any employee of the Company or a Subsidiary of the Company, by
gift, by bequest, by the laws of descent and distribution, or by operation of
law in the case where the Optionee and the Optionee's Permitted Transferee (as
defined below) hold Shares as joint tenants with right of survivorship;
provided, however, that in all of the foregoing cases (each of which is
referred to as a "Permitted Transfer") the Optionee must first give notice to
the Company of such Transfer and the transferee (the "Permitted Transferee")
first must agree in writing to be a party to and bound by the terms and
conditions of this Agreement (including by execution of the signature page to
this Agreement) and an original of such writing must be delivered to the
Company. Each Permitted Transferee acknowledges and agrees that, upon
acceptance of Shares from the Optionee, the following provisions will apply:
[a] the transfer restrictions and other obligations applicable to the Optionee
under this Agreement, as well as the agreements and obligations of the Optionee
under the Class B Common Stock Voting Trust Agreement referred to in Section
5[c] will apply to and be assumed by such Permitted Transferee with respect to
the Shares owned by the Permitted Transferee, and [b] if, as a result of the
operation of Section 9, the Optionee is (or would be) required by this
Agreement to sell any Shares held by such Optionee the Permitted Transferee
agrees to sell the Shares in the same manner and under the same terms as are
applicable to the Optionee.
9. REPURCHASE RIGHT. If the Optionee's employment with the Company or any
Subsidiary is terminated for any or no reason (whether by voluntary or
involuntary act of the Optionee, the Company or any Subsidiary, including
retirement, firing, death or disability) before or after a Release Event, the
Company will have the right, but not the obligation, to purchase from the
Optionee and each Permitted Transferee all or any part of the Shares and all or
any part of the Optionee's right to acquire Optioned Shares, which immediately
prior to such termination, are vested (the Optionee's right to acquire Optioned
Shares which has so vested is referred to as the "Vested Options"), and the
Optionee and each Permitted Transferee must sell to the Company, if the Company
exercises such option, all of the Shares the Company desires to purchase and
all of the Vested Options the Company desires to purchase. The purchase price
will be determined under Section 10, and the closing will occur as provided in
Section 11.
10. PURCHASE PRICE. [a] The purchase price per share payable by the Company
for the Shares will be fixed as of the effective date of termination of the
Optionee's employment with the Company or any Subsidiary (the "Termination
Date") at an amount equal to the fair market
-4-
<PAGE> 5
value thereof (the "Per Share Purchase Price") determined as set forth in
Section 11[b]. The purchase price per Vested Option payable by the Company for
the Vested Options will be the Per Share Purchase Price minus the Stock Option
Price for the Optioned Share underlying such Vested Option.
[b] If, at the time the Company's repurchase right
under Section 10 becomes operative, the Shares are registered under the
Securities Act of 1934, as amended (meaning the Shares are "publicly traded"),
then the Per Share Purchase Price payable by the Company for the Shares will be
fixed as of the Termination Date at a per Share price equal to the arithmetic
mean of the market prices of the class of stock of which the Shares are a part
(the "Stock") for the 20 trading days preceding the Termination Date. For this
purpose, the market price of the Stock on each such day shall be [i] the
closing price of the Stock on the principal national securities exchange on
which it is then traded, or [ii] if the Stock is not then traded on a national
securities exchange, the closing price of the Stock reported by the National
Association of Securities Dealers, Inc. National Market System or Automated
Quotation System or its successors ("NASDAQ"), or [iii] if the closing price of
the Stock is not then reported by NASDAQ, the mean of the bid and asked prices
of the Stock reported by NASDAQ, or [iv], if bid and asked prices for the Stock
are not then reported by NASDAQ, the mean of the bid and asked prices of the
Stock reported by the National Quotation Bureau, Inc. or its successor. If, at
the time the Company's repurchase right under Section 10 becomes operative, the
Shares are not registered under the Securities Exchange Act of 1934, as
amended, then the Per Share Purchase Price payable by the Company for the
Shares will be fixed as of the Termination Date and determined in good faith by
the Board of Directors using any reasonable valuation method, with the Board's
objective being to set the price at the price at which a Share would change
hands between a willing buyer and a willing seller, neither being under any
compulsion to buy or to sell and both having reasonable knowledge of relevant
facts including rights and restrictions on the Shares or the class of stock of
which they are a part.
11. CLOSING OF REPURCHASE. The closing of any purchase of Shares and/or
Vested Options by the Company under this Agreement will occur at a meeting of
the Company and the Optionee and/or the Permitted Assigns, as appropriate, on a
date selected by the Company and noticed to the Optionee and/or the Permitted
Assigns, as appropriate, which will be not later than the 120th day following
the Termination Date at 10:00 a.m. Colorado time at the Company's office in
Denver, Colorado (unless otherwise agreed by the Company and the Optionee
and/or the Permitted Transferees, as appropriate). At the meeting, the Company
will make payment for the Shares and/or Vested Options and the Optionee and/or
the Permitted Transferees, as appropriate, will deliver certificates
representing the Shares, duly endorsed for transfer. If the Shares so
purchased by the Company are then subject to the Class B Common Stock Voting
Trust Agreement, the Trustee thereunder is authorized and directed to deliver
to the Company stock certificates representing such Shares, against receipt of
payment therefor, and to deliver such payment to the Optionee upon delivery by
the Optionee to the Company of the Voting Trust Certificate representing such
Shares. Payment for the Shares and/or Vested Options will be made in cash or
by the Company's check or checks which clear in the ordinary course. All
notices under this Section to the Optionee or the Permitted Transferees, as
appropriate, will be in writing and will be deemed to have been duly given when
delivered in person (by express courier or otherwise), by telecopier or three
days after being deposited in
-5-
<PAGE> 6
the United States mail, certified mail, return receipt requested, first class
postage prepaid, to the Optionee or the Permitted Transferees, as appropriate,
at 8 Desert Willow Lane, Littleton, CO 80217, or to such other address as the
Optionee or the Permitted Transferees, as appropriate, will have specified by
notice in writing to the Company.
12. STOCK LEGEND. Except to the extent that the Board determines to add or
revise the restrictive legend, all stock and voting trust certificates
evidencing Shares will be legended as follows by the Company:
The shares represented by this certificate are subject to, and are
transferrable only on compliance with, a Nonqualified Stock Option
Agreement dated as of April 1, 1996 between RentX Industries, Inc.
and the shareholder named on the face of this certificate, a copy of
which is on file with, and may be obtained from, RentX Industries, Inc.
13. EMPLOYMENT TERMINATION. If the Optionee's employment with the Company or
any Subsidiary is terminated for any or no reason (whether by voluntary or
involuntary act of the Optionee, the Company or any Subsidiary, including
retirement, firing, death or disability), the Option (including, without
limitation, any Vested Options) will terminate and be of no further force or
effect; provided, however, that any Vested Options shall remain exercisable for
60 days from such termination of employment; and, provided, further, that in
the event any Vested Options are exercised within such 60-day period, the
Optionee and the Optionee's heirs, legal representatives and any other person
entitled to exercise the Vested Options in the Optionee's stead shall, if and
to the extent the Company exercises its rights under Section 9, immediately
sell Shares and Vested Options to the Company in accordance with Section 9.
14. ACCELERATION OF EXPIRATION OF OPTION PERIOD. Notwithstanding anything to
the contrary contained in this Agreement, in the event [a] that the Company
proposes to engage in a Non-Affiliate Asset Sale, [b] that it is proposed that
the Company be sold substantially in its entirety by a Non-Affiliate Merger or
by a Non-Affiliate Stock Sale (or any combination of the events described in
this [b]), or [c] that any transaction is proposed that would result in a
change in the majority ownership of the Company (whether as a result of the
sale of outstanding stock or the issuance of new stock, other than in a public
offering registered under the Securities Act) (each of [a], [b] and [c] being
referred to herein as an "Acceleration Event"), the Company may, at its option,
notify the Optionee of such proposed Acceleration Event and require the
Optionee to elect, within 5 days after such notice, to either exercise the
Option (which exercise, if such Option is not then vested pursuant to Section
3, shall be made contingent upon the occurrence of a Vesting Event which is
also an Acceleration Event) or allow it to expire upon the closing of the
Acceleration Event. If the Optionee does not elect to exercise any portion of
the Option within that 5-day period, the unexercised portion of the Option
shall automatically expire upon such closing. If the Optionee elects to
exercise the Option within that 5-day period, in whole or in part, the Optionee
shall deliver to the Company all funds and documents required by such notice or
this Agreement to exercise such Option and the Company shall hold such funds
and documents and the certificate representing the shares issuable upon such
exercise until such closing and shall then deposit and collect the payment
-6-
<PAGE> 7
and forward the certificate (or such other securities or property as the
Optionee may have become entitled to as a result of owning such shares on the
closing) to the Optionee (or, in the case of an Acceleration Event which
involves the acquisition or conversion of the outstanding capital stock of the
Company, to the acquiror of such stock). If the Acceleration Event is not
consummated for any reason, then [a] such exercise shall be of no force or
effect, [b] no acceleration of the vesting of the Optionee's right to acquire
the Option Shares shall be deemed to have occurred, [c] the unexercised portion
of the Option shall not expire and [d] the Company shall return to the Optionee
such funds and documents delivered to it by the Optionee in connection with
such exercise and shall cancel the related certificate. The notice originally
given to the Optionee of a proposed Acceleration Event shall describe the
proposal generally. No subsequent change in the proposal shall require a new
notice or extend or revive the 5-day exercise period.
15. SHAREHOLDER/EMPLOYEE RIGHTS. The Optionee will have the rights of a
shareholder with respect to any Shares subject to the Option only after such
Shares are issued to such person following exercise of the Option. Nothing in
this Agreement confers on the Optionee any right to continue in the employ of
the Company or any Subsidiary or interferes in any way with the right of the
Company or any Subsidiary at any time to terminate or modify the terms or
conditions of the Optionee's employment.
16. COMMUNITY PROPERTY MATTERS. If the Optionee, on or after the Grant Date,
resides in a state or other jurisdiction the laws of which determine the
interests of spouses in property on a "community property" or similar basis,
the grant of the Option and the Optionee's rights hereunder shall not be
effective unless and until the Optionee's spouse executes and delivers a
counterpart to the signature page hereto to the Company. The Optionee's spouse
shall be bound by the terms and conditions of this Agreement, including,
without limitation, those set forth in Sections 5 through 17.
17. TAX MATTERS.
[a] Tax Status. The Option granted under this Agreement is for nonqualified
stock options (that is, options that do not qualify as incentive stock
options under the Internal Revenue Code of 1986, as amended (the
"Code"). The Optionee is urged to consult with his or her own tax
advisors with respect to the federal and state income taxation of the
grant, exercise and disposition of stock pursuant to the Option.
[b] Section 83(b) Election. Whenever property is transferred to a taxpayer
in connection with performance of services, and such property is subject
to a substantial risk of forfeiture (as that term is defined under
Section 83 of the Code and applicable Treasury Regulations), the
taxpayer may elect under Section 83(b) of the Code to include in gross
income (as compensation) the excess, if any, of the fair market value of
such property over the purchase price. If this Section 83(b) election
is made, no compensation income is subsequently recognized when the risk
of forfeiture lapses. If the Optionee makes a Section 83(b) election
he or she shall give timely notice to the Company of the statement
required by the Treasury Regulations under Section 83 of the Code.
-7-
<PAGE> 8
[c] Withholding. Whenever compensation income is recognized by the Optionee
with respect to the Option, the Company may require (as a condition of
Option exercise) the Optionee to make a withholding tax payment to the
Company. The amount of such payment shall equal the amount of federal
and state income tax that the Company or any Subsidiary is required to
withhold with respect to the issuance of such stock. To the extent the
required withholding tax payment is not timely made by the Optionee, the
Company or any Subsidiary may either withhold such payment from the
Optionee's cash compensation or make such other arrangements as the
Board determines.
[d] Interpretation. This Agreement, as well as all questions arising
thereunder, shall be interpreted and answered in the manner consistent
with the Code and applicable Treasury Regulations relating to
nonqualified stock options.
18. GENERAL PROVISIONS.
[a] Capital Changes. The number of shares and purchase price of the
Optioned Shares subject to the Option shall not change in the event of
any change to the shares of Stock or to any other class or series of
capital stock of the Company or any rights related thereto, whether by
reason of recapitalization, change in conversion rates, stock dividend,
stock split, combination of shares, exchange of shares, change in
corporate structure or otherwise, except that appropriate adjustments
shall be made by the Board in the number of shares and purchase price of
the Optioned Shares subject to the Option [i] prior to the first
Qualified Public Offering for any stock dividend, stock split or similar
transaction, as determined by the Board, declared or made with respect
to all shares of capital stock of the Company prior to, but in
connection with, such Qualified Public Offering, as determined by the
Board, and [ii] after the first Qualified Public Offering for any stock
dividend, stock split or similar transaction, as determined by the
Board. If any of the foregoing adjustments shall result in a fractional
share, the fraction shall be disregarded, and the Company shall have no
obligation to make any cash or other payment with respect to such a
fractional share.
[b] Leave of Absence. For purposes of this Agreement, employment of the
Optionee shall be treated as continuing intact while such person is on
sick leave, military leave or other bona fide leave of absence if the
period of such leave does not exceed ninety days. If such person's
leave exceeds ninety days, employment shall be treated as terminated for
purposes of this Agreement on the ninety-first day of such leave unless
such person's right of continued employment is guaranteed either by
statute or contract.
[c] Delivery. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following
mailing by U.S. certified mail, postage prepaid, return receipt
requested, addressed to the recipient's then current mailing address.
Any corporate officer or other authorized agent may receipt for any
notice or document on behalf of the Company.
-8-
<PAGE> 9
[d] Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages
by reason of any breach of the provisions of this Agreement and to
exercise all other rights existing in its favor. The parties hereto
agree and acknowledge that money damages would not be an adequate remedy
for any breach of the provisions of this Agreement by the Optionee or
any Permitted Transferee, and the Company may in its sole discretion
apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief in order to enforce or
prevent any such breach of this Agreement, including, without
limitation, a breach of any provisions of the transfer restriction
contained in Section 7
[e] Actions of Board. Any determination by the Board as to any question
with respect to this Agreement will be final and binding on the
Optionee. All actions taken and all interpretations and determinations
made by the Board in good faith shall be final and binding upon the
Optionee, the Company and all other interested persons. In addition to
any other rights of indemnification, each Board member shall be
indemnified by the Company against reasonable expenses (including
attorneys' fees) actually and necessarily incurred in connection with
the defense of any action, suit or proceeding (or in connection with any
appeal) to which such person may be a party by reason of an action
taken, or any failure to act, in connection with this Agreement and the
Stock Option granted under it. This indemnification shall further
extend to all amounts paid by any Board member either in a settlement
approved by independent legal counsel selected by the Board or pursuant
to a judgment in any such action, suit or proceeding, provided that the
Board member acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Company. Any action taken
by the Board under this Agreement may be made without notice or meeting
of the Board in a writing signed by all members of the Board.
[f] Subsidiary. Any reference to a Subsidiary means any corporation in
which the Company owns at least 80% of the total voting power and value
of its stock.
[g] Amendment. This Agreement may be amended only by a written instrument
signed by both parties.
[h] Binding Effect. This Agreement is binding upon, and inures to the
benefit of, the parties and their respective heirs, legal
representatives and permitted successors and assigns.
[i] Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to its subject matter, and it supersedes all
prior written and oral agreements, including, without limitation, the
Letter Agreement.
[j] No Waiver. No waiver of any default under this Agreement will be
considered valid unless in writing, and no such waiver will be deemed a
waiver of any subsequent default of the same or similar nature.
-9-
<PAGE> 10
[k] Indemnification. Each party hereby indemnifies and agrees to hold
harmless the other from any liability, cost or expense arising from or
related to any act or failure to act of such party which is in violation
of this Agreement.
[l] Counsel. Each party has had the opportunity to obtain separate counsel
of choice. The Company expressly disclaims that it is giving any tax
advice to the Optionee with respect to the grant or exercise of the
Option or to any disposition of the Optioned Shares or any Shares. The
Optionee acknowledges and accepts this disclaimer.
[m] Originals. This Agreement is signed in two original documents, one to
be delivered to each party.
[n] Governing Law. This Agreement will be construed and enforced in
accordance with the laws of the State of Colorado.
[o] 30-Day Requirement. This Agreement will automatically terminate if the
Optionee fails to deliver an original of this Agreement to the Company
within thirty days after it has been delivered to the Optionee (unless
the Board otherwise determines).
-10-
<PAGE> 11
The Company and the Optionee have signed this Agreement effective as of the
date first above written, notwithstanding the actual date of signing.
RENTX INDUSTRIES, INC.
3/12/97 By: /s/ [ILLEGIBLE]
- ---------------------------- ---------------------------------
Date
Title: President & CEO
-------------------------------
OPTIONEE:
3/12/97 /s/ [ILLEGIBLE]
- ---------------------------- -------------------------------------
Date
- ---------------------------- -------------------------------------
Date Signature of Optionee's spouse (if
Section 17 is applicable)
- ---------------------------- -------------------------------------
Date Signature of Permitted Transferee
(pursuant to Section 8)
-11-
<PAGE> 1
EXHIBIT 10.29
RESTATED NONQUALIFIED STOCK OPTION AGREEMENT [MANAGEMENT-VESTED]
This RESTATED NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made
effective as of the 1st day of April, 1996, between RENTX INDUSTRIES, INC., a
Delaware corporation (the "Company"), and Gary J. Kulesza (the "Optionee"). In
consideration of the mutual promises set forth in this Agreement, we agree as
follows:
1. OPTION GRANT. Pursuant to the letter agreement dated April 1, 1996 between
the Company and the Optionee (the "Letter Agreement") and subject to the terms
and conditions of this Agreement (including, without limitation those relating
to "community property" and related matters set forth in Section 17), the
Company grants to the Optionee the right and option (the "Option") to purchase
an aggregate of 19,231 shares (the "Optioned Shares") of its nonvoting Class B
Common Stock (the "Stock") pursuant to the terms set forth below; provided,
however, that if, pursuant to the Company's certificate of incorporation, as
amended, each share of the Company's issued and outstanding Class B Common
Stock is reclassified and changed into one share of Class A Common Stock and
the outstanding rights to receive Class B Common Stock from the Company become
outstanding rights to acquire Class A Common Stock on a share-for share-basis,
then the term "Stock" shall also refer to such shares of Class A Common Stock).
This Option grant is made as a matter of separate agreement and not in lieu of
regular salary. The date on which this Option was granted was April 1, 1996
(the "Grant Date"). On January 30, 1997, the Company's Certificate of
Incorporation was amended to increase the authorized number of shares of
nonvoting Class B Common Stock from 12,350 shares to 192,308 shares. The
Option and the number of Optioned Shares set forth in this Agreement have been
restated to reflect such amendment to the Company's Certificate of
Incorporation. As a result, the Optioned Shares represent shares of the
authorized nonvoting Class B Common Stock of the Company as it exists following
such amendment.
2. STOCK OPTION PRICE. The purchase price of the Optioned Shares is $0.10
per share (the "Stock Option Price").
3. VESTING; TIME OF EXERCISE. The OPTIONEE'S right to exercise the Option
and acquire 100% of the Optioned Shares IS FULLY VESTED AS OF THE GRANT DATE.
SUBJECT to the provisions of Sections 13, 14 and 16, the Option may be
exercised at any time or times prior to 5:00 p.m., Colorado time, on April 1,
2006.
4. MANNER OF EXERCISE. The Option is exercisable by written notice to the
Company, signed by the Optionee. Such notice must set forth: [a] the election
to exercise the Option and accept the Company's offer, [b] the number of
Optioned Shares to which such exercise relates, and [c] a date at least three,
but no more than five, days after the giving of such notice on which payment of
the Stock Option Price will be made. Such notice must either be actually
delivered to the Company or sent by certified mail to the Company at 1522 Blake
Street, Denver, Colorado, 80202, Attn: Craig J. Zoellner, Vice President (or at
such other address as the Company may direct). Upon exercise of the Option by
giving written notice to the Company, the Optionee will be personally liable to
acquire the Optioned Shares as stated in such notice.
5. CLOSING ON SHARE ISSUANCE. On the date specified in the written notice of
exercise (the "Closing Date"), the Optionee will deliver to the Company [a] the
Stock Option Price for all Optioned Shares being acquired pursuant to the
Option, [b] the Optionee's signed investment letter in the form of the attached
Exhibit A (or in such form as the Board of Directors of the Company (the
"Board") may from time to time subsequently determine), [c] the Optionee's
<PAGE> 2
signed Class B Common Stock Voting Trust Agreement in the form of the attached
Exhibit B (or in such form as the Board may from time to time subsequently
determine) and [d], upon issuance by the Company, the stock certificate
representing the Optioned Shares, duly endorsed for transfer to the trustee
under the Class B Common Stock Voting Trust Agreement (in return for which the
Optionee shall receive a Voting Trust Certificate representing the Optioned
Shares). All of the provisions of this Agreement, including, without
limitation, Sections 7 through 18, will apply to each Voting Trust Certificate
issued under the Class B Common Stock Voting Trust Agreement in respect of any
Shares (as defined below). Payment will be made in cash, either by personal
check which clears in the ordinary course, by bank cashier's check or by
certified check (in all cases, in immediately available funds). Any other
method of payment may be made only if acceptable to the Board, in its
discretion. Notwithstanding the above, the Company shall not be obligated to
deliver any Optioned Shares unless and until, in the opinion of the Company's
counsel, there has been compliance with all applicable federal and state laws
and regulations and only when all other legal matters in connection with the
issuance and delivery of such Optioned Shares have been approved by the
Company's counsel. The Company shall use its best efforts to effect any such
compliance, and the Optionee shall take any such action reasonably requested by
the Company; provided, however, that in no event shall the Company be required
to file a registration statement under the Securities Act of 1933 or any state
securities law to satisfy its obligation to use its best efforts to effect such
compliance. The Optionee shall have the rights of a shareholder of the Company
only as to shares actually acquired by and issued to the Optionee under this
Agreement.
6. NONASSIGNABLE OPTION. Neither the Option nor any other rights acquired by
the Optionee under this Agreement are assignable or transferable by the
Optionee. Any sale, assignment, transfer, pledge or other disposition of any
Option contrary to the provisions of this Agreement, and any levy of any
attachment or similar process upon any Option, will be null and void. Upon the
occurrence of such an event, the Board may, in its discretion, terminate the
Option. The Option may be exercised only during the Employee's lifetime,
except as otherwise specifically provided in Section 13.
7. SHARE TRANSFER RESTRICTION. Except for Permitted Transfers (as defined in
Section 8) and unless a Release Event (as defined below) has occurred, none of
the Optioned Shares, any shares of capital stock of the Company issued in
respect of the Optioned Shares upon any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, change in
corporate structure or otherwise, nor any right, title or interest therein,
whether represented by the Voting Trust Certificate or otherwise (the Optioned
Shares, all such other shares, and all right, title and interest therein being
referred to collectively as the "Shares"), may be sold, assigned, transferred,
pledged, or otherwise disposed of or encumbered, voluntarily or involuntarily,
by act of the Optionee or the Optionee's Permitted Transferee or by operation
of law, including, without limitation, by bequest or the laws of descent and
distribution (any of such events being referred to as a "Transfer"), without
the Company's prior written consent and upon such terms and conditions as the
Company may determine. Any attempted transfer of any Shares contrary to the
preceding sentence will be null and void. Nevertheless, the restriction on
transfer of the Shares set forth in this Section 7 will terminate and be of no
further force and effect upon the occurrence of any of the following events
(each of which is referred to as a "Release Event"): [a] the closing of any
Qualified Public Offering (as defined below), [b] the closing of the sale by
the Company of all or substantially all or its assets
-2-
<PAGE> 3
(other than to any entity of which the majority of the voting power of the
ownership interests therein is held, immediately prior to or immediately after
such sale, by the persons who immediately prior to such transaction hold a
majority of the voting power of the ownership interests in the company) (a
"non-affiliate asset sale"), or [c] the closing of the sale of the company
substantially in its entirety by [i] merger or consolidation (other than with
an entity of which the majority of the voting power of the ownership interests
therein is held, immediately prior to or immediately after such transaction, by
the persons who immediately prior to such transaction hold a majority of the
voting power of the ownership interests in the company) (a "non-affiliate
merger") or [ii] the sale by the stockholders of the company of all of the
outstanding capital stock (other than to any entity of which the majority of
the voting power of the ownership interests therein is held, immediately prior
to or immediately after such sale, by the persons who immediately prior to such
transaction hold a majority of the voting power of the ownership interests in
the company) (a "non-affiliate stock sale") (or by any combination of the
foregoing).
For purposes of this Agreement: [a] "Qualified Public Offering" means
the sale in an underwritten public offering or a series of public offerings,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
of Common Stock, which results in public ownership of not less than 25% of the
Fully Diluted Common Stock of the Company, which shares of Common Stock are
listed upon the New York Stock Exchange, the American Stock Exchange or are
approved for quotation on the NASDAQ National Market and which offerings shall
have resulted in the receipt by the Company of aggregate cash proceeds (after
deduction of underwriting discounts and the costs associated with the
offerings) of at least $8 million and with the average price in such offering
or offerings reflecting a valuation of the Fully Diluted Common Stock
(excluding shares being issued in the offering or offerings) aggregating at
least $30 million; [b] "Common Stock" means the Class A Common Stock and the
Class B Common Stock of the Company; [c] "Common Stock Equivalents" means
(without duplication with any other Common Stock or Common Stock Equivalents)
rights, warrants, options (including, without limitation, employee stock
options), convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock and securities convertible or
exchangeable into Common Stock, whether at the time of issuance or upon the
passage of time or the occurrence of some future event, including (without
limitation) the Series A Preferred Stock and the Series B Preferred Stock of
the Company; and [d] "Fully Diluted Common Stock" means, at any time, the then
outstanding Common Stock of the Company plus (without duplication) all shares
of Common Stock issuable, whether at such time or upon the passage of time or
the occurrence of future events, upon the exercise, conversion or exchange of
all then outstanding Common Stock Equivalents.
8. PERMITTED TRANSFEREES. Any Optionee may transfer the Shares held by the
Optionee to the Optionee's spouse or children, to any other shareholder of the
Company, or to any employee of the Company or a Subsidiary of the Company, by
gift, by bequest, by the laws of descent and distribution, or by operation of
law in the case where the Optionee and the Optionee's Permitted Transferee (as
defined below) hold Shares as joint tenants with right of survivorship;
provided, however, that in all of the foregoing cases (each of which is
referred
-3-
<PAGE> 4
to as a "Permitted Transfer") the Optionee must first give notice to the
Company of such Transfer and the transferee (the "Permitted Transferee") first
must agree in writing to be a party to and bound by the terms and conditions of
this Agreement (including by execution of the signature page to this Agreement)
and an original of such writing must be delivered to the Company. Each
Permitted Transferee acknowledges and agrees that, upon acceptance of Shares
from the Optionee, the following provisions will apply: [a] the transfer
restrictions and other obligations applicable to the Optionee under this
Agreement, as well as the agreements and obligations of the Optionee under the
Class B Common Stock Voting Trust Agreement referred to in Section 5[c] will
apply to and be assumed by such Permitted Transferee with respect to the Shares
owned by the Permitted Transferee, and [b] if, as a result of the operation of
Section 9, the Optionee is (or would be) required by this Agreement to sell any
Shares held by such Optionee the Permitted Transferee agrees to sell the Shares
in the same manner and under the same terms as are applicable to the Optionee.
9. REPURCHASE RIGHT. If the Optionee's employment with the Company or any
Subsidiary is terminated for any or no reason (whether by voluntary or
involuntary act of the Optionee, the Company or any Subsidiary, including
retirement, firing, death or disability) before or after a Release Event, the
Company will have the right, but not the obligation, to purchase from the
Optionee and each Permitted Transferee all or any part of the Shares and all or
any part of the Optionee's right to acquire Optioned Shares (the Optionee's
right to acquire Optioned Shares, which IS FULLY vested AS OF THE DATE HEREOF,
IS ALSO referred to as the "Vested Options"), and the Optionee and each
Permitted Transferee must sell to the Company, if the Company exercises such
option, all of the Shares the Company desires to purchase and all of the Vested
Options the Company desires to purchase. The purchase price will be determined
under Section 10, and the closing will occur as provided in Section 11.
10. PURCHASE PRICE. [a] The purchase price per share payable by the
Company for the Shares will be fixed as of the effective date of termination of
the Optionee's employment with the Company or any Subsidiary (the "Termination
Date") at an amount equal to the fair market value thereof (the "Per Share
Purchase Price") determined as set forth in Section 11[b]. The purchase price
per Vested Option payable by the Company for the Vested Options will be the Per
Share Purchase Price minus the Stock Option Price for the Optioned Share
underlying such Vested Option.
[b] If, at the time the Company's repurchase
right under Section 10 becomes operative, the Shares are registered under the
Securities Act of 1934, as amended (meaning the Shares are "publicly traded"),
then the Per Share Purchase Price payable by the Company for the Shares will be
fixed as of the Termination Date at a per Share price equal to the arithmetic
mean of the market prices of the class of stock of which the Shares are a part
(the "Stock") for the 20 trading days preceding the Termination Date. For this
purpose, the market price of the Stock on each such day shall be [i] the
closing price of the Stock on the principal national securities exchange on
which it is then traded, or [ii] if the Stock is not then traded on a national
securities exchange, the closing price of the Stock reported by the National
Association of Securities Dealers, Inc. National Market System or Automated
Quotation System or its successors ("NASDAQ"), or [iii] if the closing price of
the Stock is not then reported by NASDAQ, the mean of the bid and asked prices
of the Stock reported by NASDAQ, or [iv],
-4-
<PAGE> 5
if bid and asked prices for the Stock are not then reported by NASDAQ, the mean
of the bid and asked prices of the Stock reported by the National Quotation
Bureau, Inc. or its successor. If, at the time the Company's repurchase right
under Section 10 becomes operative, the Shares are not registered under the
Securities Exchange Act of 1934, as amended, then the Per Share Purchase Price
payable by the Company for the Shares will be fixed as of the Termination Date
and determined in good faith by the Board of Directors using any reasonable
valuation method, with the Board's objective being to set the price at the
price at which a Share would change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or to sell and both having
reasonable knowledge of relevant facts including rights and restrictions on the
Shares or the class of stock of which they are a part.
11. CLOSING OF REPURCHASE. The closing of any purchase of Shares and/or
Vested Options by the Company under this Agreement will occur at a meeting of
the Company and the Optionee and/or the Permitted Assigns, as appropriate, on a
date selected by the Company and noticed to the Optionee and/or the Permitted
Assigns, as appropriate, which will be not later than the 120th day following
the Termination Date at 10:00 a.m. Colorado time at the Company's office in
Denver, Colorado (unless otherwise agreed by the Company and the Optionee
and/or the Permitted Transferees, as appropriate). At the meeting, the Company
will make payment for the Shares and/or Vested Options and the Optionee and/or
the Permitted Transferees, as appropriate, will deliver certificates
representing the Shares, duly endorsed for transfer. If the Shares so
purchased by the Company are then subject to the Class B Common Stock Voting
Trust Agreement, the Trustee thereunder is authorized and directed to deliver
to the Company stock certificates representing such Shares, against receipt of
payment therefor, and to deliver such payment to the Optionee upon delivery by
the Optionee to the Company of the Voting Trust Certificate representing such
Shares. Payment for the Shares and/or Vested Options will be made in cash or
by the Company's check or checks which clear in the ordinary course. All
notices under this Section to the Optionee or the Permitted Transferees, as
appropriate, will be in writing and will be deemed to have been duly given when
delivered in person (by express courier or otherwise), by telecopier or three
days after being deposited in the United States mail, certified mail, return
receipt requested, first class postage prepaid, to the Optionee or the
Permitted Transferees, as appropriate, at 8 Desert Willow Lane, Littleton, CO
80217, or to such other address as the Optionee or the Permitted Transferees, as
appropriate, will have specified by notice in writing to the Company.
12. STOCK LEGEND. Except to the extent that the Board determines to add or
revise the restrictive legend, all stock and voting trust certificates
evidencing Shares will be legended as follows by the Company:
The shares represented by this certificate are subject to, and are
transferrable only on compliance with, a Nonqualified Stock Option
Agreement dated as of April 1, 1996 between RentX Industries, Inc.
and the shareholder named on the face of this certificate, a copy of
which is on file with, and may be obtained from, RentX Industries,
Inc.
-5-
<PAGE> 6
13. EMPLOYMENT TERMINATION. If the Optionee's employment with the Company or
any Subsidiary is terminated for any or no reason (whether by voluntary or
involuntary act of the Optionee, the Company or any Subsidiary, including
retirement, firing, death or disability), the Option will terminate and be of
no further force or effect; provided, however, that the Option shall remain
exercisable for 60 days from such termination of employment; and, provided,
further, that in the event the Option is exercised within such 60-day period,
the Optionee and the Optionee's heirs, legal representatives and any other
person entitled to exercise the Option in the Optionee's stead shall, if and
to the extent the Company exercises its rights under Section 9, immediately
sell Shares and Vested Options to the Company in accordance with Section 9.
14. ACCELERATION OF EXPIRATION OF OPTION PERIOD. Notwithstanding anything to
the contrary contained in this Agreement, in the event [a] that the Company
proposes to engage in a Non-Affiliate Asset Sale, [b] that it is proposed that
the Company be sold substantially in its entirety by a Non-Affiliate Merger or
by a Non-Affiliate Stock Sale (or any combination of the events described in
this [b]), or [c] that any transaction is proposed that would result in a
change in the majority ownership of the Company (whether as a result of the
sale of outstanding stock or the issuance of new stock, other than in a public
offering registered under the Securities Act) (each of [a], [b] and [c] being
referred to herein as an "Acceleration Event"), the Company may, at its option,
notify the Optionee of such proposed Acceleration Event and require the
Optionee to elect, within 5 days after such notice, to either exercise the
Option or allow it to expire upon the closing of the Acceleration Event. If
the Optionee does not elect to exercise any portion of the Option within that
5-day period, the unexercised portion of the Option shall automatically expire
upon such closing. If the Optionee elects to exercise the Option within that
5-day period, in whole or in part, the Optionee shall deliver to the Company
all funds and documents required by such notice or this Agreement to exercise
such Option and the Company shall hold such funds and documents and the
certificate representing the shares issuable upon such exercise until such
closing and shall then deposit and collect the payment and forward the
certificate (or such other securities or property as the Optionee may have
become entitled to as a result of owning such shares on the closing) to the
Optionee (or, in the case of an Acceleration Event which involves the
acquisition or conversion of the outstanding capital stock of the Company, to
the acquiror of such stock). If the Acceleration Event is not consummated for
any reason, then [a] such exercise shall be of no force or effect, [b] the
unexercised portion of the Option shall not expire and [C] the Company shall
return to the Optionee such funds and documents delivered to it by the Optionee
in connection with such exercise and shall cancel the related certificate. The
notice originally given to the Optionee of a proposed Acceleration Event shall
describe the proposal generally. No subsequent change in the proposal shall
require a new notice or extend or revive the 5-day exercise period.
15. SHAREHOLDER/EMPLOYEE RIGHTS. The Optionee will have the rights of a
shareholder with respect to any Shares subject to the Option only after such
Shares are issued to such person following exercise of the Option. Nothing in
this Agreement confers on the Optionee any right to continue in the employ of
the Company or any Subsidiary or interferes in any way with the right of the
Company or any Subsidiary at any time to terminate or modify the terms or
conditions of the Optionee's employment.
-6-
<PAGE> 7
16. COMMUNITY PROPERTY MATTERS. If the Optionee, on or after the Grant Date,
resides in a state or other jurisdiction the laws of which determine the
interests of spouses in property on a "community property" or similar basis,
the grant of the Option and the Optionee's rights hereunder shall not be
effective unless and until the Optionee's spouse executes and delivers a
counterpart to the signature page hereto to the Company. The Optionee's spouse
shall be bound by the terms and conditions of this Agreement, including,
without limitation, those set forth in Sections 5 through 17.
17. TAX MATTERS.
[a] Tax Status. The Option granted under this Agreement is for
nonqualified stock options (that is, options that do not qualify as
incentive stock options under the Internal Revenue Code of 1986, as
amended (the "Code"). The Optionee is urged to consult with his or
her own tax advisors with respect to the federal and state income
taxation of the grant, exercise and disposition of stock pursuant to
the Option.
[b] Section 83(b) Election. Whenever property is transferred to a
taxpayer in connection with performance of services, and such property
is subject to a substantial risk of forfeiture (as that term is
defined under Section 83 of the Code and applicable Treasury
Regulations), the taxpayer may elect under Section 83(b) of the Code
to include in gross income (as compensation) the excess, if any, of
the fair market value of such property over the purchase price. If
this Section 83(b) election is made, no compensation income is
subsequently recognized when the risk of forfeiture lapses. If the
Optionee makes a Section 83(b) election he or she shall give timely
notice to the Company of the statement required by the Treasury
Regulations under Section 83 of the Code.
[c] Withholding. Whenever compensation income is recognized by the
Optionee with respect to the Option, the Company may require (as a
condition of Option exercise) the Optionee to make a withholding tax
payment to the Company. The amount of such payment shall equal the
amount of federal and state income tax that the Company or any
Subsidiary is required to withhold with respect to the issuance of
such stock. To the extent the required withholding tax payment is not
timely made by the Optionee, the Company or any Subsidiary may either
withhold such payment from the Optionee's cash compensation or make
such other arrangements as the Board determines.
[d] Interpretation. This Agreement, as well as all questions arising
thereunder, shall be interpreted and answered in the manner consistent
with the Code and applicable Treasury Regulations relating to
nonqualified stock options.
18. GENERAL PROVISIONS.
[a] Capital Changes. The number of shares and purchase price of the
Optioned Shares subject to the Option shall not change in the event of
any change to the shares of Stock or to any other class or series of
capital stock of the Company or any rights related thereto, whether by
reason of recapitalization, change in conversion rates, stock
dividend, stock split, combination of shares, exchange of shares,
change in corporate
-7-
<PAGE> 8
structure or otherwise, except that appropriate adjustments shall be
made by the Board in the number of shares and purchase price of the
Optioned Shares subject to the Option [i] prior to the first Qualified
Public Offering for any stock dividend, stock split or similar
transaction, as determined by the Board, declared or made with respect
to all shares of capital stock of the Company prior to, but in
connection with, such Qualified Public Offering, as determined by the
Board, and [ii] after the first Qualified Public Offering for any
stock dividend, stock split or similar transaction, as determined by
the Board. If any of the foregoing adjustments shall result in a
fractional share, the fraction shall be disregarded, and the Company
shall have no obligation to make any cash or other payment with
respect to such a fractional share.
[b] Leave of Absence. For purposes of this Agreement, employment of the
Optionee shall be treated as continuing intact while such person is on
sick leave, military leave or other bona fide leave of absence if the
period of such leave does not exceed ninety days. If such person's
leave exceeds ninety days, employment shall be treated as terminated
for purposes of this Agreement on the ninety-first day of such leave
unless such person's right of continued employment is guaranteed
either by statute or contract.
[c] Delivery. Delivery of any notice or document shall occur upon actual
delivery to the recipient (including receipt of telecopy or facsimile
transmission), and shall be deemed delivered the third day following
mailing by U.S. certified mail, postage prepaid, return receipt
requested, addressed to the recipient's then current mailing address.
Any corporate officer or other authorized agent may receipt for any
notice or document on behalf of the Company.
[d] Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover
damages by reason of any breach of the provisions of this Agreement
and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages would not be an
adequate remedy for any breach of the provisions of this Agreement by
the Optionee or any Permitted Transferee, and the Company may in its
sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any such breach of this Agreement,
including, without limitation, a breach of any provisions of the
transfer restriction contained in Section 7.
[e] Actions of Board. Any determination by the Board as to any question
with respect to this Agreement will be final and binding on the
Optionee. All actions taken and all interpretations and
determinations made by the Board in good faith shall be final and
binding upon the Optionee, the Company and all other interested
persons. In addition to any other rights of indemnification, each
Board member shall be indemnified by the Company against reasonable
expenses (including attorneys' fees) actually and necessarily incurred
in connection with the defense of any action, suit or proceeding (or
in connection with any appeal) to which such person may be a party by
reason of an action taken, or any failure to act, in connection with
this Agreement and the Stock Option granted under it. This
indemnification shall further extend to all amounts paid
-8-
<PAGE> 9
by any Board member either in a settlement approved by independent
legal counsel selected by the Board or pursuant to a judgment in any
such action, suit or proceeding, provided that the Board member acted
in good faith and in a manner he or she reasonably believed to be in
the best interests of the Company. Any action taken by the Board
under this Agreement may be made without notice or meeting of the
Board in a writing signed by all members of the Board.
.
[f] Subsidiary. Any reference to a Subsidiary means any corporation in
which the Company owns at least 80% of the total voting power and
value of its stock.
[g] Amendment. This Agreement may be amended only by a written instrument
signed by both parties.
[h] Binding Effect. This Agreement is binding upon, and inures to the
benefit of, the parties and their respective heirs, legal
representatives and permitted successors and assigns.
[i] Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to its subject matter, and it
supersedes all prior written and oral agreements, including, without
limitation, the Letter Agreement.
[j] No Waiver. No waiver of any default under this Agreement will be
considered valid unless in writing, and no such waiver will be deemed
a waiver of any subsequent default of the same or similar nature.
[k] Indemnification. Each party hereby indemnifies and agrees to hold
harmless the other from any liability, cost or expense arising from or
related to any act or failure to act of such party which is in
violation of this Agreement.
[l] Counsel. Each party has had the opportunity to obtain separate
counsel of choice. The Company expressly disclaims that it is giving
any tax advice to the Optionee with respect to the grant or exercise
of the Option or to any disposition of the Optioned Shares or any
Shares. The Optionee acknowledges and accepts this disclaimer.
[m] Originals. This Agreement is signed in two original documents, one to
be delivered to each party.
[n] Governing Law. This Agreement will be construed and enforced in
accordance with the laws of the State of Colorado.
[o] 30-Day Requirement. This Agreement will automatically terminate if
the Optionee fails to deliver an original of this Agreement to the
Company within thirty days after it has been delivered to the Optionee
(unless the Board otherwise determines).
-9-
<PAGE> 10
The Company and the Optionee have signed this Agreement effective as of the
date first above written, notwithstanding the actual date of signing.
RENTX INDUSTRIES, INC.
By: /s/ ARNOLD A. BERNSTEIN
3/12/97 -----------------------------------
- --------------------------
Date
Title: President - CEO
--------------------------------
OPTIONEE:
3/12/97 /s/ GARY J. KULESZA
- -------------------------- --------------------------------------
Date
- -------------------------- --------------------------------------
Date Signature of Optionee's spouse (if
Section 17 is applicable)
- -------------------------- --------------------------------------
Date Signature of Permitted Transferee
(pursuant to Section 8)
-10-
<PAGE> 11
EXHIBIT A
INVESTMENT LETTER
[MANAGEMENT]
[See Exhibit 27]
<PAGE> 12
EXHIBIT B
CLASS B COMMON STOCK
VOTING TRUST AGREEMENT
[MANAGEMENT]
[See Exhibit 27]
<PAGE> 13
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is entered into
effective as of April 1, 1996 between RentX Industries, Inc., a Delaware
corporation (the "Employer"), and Gary J. Kulesza (the "Employee").
Recitals
The Employee is the Executive Vice President of the Employer. The
execution and delivery of this Agreement is a condition precedent to the
Company executing and delivering two Restated Stock Option Agreements dated of
approximately even date herewith (the "Option Agreements") and granting the
Employee stock options thereunder.
Agreement
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties agree as
follows:
I. DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the
following terms will have the meanings set forth below:
1.1. "Affiliate" means, with respect to any Person, (i) any Person in
which such Person directly or indirectly holds an equity or profits interest,
(ii) any Person controlling, controlled by or under common control with such
Person, (iii) any director, executive officer, partner or trustee of such
Person, (iv) any member of the immediate family of such Person, (v) any trust
in which a substantial portion of the beneficial interest is held by one or a
combination of the foregoing Persons or (vi) any Person to whom such Person
provides or has provided financial assistance. As used in this definition,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or voting interests, by contract or
otherwise.
1.2. "Business" means (i) the businesses conducted or planned to be
conducted by the Employer at any time during the Employee's employment by the
Employer and (ii) any business reasonably related or incident to, or
constituting a reasonable extension of, such businesses, whether or not the
Employer has been engaged therein prior to, or is engaged therein as of, the
date on which the Employee's employment by the Employer terminates so long as
on such date the Employer has plans to thereafter conduct such business.
1.3. "Person" means any natural person, corporation, trust,
partnership, limited liability company, joint venture, unincorporated
organization, government or governmental agency, or other entity.
<PAGE> 14
II. NONCOMPETITION; CONFIDENTIALITY
2.1. Noncompetition.
(i) The Employee acknowledges that the Employer's business is
intended to be nationwide, and agrees that any activity by the Employee
anywhere in the United States within the scope of the Business would unfairly
damage the Employer and the Business. Therefore, the Employee covenants and
agrees that during the term of the Employee's employment hereunder and for a
period ending two years after the Employee's employment with the Employer
terminates, neither the Employee nor any of the Employee's Affiliates will
engage, anywhere in the United States, directly or indirectly, as an owner of a
voting, equity or profits interest (or any option or right to acquire a voting,
equity or profits interest), director, officer, employee, consultant,
principal, agent, lender or guarantor of indebtedness or otherwise, in any
activity relating to any business that is competitive with the Business or that
is similar in any material respect to the Business.
(ii) (A) Notwithstanding the provisions of Section 2.1(i), this
Agreement will not be deemed to prohibit the Employee or the Employee's
Affiliates from "beneficially owning" (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as amended) equity securities of another
Person engaged in an activity that, if engaged in by the Employee or the
Employee's Affiliates, would be prohibited by Section 2.1(i), so long as the
equity securities so owned by the Employee and the Employee's Affiliates
(including any such equity securities owned by any "associate" of the Employee
and the Employee's Affiliates within the meaning of Rule 12b-2 under the
Securities Exchange Act of 1934, as amended) are of a class of equity security
registered under the Securities Exchange Act of 1934, as amended, and do not
represent, in the aggregate, more than 2% of the voting power of all
outstanding equity securities of, or more than 2% of the profits interest in,
the issuer thereof so long as neither the Employee nor the Employee's
Affiliates has any other involvement with such other Person.
(B) Notwithstanding the provisions of Section 2.1(i), this
Agreement will not be deemed to prohibit any child of the Employee from being
employed by any business that is competitive with the Business or that is
similar in any material respect to the Business. Any child so employed shall
not be subject to Section 2.3.
(iii) The Employee and the Employer intend that the covenant
contained in Section 3.1(i) be deemed to be a series of separate covenants made
by the Employee, one for each state of the United States and each identical to
the terms of the covenant contained in Section 2.1(i).
2.2. No Competitive Hiring. The Employee covenants and agrees that
during the term of the Employee's employment hereunder and for a period of two
years after the date the Employee's employment with the Employer terminates,
the Employee will not, and will cause each of the Employee's Affiliates not to,
directly or indirectly solicit for employment any employee, officer or agent of
the Employer (except any employee whose employment by the Employer has
terminated) without the Employer's prior written consent.
2.3. Corporate Opportunities. The Employee covenants and agrees that
during the term of the Employee's employment by the Employer and for a period
of one year after the date the
2
<PAGE> 15
Employee's employment with the Employer terminates, the Employee will, and will
cause the Employee's Affiliates to, promptly refer to the Employer any
information or inquiry received by the Employee or any of the Employee's
Affiliates concerning any potential business opportunity involving the
Business.
2.4. Confidential Information. The Employee acknowledges that
information, observations and data obtained by the Employee and the Employee's
Affiliates concerning the Business or the business or affairs of the Employer
constitute confidential information, are trade secrets, are the property of the
Employer and are essential and confidential components of the Employer's
business. The Employee will not, and will cause the Employee's Affiliates not
to, directly or indirectly disclose to any Person or use any of such
information, observations or data, except to the extent that (i) any such
information, observations or data becomes generally known to and available for
use by the public other than as a result of disclosure by any Person owing a
duty of confidentiality to the Employer or (ii) the Employee or the Employee's
Affiliates are required to do so by applicable law, regulation or order of a
governmental agency or court of competent jurisdiction. Immediately upon
termination of the Employee's employment with the Employer, the Employee will
deliver to the Employer all memoranda, notes, plans, records, reports, and
other documents and information and all copies thereof in any tangible form
relating to the Business or the business and affairs of the Employer which the
Employee may then possess or have under the Employee's control and will destroy
all of such information in intangible form which is in the Employee's
possession or under the Employee's control.
2.5. Inventions. For purposes of this Section 2.5, "Invention" means
any invention, improvement, discovery or idea (whether patentable or not, and
including those which may be subject to copyright protection) relating to the
Business which are generated, conceived or reduced to practice by the Employee
alone or in conjunction with others, during or after normal business hours,
whether before or during the term of this Agreement, and all associated rights
to patents, copyrights and applications therefor. The Employee agrees promptly
to disclose to the Employer in writing all Inventions. All Inventions will be
the exclusive property of the Employer and hereby are assigned to the Employer.
The Employee will, at the Employer's reasonable expense, provide the Employer
with all assistance it requires to protect, perfect and use its rights to and
its interest in Inventions anywhere in the world and to vest in the Employer
such rights and interest.
2.6. Return of Documents, Etc. All documents and tangible items
provided to the Employee by the Employer or created by the Employee in
connection with the Employee's employment, together with all copies,
recordings, abstracts, notes or reproductions of any kind made from or about
such documents and tangible items or the information they contain, are the
property of the Employer and promptly will be returned to the Employer
immediately upon termination of the Employee's employment.
III. MISCELLANEOUS
3.1. Specific Performance. The Employer and the Employee acknowledge
and agree that any breach of the Employee's covenants set forth in Section II
hereof will result in irreparable damage to the Employer for which there will
be no adequate remedy at law. Therefore, the Employer and the Employee agree
that the Employer may in its sole discretion seek temporary
3
<PAGE> 16
and permanent court orders enjoining any breach of such covenants, without
prejudice to any other right or remedy to which the Employer may be entitled at
law, in equity or under this Agreement.
3.2. Arbitration. Except as set forth in Section 3.1, any disputes
arising under or in connection with this Agreement, including, without
limitation, those involving claims for specific performance or other equitable
relief, will be submitted to binding arbitration under the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA Rules")
under the authority of federal and state arbitration statutes, and shall not be
the subject of litigation in any forum. EXCEPT AS SET FORTH IN SECTION 3.1,
EACH PARTY, BY SIGNING THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY
WAIVES ANY RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR
OTHER FORUMS, INCLUDING THE RIGHT TO JURY TRIAL. The arbitration will be
conducted only in Denver, Colorado, before a single arbitrator from the staff
of the Judicial Arbiter Group, Inc. ("JAG") selected by the parties to such
arbitration (or, if JAG is no longer in existence, before a single arbitrator
selected by the parties in accordance with the AAA Rules) or, if they are
unable to agree on an arbitrator, before a panel of three arbitrators selected
from the staff of JAG (or, if JAG is no longer in existence, before a panel of
three arbitrators selected in accordance with the AAA Rules), one selected by
the Employee, one selected by the Employer and the third selected by the other
two arbitrators. The arbitrators shall have full authority to order specific
performance and award damages and other relief available under this Agreement
or applicable law, but shall have no authority to add to, detract from, change
or amend the terms of this Agreement (except as otherwise contemplated by
Section 3.5) or existing law. All arbitration proceedings, including
settlements and awards, shall be confidential. The decision of the arbitrators
will be final and binding, and judgment on the award by the arbitrators may be
entered in any court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT
TO ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE.
3.3. Attorneys' Fees and Costs. The prevailing party or parties in
any arbitration or in any other action to enforce this Agreement will be
entitled to all reasonable costs and expenses, including attorneys' fees and
fees and expenses of the arbitrators, incurred in connection therewith.
3.4. Binding Contract. The mutual reliance by the Employer and the
Employee upon the existence of this Agreement as a condition precedent to their
obligations to consummate the transaction contemplated by the Option Agreements
will constitute sufficient consideration for the validity and enforceability of
each of its provisions.
3.5. Severability. The Employer and the Employee agree that the terms
of this Agreement, and in particular the restrictions on the Employee set forth
in Section II, are reasonable and fair in light of the transactions
contemplated hereby and by the Option Agreements. Whenever possible each
provision of this Agreement will be interpreted so as to be fully effective and
valid under applicable law. If any provision of this Agreement is determined to
be invalid, illegal or unenforceable in any respect as written, such provision
will be automatically modified only to the minimum extent necessary to make it
enforceable and the provision as so modified will be enforced, without
invalidating any other provision of this Agreement (it being the intent of the
parties that, if Section 2.1(i) is not enforceable as written, Section 2.1(i)
shall be enforceable with respect to each state of the United States in which
the Employer owns rental equipment stores as of the date on which the
Employee's employment by the Employer terminates). If any provision contained
in this
4
<PAGE> 17
Agreement is determined to be void or unenforceable against the Employee in
whole or in part, it will not be deemed to affect or impair the validity of any
other provision of this Agreement or the validity thereof with respect to any
other party. This Agreement constitutes a fully negotiated agreement between
the parties, each with the aid and assistance of legal counsel. The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent and will be construed and interpreted as though
drafted by all the parties to this Agreement.
3.6. Extension of Periods. The periods of time set forth in Section
II of this Agreement will be extended by any period of time during which the
Employee or any of the Employee's Affiliates is in breach of any term of this
Agreement.
3.7. Waiver. Any failure by the Employer to insist upon strict
compliance with any term, covenant or condition hereof will not be deemed to be
a waiver of such term, covenant or condition, nor will the relinquishment of
any right or power hereunder by the Employer at any one or more times be deemed
a waiver or relinquishment of such right or power by the Employer at any other
time or times.
3.8. Assignment. This Agreement will inure to the benefit of and be
enforceable by the parties and their successors and assigns, but will not be
assignable or delegable in whole or in part by the Employee.
3.9. Headings. The headings contained in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
3.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original but all of which
together shall constitute but one agreement.
3.11. Complete Agreement. This Agreement embodies the complete
agreement and understanding between the parties and supersedes and preempts any
prior understandings, agreements or representations by the parties, written or
oral, which may relate to the subject matter hereof.
3.12. CHOICE OF LAW. THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF THE STATE OF COLORADO
WITHOUT REFERENCE TO ANY CONFLICT OF LAW PRINCIPLES.
3.13. Notices. All notices hereunder shall be in writing. Any notice
hereunder shall be deemed duly given if it is sent by registered or certified
mail, return receipt requested, postage prepaid, or by courier, telecopy or
facsimile, and addressed to the intended recipient as follows: (i) if to the
Employee: 8 Desert Willow Lane, Littleton, CO 80127, Telecopy (303) 512-2028;
or (ii) if to the Employer: RentX Industries, Inc., 1522 Blake Street, Denver,
Colorado 80202, Attn: Craig J. Zoellner, Telecopy: (303) 620-9016. Notices will
be deemed given three days after mailing if sent by certified mail, when
delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Either party may change
the address to
5
<PAGE> 18
which notices hereunder are to be delivered by giving the other party notice in
the manner herein set forth.
IN WITNESS WHEREOF, the parties have hereunto set their hands
effective as of the date first above written, notwithstanding the actual date
of signing.
RENTX INDUSTRIES, INC.
Dated: February 21, 1997 By: /s/ Arnold Bernstein
----------------------------------
Name: Arnold Bernstein
--------------------------------
Title: President-CEO
-------------------------------
Dated: February 28, 1997 /s/ Gary J. Kulesza
-------------------------------------
Gary J. Kulesza
6
<PAGE> 1
EXHIBIT 10.30
April 3, 1997
Mr. Stephen T. Carlson
11270 West Jewell
Lakewood, CO 80227
Re: Letter Agreement
Dear Stephen:
The purpose of this Letter Agreement is to set forth the terms of your
proposed employment as Vice President/Controller of RentX Industries, Inc.
("RentX"). Your compensation package will include the following:
Base Salary: $80,000 (Annually);
Bonus: 35% of Base Salary, assuming the annual budgeting
goals of RentX are satisfied and your performance
is fully effective (with $25,000 of that amount to
be guaranteed for the first year upon your
completion of 1 year of employment);
Car Allowance: $250 / month;
Options: Option to purchase 2,500 shares of common stock in
RentX pursuant to RentX's "Non-Qualified Employee
Stock Option Plan" which Option rights will vest at
the rate of 20% per year; and
Benefits: You will be entitled to participate in all employee
benefit programs customarily offered to RentX's
associates, including medical, dental and optical
insurance, at minimal cost to you.
The term of your employment will be one (1) year from and after the
effective date of this Letter Agreement (subject to termination prior to the
expiration of such term "For Cause," as defined below), and your employment
will, thereafter, be "at-will." If you voluntarily terminate your employment
with RentX prior to the expiration of one (1) year from and after the date of
this Letter Agreement, you agree to pay to RentX, within sixty (60) days
thereafter, the sum of $33,000.
"For Cause" termination shall exist in the event your employment is
terminated for any of the following: willful violation of this Letter
Agreement, commission of a felony or crime involving moral turpitude, theft,
dishonesty, intoxication in the workplace, actual or attempted possession, sale
or use of illegal items or substances, damaging or destroying RentX's property,
engaging in threatening, abusive, harassing or unlawful behavior to or with any
employee or customer of RentX or any agent maintained by RentX, negligence in
the exercise of your authority or performance of your duties hereunder,
willfully failing to discharge your responsibilities hereunder, engaging in any
other activity which may be contrary to the best interest of RentX or its
business, or soliciting any other person or partake in any of the foregoing.
You acknowledge that RentX's business is intended to be nationwide, and
that any activity engaged in by you hereunder which competes with the business
operations of RentX would unfairly damage RentX. You therefore agree to
refrain, within the United States of America, from competing with RentX,
directly or indirectly, in the business currently conducted by RentX, from
soliciting the employees of RentX to leave their employment, and from
disclosing any "Confidential Information" (as defined below) of RentX, its
affiliates, suppliers, employees or customers. You agree to refrain from
directly or indirectly disclosing to any person or entity all or any portion of
such Confidential Information (or any use made by RentX thereof) except to the
extent that the
<PAGE> 2
Letter Agreement
April 3, 1997
Page 2
same becomes generally known to the public by any means other than via breach
of this or a similar non-disclosure covenant, or to the extent you are required
to do so by applicable law, regulation or order of a governmental agency or
court of competent jurisdiction. This provision will survive during the term
of your employment and thereafter for a period of 1 year in all instances.
Notwithstanding the foregoing, this Letter Agreement will not prohibit you
from: "beneficially owning" (as that term is used in Section 13d-3 of the
Securities Exchange Act of 1934, as amended, "the Exchange Act") not more than
1% of the equity securities of any business registered under the Exchange Act.
The parties to this Letter Agreement intend that the covenant contained in this
paragraph be deemed a series of separate covenants made by you, one for each of
the United States.
As used in this Letter Agreement, the term "Confidential Information"
means information, observations, inventions, and data, whether disclosed to you
prior to or after the date of this Letter Agreement, concerning the
equipment/party rental business, the business of RentX, or any business
operation investigated or targeted for acquisition by RentX, including without
limitation, any customer(s), customer lists, supplier(s), supplier lists,
financial information, credit information, or employee lists, policies or
programs of the same. You acknowledge that such information is proprietary to
RentX, essential to the conduct of RentX's business, and constitutes a trade
secret of RentX.
Except with respect to any breach by you of the covenants of non-
competition and non-disclosure set forth above, which breach(es) would result
in irreparable damage to RentX, and for which RentX may immediately seek
temporary and permanent court orders enjoining the same, any disputes with
respect to the provisions of this Letter Agreement will be submitted to
confidential arbitration before a single arbitrator appointed by the American
Arbitration Association located in Denver, Colorado. The decision of the
arbitrator will be final and binding, judgment on any award thereof may be
entered in any court of competent jurisdiction, and the prevailing party shall
be entitled to recover from the non-prevailing party all costs (including
attorneys' fees) incurred in connection therewith. BY SIGNING BELOW, YOU
VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVE ANY RIGHTS YOU MAY OTHERWISE
HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO JURY
TRIAL. THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE SPECIFICALLY
ENFORCEABLE.
If any provision of this Letter Agreement is determined to be invalid,
illegal or unenforceable in any respect, such provision will be automatically
modified only to the extent necessary to make it enforceable. If such
provision cannot be so modified, the same shall be stricken, and this Letter
Agreement will remain enforceable as to the remainder of its provisions, as if
the stricken provision had never been included.
This Letter Agreement constitutes the entire agreement with respect to
your employment with RentX. It is intended to constitute a mutual and binding
contract between the undersigned parties, and there are no other written or
verbal agreements between the undersigned with respect thereto. This Letter
Agreement may be executed in multiple counterparts, each of which will be
deemed an original, but all of which together shall constitute but one
agreement. Facsimile signatures will be acceptable as originals for all such
purposes.
If the foregoing meets with your approval, please sign in the space
provided below and return it to me via facsimile at (303) 782-5370. Feel free
to call me at 512-2001 if you have any questions.
<PAGE> 3
Letter Agreement
April 3, 1997
Page 3
Steve, we are excited to have you join the RentX team, and I look
forward to working with you.
RentX Industries, Inc.
By: /s/ ARNIE BERNSTEIN 4/3/97
---------------------------
Arnie Bernstein,
President and C.E.O.
Acknowledged and Agreed:
/s/ STEPHEN T. CARLSON 4/3/97
- -----------------------------------
Stephen T. Carlson
<PAGE> 1
EXHIBIT 10.31
November 13, 1996
Mr. Arnold Bernstein
212 West Hopkins
Aspen, Colorado 81611
Dear Arnie:
We are very excited that you have accepted our offer to be the CEO and
President of RentX Industries, Inc. (RentX). We have outlined below the terms
of your employment as they have been verbally agreed to:
SALARY:
$15,000 per month, paid pro rata in arrears every two weeks.
BONUS:
Up to 50% of salary paid after the end of the fiscal year end and subject to
your continued employment by RentX at that time. The bonus for fiscal year
1997 shall be prorated and will be largely subjective. Subsequent bonuses
would have a significant basis in financial results.
BENEFITS:
You are eligible to participate in all RentX benefits programs.
CAR ALLOWANCE:
You shall receive a car allowance of $750 per month.
EQUITY:
Subject to execution of formal option documents, you shall receive options
equal to two percent of the initial $15 million of equity in RentX which will
be subject to the following vesting schedule:
20% at the end of your first year of employment
20% at the end of your second year of employment
20% at the end of your third year of employment
20% at the end of your fourth year of employment
20% at the end of your fifth year of employment
Your ability to vest is subject to your continued employment by RentX on each
vesting date. The five-year vesting period is not a commitment for five years
or any other fixed period of time (if IPO).
<PAGE> 2
OTHER:
You will be reimbursed for the cost of moving your personal belongings from
Minneapolis to Denver.
You will be able to purchase stock in RentX, on the same basis as the original
investors, for up to 90 days.
RentX Industries, Inc. reserves the right to terminate your employment at any
time, with or without cause, RentX's only obligation being payment of earned
but unpaid salary and vacation pay. You will report to and be subject to the
direction of the Board of Directors of Rentx. RentX's obligations and
commitments to you cannot be altered from those set forth in this letter
agreement except in a writing signed by an authorized RentX officer, after
formal Board approval.
Arnie, we look forward to working with yo in this endeavor and to a prosperous
relationship.
Sincerely,
RentX Industries, Inc.
/s/ DIRK M. TYLER
Dirk M. Tyler
President
Understood and agreed to as written above.
/s/ ARNOLD BERNSTEIN
- -----------------------------------
Arnold Bernstein
<PAGE> 3
RentX Industries, Inc.
Attn.: Craig J. Zoellner, Vice President
6000 East Evans, Suite 2-300
Denver, Colorado 80222
Re: Stock Options
Dear Craig:
This letter agreement is being delivered to RentX Industries,
Inc. (the "Company") in connection with the grant to the undersigned of the
right and option to purchase an aggregate of 103,446 shares (the "Optioned
Shares") of the Company's nonvoting Class B Common Stock (the "Class B Common
Stock") pursuant to the terms of a Restated Nonqualified Stock Option Agreement
between the undersigned and the Company executed concurrently with the
execution of this letter agreement.
Pursuant to the letter agreement dated November 13, 1996
between the Company and the undersigned executed in connection with the
employment of the undersigned by the Company, the undersigned is entitled to
receive options for a number of shares of Class B Common Stock representing, at
the time of the first Fundamental Change, 2.152% of the Fully Diluted Shares
exclusive of any Class A Common Stock issued or issuable in respect of any
equity investment in preferred stock of the Company in excess of $15,000,000)
(the "Specified Fully Diluted Shares"). The undersigned acknowledges that the
Optioned Shares represent 2.152% of the Specified Fully Diluted Shares,
assuming that the Additional Conversion Rate under Section 4.2.5(c) of the
Company's Certificate of Incorporation, as amended (the "Certificate"), is such
that the percentage of Fully Diluted Shares represented by the Additional
Series B Conversion Shares is 35%. If the percentage of Fully Diluted Shares
represented by the Additional Series B Conversion Shares is ultimately
determined pursuant to the Certificate to be less than 35%, the undersigned
acknowledges and agrees that the Certificate will be amended to increase the
Series A Conversion Rate and the Base Series B Conversion Rate as necessary to
cause the Optioned Shares to represent, after such increase in the Series A
Conversion Rate and the Series B Conversion Rate, 2.152% of the Specified Fully
Diluted Shares. Capitalized terms used in this paragraph which are not defined
in this letter agreement have the meanings given them in the Certificate.
<PAGE> 4
RentX Industries, Inc.
Page 2
If the foregoing sets forth the Company's understanding and
agreement, please so indicate by signing below.
Very truly yours,
/s/ ARNOLD A. BERNSTEIN
Dated: February 17, 1997 Arnold A. Bernstein
Agreed and accepted this 17 day of February, 1997.
RENTX INDUSTRIES, INC.
By:/s/ CRAIG J. ZOELLNER
----------------------
Craig J. Zoellner
Vice President
<PAGE> 1
EXHIBIT 10.32
TO: Gary Kulesza
FROM: Craig Zoellner
DATE: April 1, 1996
We are pleased to offer you the position of Executive Vice President of RentX
Industries, Inc. (the "Company") to begin upon the closing of the Zodiac
acquisition.
The terms of your employment are as follows:
1. Base salary of $10,417 per month, plus a bonus with potential up to a
maximum 50% of base salary per fiscal year of your employment. This
bonus will be based upon financial performance against plan (the
majority component) and achievement of agreed upon non-financial
goals. It is understood that the exact structure of this bonus plan,
as well as the plan targets and goals will be determined after the
hiring of the CEO and with the approval of the Board, assuming the CEO
is hired within the first few months. In addition, you will receive a
$450 per month car allowance.
2. You will receive options for one-percent (1%) of the fully diluted
equity of the Company. This one-percent will have anti-dilution
protection up to $15 million of invested equity, but will be diluted
pro-rata upon the issuance of any additional equity. The exercise
price on the options will be the minimum allowable under legal rules.
These options will vest 20% at the end of each year for five years,
beginning one year from your start date, but will become 100% vested
upon the completion of an IPO or a sale of the Company. The vesting
of these options requires your employment with the Company on each
anniversary date, or on the date of a sale or IPO.
3. In the event of termination of your employment by the Company, you
would be paid severance according to the following schedule:
<TABLE>
<CAPTION>
Months After Start Date Months of Base Pay Severance
----------------------- ----------------------------
<S> <C>
0-3 9
3-4 8
4-5 7
5-7 6
7-9 5
9-11 4
over 11 3
</TABLE>
There would be no severance if you leave the Company.
<PAGE> 2
Gary, we are excited to have you join the team. Again, all this only takes
effect and is contingent upon the closing of the Zodiac acquisition and there
are no obligations of any kind upon any party until that time. Also, this does
not represent an employment contract, either express or implied. It is
expressly understood that your continued employment after the Zodiac
acquisition is at will and can be terminated at any time, subject to the
severance schedule in #3 above. Please sign below to indicate your agreement
that this accurately represents the entire understanding between yourself,
RentX and BACE Industries.
RentX, Inc.
/s/ GARY J. KULESZA /s/ CRAIG J. ZOELLNER
- ---------------------------------- ----------------------------------
Gary J. Kulesza Craig J. Zoellner
Vice President
<PAGE> 3
TO: Gary Kulesza
FROM: Craig Zoellner
DATE: April 4, 1996
Please sign below to indicate your agreement with the following change to the
terms outlined in my memorandum of April 1, 1996:
1) With regard to the acceleration of vesting described in point #2, you
would continue to be subject to the 20% per year vesting schedule
after an IPO if you terminate your employment with the Company. The
vesting schedule would not apply after an IPO if the company
terminates you [or upon your death].
RentX, Inc.
/s/ GARY J. KULESZA /s/ CRAIG J. ZOELLNER
- ---------------------------------- ----------------------------------
Gary J. Kulesza Craig J. Zoellner
Vice President
<PAGE> 4
RentX Industries, Inc.
Attn.: Craig J. Zoellner, Vice President
6000 East Evans, Suite 2-300
Denver, Colorado 80222
Re: Stock Options
Dear Craig:
This letter agreement is being delivered to RentX Industries,
Inc. (the "Company") in connection with the grant to the undersigned of the
right and option to purchase an aggregate of 51,763 shares (the "Optioned
Shares") of the Company's nonvoting Class B Common Stock (the "Class B Common
Stock") pursuant to the terms of a Restated Nonqualified Stock Option Agreement
between the undersigned and the Company executed concurrently with the
execution of this letter agreement.
Pursuant to the letter agreement dated April 1, 1996 between
the Company and the undersigned executed in connection with the employment of
the undersigned by the Company, the undersigned is entitled to receive options
for a number of shares of Class B Common Stock representing, at the time of the
first Fundamental Change, 1.077% of the Fully Diluted Shares exclusive of any
Class A Common Stock issued or issuable in respect of any equity investment in
preferred stock of the Company in excess of $15,000,000) (the "Specified Fully
Diluted Shares"). The undersigned acknowledges that the Optioned Shares
represent 1.077% of the Specified Fully Diluted Shares, assuming that the
Additional Conversion Rate under Section 4.2.5(c) of the Company's Certificate
of Incorporation, as amended (the "Certificate"), is such that the percentage
of Fully Diluted Shares represented by the Additional Series B Conversion
Shares is 35%. If the percentage of Fully Diluted Shares represented by the
Additional Series B Conversion Shares is ultimately determined pursuant to the
Certificate to be less than 35%, the undersigned acknowledges and agrees that
the Certificate will be amended to increase the Series A Conversion Rate and
the Base Series B Conversion Rate as necessary to cause the Optioned Shares to
represent, after such increase in the Series A Conversion Rate and the Series B
Conversion Rate, 1.077% of the Specified Fully Diluted Shares. Capitalized
terms used in this paragraph which are not defined in this letter agreement
have the meanings given them in the Certificate.
<PAGE> 5
RentX Industries, Inc.
Page 2
If the foregoing sets forth the Company's understanding and
agreement, please so indicate by signing below.
Very truly yours,
/s/ GARY J. KULESZA
Dated: February 21, 1997 Gary J. Kulesza
Agreed and accepted this 25 day of February, 1997.
RENTX INDUSTRIES, INC.
By:/s/ CRAIG J. ZOELLNER
----------------------
Craig J. Zoellner
Vice President
<PAGE> 1
EXHIBIT 10.33
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made as of the 15th day of May,
1996, between George Evans and Larry Davidson (collectively, "Landlord") and
RentX Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 4,000 rentable square foot building located at
9215 Federal, Westminster, Colorado (the "Building"), together with a
non-exclusive license, subject to the provisions hereof, to use all
appurtenances thereto, including, but not limited to, any parking area and
access roads, and other areas related to the use of the Building (collectively,
the "Premises").
2. TERM. The term of this Lease shall commence as of May 15,
1996 (the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant
shall pay to Landlord the annual sum of $37,277.52 (the "Rent") which sum shall
be payable in twelve equal monthly installments of $3,106.46 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in
advance without notice at the office of Landlord or to such other person or at
such other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this
is a "triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied
against the Premises by any governmental or quasi-governmental authority. The
foregoing shall include any taxes, assessments, surcharges, or service or other
fees of a nature not presently in effect which shall hereafter be levied on the
Premises as a result of the use, ownership or operation of the Premises or for
any other reason, whether in lieu of or in addition to any current real estate
taxes and assessments. Expenses incurred by Tenant for tax consultants and in
contesting the amount or validity of any such taxes or assessments shall be
included in such computations.
<PAGE> 2
Assessments shall include any and all so-called special assessments, license
tax, business license fee, business license tax, commercial rental tax, levy,
charge or tax, imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, water, drainage or other improvement or special
district thereof, against the Premises, or the Building, or against any legal
or equitable interest of Landlord therein. Taxes and assessment shall exclude
Landlord's income taxes or similar taxes. Any special assessments will be
amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk
coverage; public liability insurance; and any other insurance carried by Tenant
or Landlord relating to this Lease. All such insurance shall be in such
amounts as set forth in this Lease.
C. Any capital improvements, repairs and replacements
made in or to the Premises. The cost of any capital improvement shall be
amortized over the useful life of such item and Tenant will pay its percentage
share (which shall be determined by dividing the square footage of the Building
by the square footage of all buildings benefitted by such improvement,
including the Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by
fire, windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated
by condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may estimate the amount of Operating Expenses for the then
current year based on the most currently
-2-
<PAGE> 3
available information to Landlord. Upon the determination of the actual
Operating Expenses for such year, Landlord shall deliver to Tenant a
comparative statement which shall show a comparison of the estimated Operating
Expenses to the actual Operating Expenses for the applicable year. If the
estimated Operating Expenses exceed the actual Operating Expenses, Landlord
shall immediately remit such excess to Tenant. If the estimated Operating
Expenses are less than the actual Operating Expenses, Tenant shall immediately
pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only after paying
such tax or posting such security that Landlord reasonably requires in order to
protect the Leased Premises against loss or forfeiture. Upon the conclusion of
any such protest proceedings, Tenant will pay its share of the tax, as finally
determined, in accordance with this Lease the payment of which tax may have
been deferred during the prosecution of the proceedings, together with any
costs, fees, interest, penalties, or other related liabilities. Landlord will
not be required to join in any contest or proceedings unless the provisions of
any law or regulations then in effect require that the proceedings be brought
by or in the name of Landlord. In that event, Landlord will join in the
proceedings or permit them to be brought in its name; however, Landlord will
not be subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
-3-
<PAGE> 4
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and
equipment rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit
waste to be committed, nor shall Tenant permit any nuisance in or about the
Premises.
C. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or
hereafter enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services.
If an interruption of services which materially affects Tenant's use and
enjoyment of the Premises continues for more than 30 consecutive calendar days,
Tenant shall have the right to terminate this Lease upon written notice to
Landlord, and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant
in the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-4-
<PAGE> 5
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph
4 above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain
the Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace
all structural components of the Premises and the roof of the Building, and if
a repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The
cost of any such capital improvement shall be amortized over the useful life of
such item and Tenant agrees to pay its percentage share (which shall be
determined by dividing the square footage of the Building by the square footage
of all buildings benefitted by such improvement, including the Building) of the
annual amortized amount. Such payment will be made by Tenant as set forth in
Paragraph 4 above. Landlord shall do all acts required to comply with all
applicable laws, ordinances, regulations and rules of any public authority
relating to the Premises, except to the extent that the foregoing are solely a
result of Tenant's use of the Premises. Tenant shall do all acts required to
comply with all applicable laws, ordinances, regulations and rules of any
public authority relating solely to Tenant's use of the Premises. If a repair
is required as a result of Tenant's negligence and such repair cost is not
covered by insurance proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive
-5-
<PAGE> 6
business days, then Tenant shall be entitled to an abatement of rent commencing
with the fourth business day that the same are unusable; provided, however,
that Tenant shall not be entitled to a pro rata abatement of rent under the
foregoing due to unusability (i) caused directly or indirectly by any act or
omission of Tenant or any of Tenant's servants, employees, agents, contractors,
visitors or licensees, (ii) where Tenant makes a decoration, alteration,
improvement or addition which directly causes such unusability, or (iii) where
the repair in question is one which Tenant is obligated to furnish under the
provisions of this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions
or improvements (other than any non- structural change or decorating alteration
to the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Landlord may condition its consent to any alterations,
additions or improvements upon such reasonable requirements as Landlord may
deem necessary in its reasonable discretion, including without limitation the
manner in which the work is done and the right to approve the contractor by
whom the work is to be performed.
(2) All items installed in the Premises by Tenant
and all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring
Landlord's consent prior to the commencement of any such work, Tenant shall
upon request deliver to Landlord, certificates issued by insurance companies
qualified to do business in the state where the Premises are located,
evidencing that Workmen's Compensation, general liability insurance and
property damage insurance, all in amounts, with companies and on forms
reasonably satisfactory to Landlord, are in full force and effect and
maintained by all contractors and subcontractors engaged by Tenant to perform
such work. All such policies shall name Landlord as an additional insured.
Each such certificate shall provide that the insurance policy may not be
canceled or modified without 10 days' prior written notice to Landlord.
Further, Tenant shall permit Landlord to post notices in the Premises in
locations which will be visible by persons performing any work on the Premises
stating that Landlord is not responsible for the payment for such work and
setting forth such other information as Landlord may deem necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the
right to enter the Premises at all reasonable times after 24 hours' prior
written notice, except in emergencies, for the purpose of: (1) examining or
inspecting the same; (2) showing the same to prospective purchasers or tenants
of the Building during the last six months of the Primary Lease Term or
-6-
<PAGE> 7
during the last six months of any option period, if this Lease is extended;
provided, however, if such prospective purchaser or tenant is viewed by Tenant
as a "competitor" in the industry, then Landlord will use best efforts to
restrict such prospective purchaser's or tenant's access to areas where Tenant
has confidential information (such restricted access may mean certain areas may
not be available for view or require that such party be accompanied by a
representative of Tenant when entering such areas); and (3) making such
alterations, repairs, improvements or additions to the Building which are the
obligation of Landlord, in a manner which will not unreasonably interfere with
Tenant's use of the Premises. If Tenant shall not be personally present to
open and permit entry into the Premises at any time when such entry by Landlord
is necessary or permitted hereunder, Landlord may enter by means of a master
key without liability to Tenant, except for any failure to exercise due care
for Tenant's property, and without affecting this Lease. Such entry shall not
be construed as a manifestation by the Landlord of an intent to terminate this
Lease. Tenant shall not, without the prior consent of Landlord, change the
locks or install additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all
costs for work done by Tenant or caused to be done by Tenant on the Premises of
a character which may result in liens on Landlord's interest therein. Tenant
will keep the Premises free and clear of all mechanics' liens and other liens
on account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any
liens be filed or recorded against the Premises for work or materials supplied
to Tenant, or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be removed of record within 30 days after
notice from Landlord. If Tenant desires to contest any claim of lien, Tenant
shall furnish to Landlord adequate security in the amount of 100% of the amount
of the claim, plus estimated costs and interest, and, if a final judgment
establishing the validity or existence of any lien for any amount is entered,
Tenant shall pay and satisfy the same at once. If Tenant shall be in default
in paying any charge for which a mechanic's lien or suit to foreclose the lien
has been recorded or filed, and shall not have caused the same to be released
of record or shall not have given Landlord security as aforesaid, Landlord may
(but without being required to do so) pay such lien or claim and any costs or
obtain a bond or title insurance protection against such lien, and the amount
so paid, together with reasonable attorneys' fees incurred in connection
therewith, shall be immediately due from Tenant to Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises
-7-
<PAGE> 8
or any part thereof, when such injury or damage is caused in whole or in part
by the act, neglect, fault or omission to act on the part of Tenant, its
agents, contractors, or employees. Tenant further indemnifies and agrees to
hold Landlord harmless from and to defend Landlord against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from
any act or negligence of Tenant, or any of its agents, contractors, or
employees, and from and against all costs, reasonable attorneys' and legal
assistants' fees and liabilities incurred as a result of any such claim or any
action or proceeding brought thereon. Tenant shall not be liable to Landlord
for any damage by or from any act or negligence of any owner or occupant of
adjoining or contiguous property. Tenant agrees to pay for all damage to the
Premises caused by Tenant's misuse of the Premises. Tenant shall not be
required to indemnify Landlord for Landlord's own negligence or misconduct or
the negligence or misconduct of Landlord's agents, contractors or employees.
Landlord hereby indemnifies and agrees to hold Tenant harmless from and to
defend Tenant against, any and all claims of liability for any injury
(including death) or damage to any person or property whatsoever occurring in
or about the Building, or Premises when such injury or damage is caused in
whole or in part by the act, neglect, fault or omission to act on the part of
Landlord, its agents, contractors, or employees. Landlord further indemnifies
and agrees to hold Tenant harmless from, and to defend Tenant against any and
all claims arising from any breach or default in performance of any obligation
on Landlord's part to be performed under the terms of this Lease, or arising
from any act or negligence of Landlord, or any of its agents, contractors or
employees, and from and against all costs, attorneys' and legal assistants'
fees, expenses and liabilities incurred as a result of any such claim or any
action or proceeding brought thereon. Landlord shall not be liable to Tenant
for any damage by or from any act or negligence of any other occupant of the
Building, or by any owner or occupant of adjoining or contiguous property.
Landlord shall not be required to indemnify Tenant for Tenant's own negligence
or misconduct or the negligence or misconduct of Tenant's agents, contractors
or employees.
B. Neither Landlord nor its agents shall be liable for
any damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or
-8-
<PAGE> 9
arising from any act or negligence of Tenant, or of its agents or employees,
Tenant upon reasonable prior written notice from Landlord, shall defend the
same at Tenant's expense. In case any action or proceeding is brought against
Tenant by reason of any obligation on Landlord's part to be performed under the
terms of this Lease, or arising from any act or negligence of Landlord, or of
its agents, or employees, Landlord, upon reasonable prior written notice from
Tenant, shall defend the same at Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance
in the amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or
other insured casualty, Tenant shall deliver the insurance proceeds received
for the Building, excluding the amounts received for Tenant's Property and the
amount of any deductible paid by Tenant, to Landlord, and the damage shall be
repaired by and at the expense of Landlord, regardless of the extent of
available insurance proceeds, provided that such repairs and restoration can,
in Landlord's reasonable opinion, be made within 120 days after the occurrence
of such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30
days after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth
the approximate length of time Landlord estimates will be required to complete
such repairs and restoration. If Landlord estimates it cannot make such
repairs and restoration within said 120-day period, then either party, by
written notice to the other, may cancel this Lease as of the date of occurrence
of such damage, provided that such
-9-
<PAGE> 10
notice is given to the other party within 15 days after Landlord notifies
Tenant of the estimated time for completion of such repairs and restoration.
If no notice is given by either party to terminate this Lease, this Lease shall
continue in effect and the Rent shall be apportioned in the manner provided
above. Landlord agrees that if Landlord exercises the foregoing termination
option, Tenant shall have the right to reinstate the Lease by giving Landlord
written notice of such reinstatement within 15 days after receipt of Landlord's
termination notice, and upon such reinstatement, Landlord shall deliver all
insurance proceeds to Tenant, who will commence and complete such repair and
restoration work.
C. Landlord and Tenant hereby waive any and all rights
of recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or provisions waiving
the insurer's rights of subrogation with respect to claims against the other,
and each shall notify its insurance companies of the existence of the waiver
and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises untenantable, is taken
by right of eminent domain or by condemnation, or is conveyed in lieu of any
such taking, then this Lease may be terminated at the option of Tenant. Such
option shall be exercised by Tenant giving notice to Landlord of such
termination within 30 days after such taking or conveyance; whereupon this
Lease shall forthwith terminate and the Rent shall be duly apportioned as of
the date of such taking or conveyance. Upon such termination, Tenant shall
surrender to Landlord the Premises and all of Tenant's interest therein under
this Lease, and Landlord may re-enter and take possession of the Premises or
remove Tenant therefrom. If any portion of the Premises is taken which does
not materially affect Tenant's right to use the remainder of the Premises for
the purposes set forth herein, this Lease shall continue in full force and
effect, and Landlord shall promptly perform any repair or restoration work
required to restore the Premises, insofar as possible, to former condition, and
the rental owing hereunder shall be adjusted, if necessary, in such just manner
and proportion as the part so taken (and its effect on Tenant's ability to use
the remainder of the Premises) bears to the whole. In the event of taking or
conveyance as described herein, Landlord shall receive the award or
consideration for the lands and improvements so taken; provided, however, that
Landlord shall have no interest in any award made for Tenant's loss of business
or value of its leasehold interest or for the taking of Tenant's fixtures or
property, or for Tenant's relocation expenses. Landlord and Tenant shall
cooperate with one another in making claims for condemnation awards.
-10-
<PAGE> 11
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to
be used or occupied by any persons other than Tenant and the employees of
Tenant, nor shall Tenant permit any part of the Premises to be used or occupied
by any licensee or concessionaire, or permit any persons to be upon the
Premises other than Tenant, and employees, customers and others having lawful
business with Tenant without the prior written consent of Landlord, not to be
unreasonably withheld or delayed. Tenant shall have the right to assign or
part with the possession of the Premises without the prior written consent of
Landlord, provided that such assignment or sublease is to an entity (i)
controlled by, controlling, or under common control with Tenant or (ii) which
acquires, by merger or otherwise, substantially all of the assets or business
of Tenant. Tenant may collaterally assign this Lease to any lender of Tenant
without obtaining Landlord's consent thereto.
B. Tenant may sublet all or any part of the Premises to
any subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time
and from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this Paragraph 15 shall be conditioned upon
receipt by Tenant of a nondisturbance agreement pursuant to the provisions of
Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following
events shall constitute an "event of default":
A. Tenant shall fail to pay when due any installment of
Rent, and such default shall continue for 10 days after receipt of written
notice from Landlord;
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
-11-
<PAGE> 12
C. This Lease or the Premises or any part thereof shall
be taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or
insolvency or for reorganization or arrangement under the bankruptcy laws of
the United States or under any insolvency act of any state, or shall
voluntarily take advantage of any such law or act by answer or otherwise, or
shall be dissolved, or shall make an assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law
or insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be
performed, and such non-performance shall continue for a period of 30 days
after written notice thereof by Landlord to Tenant; provided that if the
curative action to be taken by Tenant cannot, for reasons beyond Tenant's
reasonable control be completed within 30 days, then so long as Tenant promptly
initiates and diligently provides such cure, Tenant will not be deemed in
default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as
hereinabove described, Landlord shall have the right, at its election, then or
at any time thereafter and while any such event of default shall continue,
either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the
Premises and repossess the same as of Landlord's former estate, and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both, and without prejudice to any remedies for arrears of Rent. Should
Landlord elect to re-enter as provided in this subparagraph (2), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord shall without terminating this Lease, use
reasonable efforts to relet the Premises in Landlord's or Tenant's name, but
for the account of Tenant, for such term or terms (which may be greater or less
than the period which would otherwise have constituted the
-12-
<PAGE> 13
balance of the term of this Lease) and on such conditions and upon such other
terms as Landlord may reasonably determine, and Landlord may collect and
receive the rents therefor. Landlord shall in no way be responsible or liable
for any failure to relet the Premises after exercising good faith efforts
therefor, but shall make every reasonable effort to mitigate its damages. No
such re-entry or taking possession of the Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant. No notice from Landlord
hereunder or under a forcible entry and detainer statute or similar law shall
constitute an election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right following any such
re-entry or reletting to exercise its right to terminate this Lease by giving
Tenant written notice to that effect, in which event the Lease will terminate
as specified in said notice.
B. In the event that Landlord does not elect to
terminate this Lease and elects to take possession as provided in subparagraph
A(2) hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly
on the days on which the Rent would have been payable hereunder if possession
had not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a
result of an uncured default by Tenant, as permitted in subparagraph A(1)
hereof, Tenant shall remain liable to Landlord for damages in an amount equal
to the Rent and other sums which would have been owed by Tenant hereunder for
the balance of the term had this Lease not been terminated, less the net
proceeds, if any, of any reletting of the Premises by Landlord subsequent to
such termination, after deducting all Landlord's expenses in connection with
such reletting, including, but without limitation, the expenses enumerated
above. Landlord shall be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
hereunder if this Lease had not been terminated, and Landlord shall be entitled
to receive the same from Tenant on each such day. Landlord agrees to use good
faith efforts to mitigate its damages in the event of Tenant's default.
Alternatively, at the option of Landlord, Landlord shall be entitled to recover
forthwith against Tenant, as damages for the loss of the bargain and not as a
penalty, an aggregate sum which, at the time of such termination of this Lease,
represents the amount, if any, by which the aggregate of the Rent and all other
sums payable by Tenant hereunder which would have accrued for the balance of
the term exceeds the aggregate rental value of the Premises (such rental value
to be computed on the basis of a tenant
-13-
<PAGE> 14
paying not only Rent, but also such other charges as are required to be paid by
Tenant under the terms of this Lease) for the balance of such term, both
discounted to present worth at the Federal Reserve discount rate plus one
percent (1%).
D. Suit or suits for the recovery of the amounts and
damages set forth herein may be brought by Landlord, from time to time, at
Landlord's election; and nothing herein shall be deemed to require Landlord to
await the date that this Lease or the term hereof would have expired had there
been no such default by Tenant, or no such termination, as the case may be.
Each right and remedy provided for in this Lease shall be cumulative and shall
be in addition to every other right or remedy provided for in this Lease or now
or hereafter existing at law or in equity or by statute or otherwise,
including, but not limited to, suits for injunctive relief and specific
performance. The exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease as now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease as now or hereafter existing at
law or in equity or by statute or otherwise. All costs incurred by Landlord in
connection with collecting any amounts and damages owed by Tenant pursuant to
the provisions of this Lease, including reasonable attorneys' fees from the
date any such matter is turned over to an attorney, shall also be recoverable
by Landlord from Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach. Notwithstanding any termination
of this Lease, the same shall continue in full force and effect as to any
provisions hereof which require observance or performance by Landlord or Tenant
subsequent to termination.
(1) Nothing contained in this Paragraph 17 shall
limit or prejudice the right of Landlord to prove and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding an amount equal to the maximum allowed by any statute or
rule of law governing such proceeding and in effect at the time when such
damages are to be proved.
(2) Notwithstanding anything in this Paragraph 17
to the contrary, any such proceeding or action involving bankruptcy,
insolvency, reorganization, arrangement, assignment for the benefit of
creditors, or appointment of a receiver or trustee, as
-14-
<PAGE> 15
specified in subparagraphs 16D and 16E above, shall be considered to be an
event of default only when such proceeding, action or remedy shall be taken or
brought by or against the then holder of the leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are
not paid within 30 days after they are due shall bear interest at the rate of
10% per annum from the 31st day after the due date of such payment until
received by Landlord. Similarly, any amounts paid by Landlord to cure any
defaults of Tenant hereunder, which Landlord shall have the right, but not the
obligation to do, shall, if not repaid by Tenant within 30 days after demand by
Landlord, thereafter bear interest at the above rate until received by
Landlord.
G. Landlord hereby waives any statutory or common law
rights it may have granting Landlord a lien or the right to foreclose on the
personal property of Tenant and/or the tenant improvements installed in the
Premises by Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any other person, but with an obligation by
Landlord to account therefor. Tenant shall pay Landlord for all expenses
incurred in connection with the disposition of such property.
19. HOLDING OVER. Should Tenant hold over after the termination
of this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to- month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
20. BROKER'S FEE. Tenant and Landlord each represent and warrant
to the other that it has had no dealings with any person, firm, broker or
finder in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and
-15-
<PAGE> 16
that no broker or other person, firm or entity is entitled to any commission or
finder's fee in connection with said transaction. Tenant and Landlord do each
hereby agree to indemnify, protect, defend and hold the other harmless from and
against liability for compensation or charges which may be claimed by any such
unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying party, including any costs, expenses, attorneys'
fees reasonably incurred with respect thereto.
21. SURRENDER AND NOTICE. Upon the expiration or other
termination of the term of this Lease, Tenant shall promptly quit the Premises
and surrender the Premises to Landlord broom clean, in good order and
condition, except for ordinary wear and tear and loss by fire or other
casualty. Tenant may remove Tenant's Property and all of its movable furniture
and other effects and such alterations, additions and improvements that Tenant
installed pursuant to Paragraph 26 hereof. In the event that Tenant fails to
vacate the Premises in a timely manner as required, Tenant shall be responsible
to Landlord for all reasonable costs incurred by Landlord as a result of such
failure, including, but not limited to, any amounts required to be paid to
third parties who were to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in
this Lease to the contrary, Landlord represents and warrants to Tenant that it
is the sole owner in fee simple of the Leased Premises, that no mortgages,
deeds of trusts or liens or encumbrances of any nature presently encumber
Landlord's title to the Premises except as set forth on Exhibit B, attached
hereto and incorporated herein by this reference; that none of said
encumbrances shall prohibit or impede the use of the Premises as contemplated
herein or create any financial obligation on the part of Tenant except as
expressly set forth herein; that Landlord has the full right, power and
authority to enter into this Lease and make the agreements contained herein on
its part to be performed; that the execution, delivery and performance of this
Lease has been duly authorized by Landlord; that the Lease constitutes the
valid and binding obligation of Landlord, enforceable in accordance with its
terms; that the making of this Lease and the performance thereof will not
violate any present zoning laws or ordinances or the terms or provisions of any
mortgage, lease or other agreement to which Landlord is a party or under which
Landlord is otherwise bound, or which restricts Landlord in any way with
respect to the use or disposition of the Premises; that Landlord has no
knowledge of any pending zoning changes affecting the Premises; that the
Premises and Building will be kept in compliance by Landlord, at its cost, with
all applicable laws and regulations enacted from and after the date of this
Lease; that the Premises are presently zoned so as to permit the operation of
the Premises as contemplated in this Lease; and that the Premises presently
include full legal access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's
option, shall be subordinate to any mortgage or deed of trust (now or hereafter
placed upon the Premises), and to any and all advances made under any mortgage
or deed of trust and to all renewals, modifications, consolidations,
replacements and extensions thereof. Tenant agrees to execute such documents
as may be further required to evidence such subordination or to make this Lease
-16-
<PAGE> 17
prior to the lien of any mortgage or deed of trust, as the case may be, subject
to the following sentence. Notwithstanding the foregoing, Tenant shall only be
obligated to subordinate its leasehold interest to any mortgage, deed of trust,
or ground lease now or hereafter placed upon the Premises if the holder of such
mortgage or deed of trust or the landlord under such ground lease delivers to
Tenant a non-disturbance agreement, using the form of document then being
employed by such holder provided it is reasonably acceptable to Tenant, which
will provide that Tenant, notwithstanding any default of Landlord thereunder,
shall have the right to remain in possession of the Premises described herein
in accordance with the terms and provisions of this Lease for so long as Tenant
shall not be in default under this Lease. Upon the mutual execution of this
Lease, Landlord shall deliver such a non-disturbance agreement from any present
lender having a deed of trust or mortgage on the Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act
in any matter provided for herein by and through its building manager or any
other person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be
given to Landlord hereunder shall be in writing, and shall be deemed duly
served three days after deposited in the United States Mail, with proper
postage prepaid, certified or registered, return receipt requested, addressed
to Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of this Lease, except
that the monthly rent for each respective Option Period will be increased in
the manner set forth in subparagraph B below. Tenant will exercise its option
by giving Landlord written notice at least 180 days prior to the expiration of
the Primary Lease Term, or the expiration of the then current Option Period, as
the case may be.
B. Landlord and Tenant agree that the monthly rent for
each Option Period will be determined set forth in this paragraph. For the
first month of the first year of the subject Option Period, the Rent due
hereunder will be adjusted in accordance with the
-17-
<PAGE> 18
increase, if any, which has occurred in the Consumer Price Index,
Denver-Boulder area for all Urban Consumers, U.S. City Average - All Items
Index (CPI-U, 1982-84 equals 100), published by the United States Department of
Labor, Bureau of Labor Statistics (the "INDEX") from the Commencement Date or
the last day of a prior Rent adjustment, whichever is later, to the date of the
present adjustment. Such adjusted Rent rate will be the Rent for the then
Option Period. If the Index is discontinued, Landlord and Tenant shall agree
upon comparable statistics on the cost of living for the computations under
this subparagraph B, and such statistics shall be published by an agency of the
United States Government or by a responsible financial periodical or recognized
authority. If Landlord and Tenant fail to agree on a replacement index, they
will submit the question of a replacement index to an arbitrator in accordance
with the rules and regulations of the American Arbitration Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip
the Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply
for, diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits or
approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense,
as part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental regulations. All sign construction shall be
in accordance with such local sign ordinances and applicable governmental
regulation. Tenant shall obtain, and Landlord shall cooperate with
-18-
<PAGE> 19
Tenant's applications therefor, any and all permits as are required under such
governmental regulations.
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and
hold harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's rental and other payment obligations under this Lease
shall be abated entirely during the period beyond the 24 hours that Tenant is
required to be closed for business or abated in proportion to the amount of
lost business suffered by Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold harmless Landlord, its directors, officers,
employees, and agents and assignees or successors to Landlord's interest in the
Premises, their directors, officers, employees, and agents from and
-19-
<PAGE> 20
against any and all losses, claims, damages, penalties and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees (i) including
all damages, directly or indirectly arising out of the use, generation,
storage, release or disposal of Hazardous Materials by Tenant, its agents or
contractors, and (ii) including, without limitation, the cost of any required
or necessary repair, clean-up or detoxification and the preparation of any
closure or other required plans to the full extent that such is attributable,
directly or indirectly, to the use, generation, storage, release or disposal of
Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Premises at the
time in question. In the event of any transfer or transfers of the title to
the Premises, the Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released,
from and after the date of such transfer or conveyance, from all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that the
grantee assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an interest in the
hands of Landlord or the then grantor at the time of such transfer shall be
turned over to the grantee. Any amount then due and payable to Tenant by
Landlord or the then grantor under any provisions of this Lease shall be paid
to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease
shall not work a merger, and such termination or mutual cancellation shall, at
the option of Landlord, either terminate all subleases and subtenancies or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30 days after demand, and if the other
party is Tenant, such expenditures may be offset against Rent due under this
Lease but only if Landlord does not pay such amount within such 30-day period.
Notwithstanding anything in this paragraph to the contrary, no prior notice to
the non- complying party shall be necessary if the failure to comply involves
emergency repairs under this Lease reasonably necessary for the safety and
preservation of the Premises or the furnishings and equipment located therein
or the health or safety of the occupants or employees thereof.
-20-
<PAGE> 21
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter
of convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day
permitted for the performance of any act required or permitted under this Lease
falls on a Saturday, Sunday or holiday, the time for such performance will be
extended to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any
obligation of Tenant, other than the payment of Rent, which is delayed or not
performed due to acts of God, strike, riot, war, weather, failure to obtain
labor and materials at a reasonable cost, or any other reason beyond the
control of the Landlord or Tenant shall not constitute a default hereunder and
shall be performed within a reasonable time after the end of such cause for
delay or non- performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all of Tenant's income, leasehold improvements,
equipment, furniture, fixtures and personal property owned by Tenant located in
the Premises. In the event that any or all of Tenant's leasehold improvements,
equipment, furniture, fixtures and personal property shall be assessed and
taxed with the Building, Tenant shall pay such taxes applicable to Tenant's
property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or
-21-
<PAGE> 22
permit them to be brought in its name; however, Landlord will not be subjected
to any liability for the payment of any costs or expenses in connection with
any contest or proceedings, and Tenant will indemnify Landlord against and save
Landlord harmless from any costs and expenses in this regard.
L. Any consent of Landlord or Tenant hereunder shall not
be unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
N. This Lease will be construed and enforced in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
"LANDLORD"
By: /s/ GEORGE EVANS
-------------------------------------------
George Evans
Date: May 15, 1996
-----------------------------------------
Address: 8157 E. Hunter Hill Dr.
--------------------------------------
Englewood, CO 80124
----------------------------------------------
By: /s/ LARRY DAVIDSON
-------------------------------------------
Larry Davidson
Date: May 15, 1996
-----------------------------------------
Address: 9504 Southern Hills Cr.
--------------------------------------
Littleton, CO 80124
----------------------------------------------
"TENANT"
RentX Industries, Inc., a Delaware corporation
By: /s/ RICHARD M. TYLER
------------------------------------------
Its: Richard M. Tyler
------------------------------------------
Date: May 15, 1996
-----------------------------------------
Address: 1522 Blake Street,
Denver, Colorado 80202
-22-
<PAGE> 23
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
[LEGAL DESCRIPTION OMITTED]
A-1
<PAGE> 24
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
Mortgage held by Don Nelson, 10600 W. 73rd Place, Arvada, Colorado 80005-3644
Deed of Trust dated September 30, 1994, for the benefit of Donavan Nelson and
Helen M. Nelson recorded in Book 457 at Page 460, Adams County, Colorado
B-1
<PAGE> 1
EXHIBIT 10.34
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made as of the 15th day of May,
1996, between George Evans and Larry Davidson (collectively, "Landlord") and
RentX Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 10,800 rentable square foot building located at
1230 N. Park, Castle Rock, Colorado (the "Building"), together with a non-
exclusive license, subject to the provisions hereof, to use all appurtenances
thereto, including, but not limited to, any parking area and access roads, and
other areas related to the use of the Building (collectively, the "Premises").
2. TERM. The term of this Lease shall commence as of May 15, 1996
(the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant shall
pay to Landlord the annual sum of $38,080.80 (the "Rent") which sum shall be
payable in twelve equal monthly installments of $3,173.40 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in advance
without notice at the office of Landlord or to such other person or at such
other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this is a
"triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied against the
Premises by any governmental or quasi-governmental authority. The foregoing
shall include any taxes, assessments, surcharges, or service or other fees of a
nature not presently in effect which shall hereafter be levied on the Premises
as a result of the use, ownership or operation of the Premises or for any other
reason, whether in lieu of or in addition to any current real estate taxes and
assessments. Expenses incurred by Tenant for tax consultants and in contesting
the amount or validity of any such taxes or assessments shall be included in
such computations.
<PAGE> 2
Assessments shall include any and all so-called special assessments, license
tax, business license fee, business license tax, commercial rental tax, levy,
charge or tax, imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, water, drainage or other improvement or special
district thereof, against the Premises, or the Building, or against any legal
or equitable interest of Landlord therein. Taxes and assessment shall exclude
Landlord's income taxes or similar taxes. Any special assessments will be
amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk coverage;
public liability insurance; and any other insurance carried by Tenant or
Landlord relating to this Lease. All such insurance shall be in such amounts as
set forth in this Lease.
C. Any capital improvements, repairs and replacements made in
or to the Premises. The cost of any capital improvement shall be amortized over
the useful life of such item and Tenant will pay its percentage share (which
shall be determined by dividing the square footage of the Building by the
square footage of all buildings benefitted by such improvement, including the
Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by fire,
windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated by
condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may estimate the amount of Operating Expenses for the then
current year based on the most currently
-2-
<PAGE> 3
available information to Landlord. Upon the determination of the actual
Operating Expenses for such year, Landlord shall deliver to Tenant a
comparative statement which shall show a comparison of the estimated Operating
Expenses to the actual Operating Expenses for the applicable year. If the
estimated Operating Expenses exceed the actual Operating Expenses, Landlord
shall immediately remit such excess to Tenant. If the estimated Operating
Expenses are less than the actual Operating Expenses, Tenant shall immediately
pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only after paying
such tax or posting such security that Landlord reasonably requires in order to
protect the Leased Premises against loss or forfeiture. Upon the conclusion of
any such protest proceedings, Tenant will pay its share of the tax, as finally
determined, in accordance with this Lease the payment of which tax may have
been deferred during the prosecution of the proceedings, together with any
costs, fees, interest, penalties, or other related liabilities. Landlord will
not be required to join in any contest or proceedings unless the provisions of
any law or regulations then in effect require that the proceedings be brought
by or in the name of Landlord. In that event, Landlord will join in the
proceedings or permit them to be brought in its name; however, Landlord will
not be subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
-3-
<PAGE> 4
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and equipment
rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit waste to
be committed, nor shall Tenant permit any nuisance in or about the Premises.
C. Tenant shall not use the Premises or permit anything to be
done in or about the Premises which will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force or hereafter
enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services. If
an interruption of services which materially affects Tenant's use and enjoyment
of the Premises continues for more than 30 consecutive calendar days, Tenant
shall have the right to terminate this Lease upon written notice to Landlord,
and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant in
the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-4-
<PAGE> 5
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph 4
above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain the
Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace all
structural components of the Premises and the roof of the Building, and if a
repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The cost
of any such capital improvement shall be amortized over the useful life of such
item and Tenant agrees to pay its percentage share (which shall be determined
by dividing the square footage of the Building by the square footage of all
buildings benefitted by such improvement, including the Building) of the annual
amortized amount. Such payment will be made by Tenant as set forth in Paragraph
4 above. Landlord shall do all acts required to comply with all applicable
laws, ordinances, regulations and rules of any public authority relating to the
Premises, except to the extent that the foregoing are solely a result of
Tenant's use of the Premises. Tenant shall do all acts required to comply with
all applicable laws, ordinances, regulations and rules of any public authority
relating solely to Tenant's use of the Premises. If a repair is required as a
result of Tenant's negligence and such repair cost is not covered by insurance
proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive
-5-
<PAGE> 6
business days, then Tenant shall be entitled to an abatement of rent commencing
with the fourth business day that the same are unusable; provided, however,
that Tenant shall not be entitled to a pro rata abatement of rent under the
foregoing due to unusability (i) caused directly or indirectly by any act or
omission of Tenant or any of Tenant's servants, employees, agents, contractors,
visitors or licensees, (ii) where Tenant makes a decoration, alteration,
improvement or addition which directly causes such unusability, or (iii) where
the repair in question is one which Tenant is obligated to furnish under the
provisions of this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions or
improvements (other than any non-structural change or decorating alteration to
the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Landlord may condition its consent to any alterations,
additions or improvements upon such reasonable requirements as Landlord may
deem necessary in its reasonable discretion, including without limitation the
manner in which the work is done and the right to approve the contractor by
whom the work is to be performed.
(2) All items installed in the Premises by Tenant and
all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring Landlord's
consent prior to the commencement of any such work, Tenant shall upon request
deliver to Landlord, certificates issued by insurance companies qualified to do
business in the state where the Premises are located, evidencing that Workmen's
Compensation, general liability insurance and property damage insurance, all in
amounts, with companies and on forms reasonably satisfactory to Landlord, are
in full force and effect and maintained by all contractors and subcontractors
engaged by Tenant to perform such work. All such policies shall name Landlord
as an additional insured. Each such certificate shall provide that the
insurance policy may not be canceled or modified without 10 days' prior written
notice to Landlord. Further, Tenant shall permit Landlord to post notices in
the Premises in locations which will be visible by persons performing any work
on the Premises stating that Landlord is not responsible for the payment for
such work and setting forth such other information as Landlord may deem
necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the right
to enter the Premises at all reasonable times after 24 hours' prior written
notice, except in emergencies, for the purpose of: (1) examining or inspecting
the same; (2) showing the same to prospective purchasers or tenants of the
Building during the last six months of the Primary Lease Term or
-6-
<PAGE> 7
during the last six months of any option period, if this Lease is extended;
provided, however, if such prospective purchaser or tenant is viewed by Tenant
as a "competitor" in the industry, then Landlord will use best efforts to
restrict such prospective purchaser's or tenant's access to areas where Tenant
has confidential information (such restricted access may mean certain areas may
not be available for view or require that such party be accompanied by a
representative of Tenant when entering such areas); and (3) making such
alterations, repairs, improvements or additions to the Building which are the
obligation of Landlord, in a manner which will not unreasonably interfere with
Tenant's use of the Premises. If Tenant shall not be personally present to open
and permit entry into the Premises at any time when such entry by Landlord is
necessary or permitted hereunder, Landlord may enter by means of a master key
without liability to Tenant, except for any failure to exercise due care for
Tenant's property, and without affecting this Lease. Such entry shall not be
construed as a manifestation by the Landlord of an intent to terminate this
Lease. Tenant shall not, without the prior consent of Landlord, change the
locks or install additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all costs
for work done by Tenant or caused to be done by Tenant on the Premises of a
character which may result in liens on Landlord's interest therein. Tenant will
keep the Premises free and clear of all mechanics' liens and other liens on
account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any liens
be filed or recorded against the Premises for work or materials supplied to
Tenant, or should any action affecting the title thereto be commenced, Tenant
shall cause such liens to be removed of record within 30 days after notice from
Landlord. If Tenant desires to contest any claim of lien, Tenant shall furnish
to Landlord adequate security in the amount of 100% of the amount of the claim,
plus estimated costs and interest, and, if a final judgment establishing the
validity or existence of any lien for any amount is entered, Tenant shall pay
and satisfy the same at once. If Tenant shall be in default in paying any
charge for which a mechanic's lien or suit to foreclose the lien has been
recorded or filed, and shall not have caused the same to be released of record
or shall not have given Landlord security as aforesaid, Landlord may (but
without being required to do so) pay such lien or claim and any costs or obtain
a bond or title insurance protection against such lien, and the amount so paid,
together with reasonable attorneys' fees incurred in connection therewith,
shall be immediately due from Tenant to Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises
-7-
<PAGE> 8
or any part thereof, when such injury or damage is caused in whole or in part
by the act, neglect, fault or omission to act on the part of Tenant, its
agents, contractors, or employees. Tenant further indemnifies and agrees to
hold Landlord harmless from and to defend Landlord against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from
any act or negligence of Tenant, or any of its agents, contractors, or
employees, and from and against all costs, reasonable attorneys' and legal
assistants' fees and liabilities incurred as a result of any such claim or any
action or proceeding brought thereon. Tenant shall not be liable to Landlord
for any damage by or from any act or negligence of any owner or occupant of
adjoining or contiguous property. Tenant agrees to pay for all damage to the
Premises caused by Tenant's misuse of the Premises. Tenant shall not be
required to indemnify Landlord for Landlord's own negligence or misconduct or
the negligence or misconduct of Landlord's agents, contractors or employees.
Landlord hereby indemnifies and agrees to hold Tenant harmless from and to
defend Tenant against, any and all claims of liability for any injury
(including death) or damage to any person or property whatsoever occurring in
or about the Building, or Premises when such injury or damage is caused in
whole or in part by the act, neglect, fault or omission to act on the part of
Landlord, its agents, contractors, or employees. Landlord further indemnifies
and agrees to hold Tenant harmless from, and to defend Tenant against any and
all claims arising from any breach or default in performance of any obligation
on Landlord's part to be performed under the terms of this Lease, or arising
from any act or negligence of Landlord, or any of its agents, contractors or
employees, and from and against all costs, attorneys' and legal assistants'
fees, expenses and liabilities incurred as a result of any such claim or any
action or proceeding brought thereon. Landlord shall not be liable to Tenant
for any damage by or from any act or negligence of any other occupant of the
Building, or by any owner or occupant of adjoining or contiguous property.
Landlord shall not be required to indemnify Tenant for Tenant's own negligence
or misconduct or the negligence or misconduct of Tenant's agents, contractors
or employees.
B. Neither Landlord nor its agents shall be liable for any
damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or
-8-
<PAGE> 9
arising from any act or negligence of Tenant, or of its agents or employees,
Tenant upon reasonable prior written notice from Landlord, shall defend the
same at Tenant's expense. In case any action or proceeding is brought against
Tenant by reason of any obligation on Landlord's part to be performed under the
terms of this Lease, or arising from any act or negligence of Landlord, or of
its agents, or employees, Landlord, upon reasonable prior written notice from
Tenant, shall defend the same at Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance in the
amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or other
insured casualty, Tenant shall deliver the insurance proceeds received for the
Building, excluding the amounts received for Tenant's Property and the amount
of any deductible paid by Tenant, to Landlord, and the damage shall be repaired
by and at the expense of Landlord, regardless of the extent of available
insurance proceeds, provided that such repairs and restoration can, in
Landlord's reasonable opinion, be made within 120 days after the occurrence of
such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30 days
after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth the
approximate length of time Landlord estimates will be required to complete such
repairs and restoration. If Landlord estimates it cannot make such repairs and
restoration within said 120-day period, then either party, by written notice to
the other, may cancel this Lease as of the date of occurrence of such damage,
provided that such
-9-
<PAGE> 10
notice is given to the other party within 15 days after Landlord notifies
Tenant of the estimated time for completion of such repairs and restoration. If
no notice is given by either party to terminate this Lease, this Lease shall
continue in effect and the Rent shall be apportioned in the manner provided
above. Landlord agrees that if Landlord exercises the foregoing termination
option, Tenant shall have the right to reinstate the Lease by giving Landlord
written notice of such reinstatement within 15 days after receipt of Landlord's
termination notice, and upon such reinstatement, Landlord shall deliver all
insurance proceeds to Tenant, who will commence and complete such repair and
restoration work.
C. Landlord and Tenant hereby waive any and all rights of
recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or provisions waiving
the insurer's rights of subrogation with respect to claims against the other,
and each shall notify its insurance companies of the existence of the waiver
and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises untenantable, is taken
by right of eminent domain or by condemnation, or is conveyed in lieu of any
such taking, then this Lease may be terminated at the option of Tenant. Such
option shall be exercised by Tenant giving notice to Landlord of such
termination within 30 days after such taking or conveyance; whereupon this
Lease shall forthwith terminate and the Rent shall be duly apportioned as of
the date of such taking or conveyance. Upon such termination, Tenant shall
surrender to Landlord the Premises and all of Tenant's interest therein under
this Lease, and Landlord may re-enter and take possession of the Premises or
remove Tenant therefrom. If any portion of the Premises is taken which does not
materially affect Tenant's right to use the remainder of the Premises for the
purposes set forth herein, this Lease shall continue in full force and effect,
and Landlord shall promptly perform any repair or restoration work required to
restore the Premises, insofar as possible, to former condition, and the rental
owing hereunder shall be adjusted, if necessary, in such just manner and
proportion as the part so taken (and its effect on Tenant's ability to use the
remainder of the Premises) bears to the whole. In the event of taking or
conveyance as described herein, Landlord shall receive the award or
consideration for the lands and improvements so taken; provided, however, that
Landlord shall have no interest in any award made for Tenant's loss of business
or value of its leasehold interest or for the taking of Tenant's fixtures or
property, or for Tenant's relocation expenses. Landlord and Tenant shall
cooperate with one another in making claims for condemnation awards.
-10-
<PAGE> 11
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to be
used or occupied by any persons other than Tenant and the employees of Tenant,
nor shall Tenant permit any part of the Premises to be used or occupied by any
licensee or concessionaire, or permit any persons to be upon the Premises other
than Tenant, and employees, customers and others having lawful business with
Tenant without the prior written consent of Landlord, not to be unreasonably
withheld or delayed. Tenant shall have the right to assign or part with the
possession of the Premises without the prior written consent of Landlord,
provided that such assignment or sublease is to an entity (i) controlled by,
controlling, or under common control with Tenant or (ii) which acquires, by
merger or otherwise, substantially all of the assets or business of Tenant.
Tenant may collaterally assign this Lease to any lender of Tenant without
obtaining Landlord's consent thereto.
B. Tenant may sublet all or any part of the Premises to any
subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time and
from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this Paragraph 15 shall be conditioned upon
receipt by Tenant of a nondisturbance agreement pursuant to the provisions of
Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following events
shall constitute an "event of default":
A. Tenant shall fail to pay when due any installment of Rent,
and such default shall continue for 10 days after receipt of written notice
from Landlord;
-11-
<PAGE> 12
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
C. This Lease or the Premises or any part thereof shall be
taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or insolvency
or for reorganization or arrangement under the bankruptcy laws of the United
States or under any insolvency act of any state, or shall voluntarily take
advantage of any such law or act by answer or otherwise, or shall be dissolved,
or shall make an assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other agreements,
terms, covenants or conditions hereof on Tenant's part to be performed, and
such non-performance shall continue for a period of 30 days after written
notice thereof by Landlord to Tenant; provided that if the curative action to
be taken by Tenant cannot, for reasons beyond Tenant's reasonable control be
completed within 30 days, then so long as Tenant promptly initiates and
diligently provides such cure, Tenant will not be deemed in default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as hereinabove
described, Landlord shall have the right, at its election, then or at any time
thereafter and while any such event of default shall continue, either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the Premises and
repossess the same as of Landlord's former estate, and expel Tenant and those
claiming through or under Tenant, and remove the effects of both, and without
prejudice to any remedies for arrears of Rent. Should Landlord elect to re-
enter as provided in this subparagraph (2), or
-12-
<PAGE> 13
should Landlord take possession pursuant to legal proceedings or pursuant to
any notice provided for by law, Landlord shall without terminating this Lease,
use reasonable efforts to relet the Premises in Landlord's or Tenant's name,
but for the account of Tenant, for such term or terms (which may be greater or
less than the period which would otherwise have constituted the balance of the
term of this Lease) and on such conditions and upon such other terms as
Landlord may reasonably determine, and Landlord may collect and receive the
rents therefor. Landlord shall in no way be responsible or liable for any
failure to relet the Premises after exercising good faith efforts therefor, but
shall make every reasonable effort to mitigate its damages. No such re-entry or
taking possession of the Premises by Landlord shall be construed as an election
on Landlord's part to terminate this Lease unless a written notice of such
intention is given to Tenant. No notice from Landlord hereunder or under a
forcible entry and detainer statute or similar law shall constitute an election
by Landlord to terminate this Lease unless such notice specifically so states.
Landlord reserves the right following any such re-entry or reletting to
exercise its right to terminate this Lease by giving Tenant written notice to
that effect, in which event the Lease will terminate as specified in said
notice.
B. In the event that Landlord does not elect to terminate
this Lease and elects to take possession as provided in subparagraph A(2)
hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly on
the days on which the Rent would have been payable hereunder if possession had
not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a result of
an uncured default by Tenant, as permitted in subparagraph A(1) hereof, Tenant
shall remain liable to Landlord for damages in an amount equal to the Rent and
other sums which would have been owed by Tenant hereunder for the balance of
the term had this Lease not been terminated, less the net proceeds, if any, of
any reletting of the Premises by Landlord subsequent to such termination, after
deducting all Landlord's expenses in connection with such reletting, including,
but without limitation, the expenses enumerated above. Landlord shall be
entitled to collect such damages from Tenant monthly on the days on which the
Rent and other amounts would have been payable hereunder if this Lease had not
been terminated, and Landlord shall be entitled to receive the same from Tenant
on each such day. Landlord agrees to use good faith efforts to mitigate its
damages in the event of Tenant's default. Alternatively, at the option of
Landlord, Landlord shall be entitled to recover forthwith against Tenant, as
damages for the loss of the
-13-
<PAGE> 14
bargain and not as a penalty, an aggregate sum which, at the time of such
termination of this Lease, represents the amount, if any, by which the
aggregate of the Rent and all other sums payable by Tenant hereunder which
would have accrued for the balance of the term exceeds the aggregate rental
value of the Premises (such rental value to be computed on the basis of a
tenant paying not only Rent, but also such other charges as are required to be
paid by Tenant under the terms of this Lease) for the balance of such term,
both discounted to present worth at the Federal Reserve discount rate plus one
percent (1%).
D. Suit or suits for the recovery of the amounts and damages
set forth herein may be brought by Landlord, from time to time, at Landlord's
election; and nothing herein shall be deemed to require Landlord to await the
date that this Lease or the term hereof would have expired had there been no
such default by Tenant, or no such termination, as the case may be. Each right
and remedy provided for in this Lease shall be cumulative and shall be in
addition to every other right or remedy provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise, including,
but not limited to, suits for injunctive relief and specific performance. The
exercise or beginning of the exercise by Landlord of any one or more of the
rights or remedies provided for in this Lease as now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by Landlord of any or all other rights or remedies provided
for in this Lease as now or hereafter existing at law or in equity or by
statute or otherwise. All costs incurred by Landlord in connection with
collecting any amounts and damages owed by Tenant pursuant to the provisions of
this Lease, including reasonable attorneys' fees from the date any such matter
is turned over to an attorney, shall also be recoverable by Landlord from
Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach. Notwithstanding any termination
of this Lease, the same shall continue in full force and effect as to any
provisions hereof which require observance or performance by Landlord or Tenant
subsequent to termination.
(1) Nothing contained in this Paragraph 17 shall limit
or prejudice the right of Landlord to prove and obtain as liquidated damages in
any bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding an amount equal to the maximum allowed by any statute or rule of law
governing such proceeding and in effect at the time when such damages are to be
proved.
-14-
<PAGE> 15
(2) Notwithstanding anything in this Paragraph 17 to
the contrary, any such proceeding or action involving bankruptcy, insolvency,
reorganization, arrangement, assignment for the benefit of creditors, or
appointment of a receiver or trustee, as specified in subparagraphs 16D and 16E
above, shall be considered to be an event of default only when such proceeding,
action or remedy shall be taken or brought by or against the then holder of the
leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are not
paid within 30 days after they are due shall bear interest at the rate of 10%
per annum from the 31st day after the due date of such payment until received
by Landlord. Similarly, any amounts paid by Landlord to cure any defaults of
Tenant hereunder, which Landlord shall have the right, but not the obligation
to do, shall, if not repaid by Tenant within 30 days after demand by Landlord,
thereafter bear interest at the above rate until received by Landlord.
G. Landlord hereby waives any statutory or common law rights
it may have granting Landlord a lien or the right to foreclose on the personal
property of Tenant and/or the tenant improvements installed in the Premises by
Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any other person, but with an obligation by
Landlord to account therefor. Tenant shall pay Landlord for all expenses
incurred in connection with the disposition of such property.
19. HOLDING OVER. Should Tenant hold over after the termination of
this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to-month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
-15-
<PAGE> 16
20. BROKER'S FEE. Tenant and Landlord each represent and warrant to
the other that it has had no dealings with any person, firm, broker or finder
in connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction. Tenant and Landlord do each hereby agree to indemnify, protect,
defend and hold the other harmless from and against liability for compensation
or charges which may be claimed by any such unnamed broker, finder or other
similar party by reason of any dealings or actions of the indemnifying party,
including any costs, expenses, attorneys' fees reasonably incurred with respect
thereto.
21. SURRENDER AND NOTICE. Upon the expiration or other termination of
the term of this Lease, Tenant shall promptly quit the Premises and surrender
the Premises to Landlord broom clean, in good order and condition, except for
ordinary wear and tear and loss by fire or other casualty. Tenant may remove
Tenant's Property and all of its movable furniture and other effects and such
alterations, additions and improvements that Tenant installed pursuant to
Paragraph 26 hereof. In the event that Tenant fails to vacate the Premises in a
timely manner as required, Tenant shall be responsible to Landlord for all
reasonable costs incurred by Landlord as a result of such failure, including,
but not limited to, any amounts required to be paid to third parties who were
to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in this
Lease to the contrary, Landlord represents and warrants to Tenant that it is
the sole owner in fee simple of the Leased Premises, that no mortgages, deeds
of trusts or liens or encumbrances of any nature presently encumber Landlord's
title to the Premises except as set forth on Exhibit B, attached hereto and
incorporated herein by this reference; that none of said encumbrances shall
prohibit or impede the use of the Premises as contemplated herein or create any
financial obligation on the part of Tenant except as expressly set forth
herein; that Landlord has the full right, power and authority to enter into
this Lease and make the agreements contained herein on its part to be
performed; that the execution, delivery and performance of this Lease has been
duly authorized by Landlord; that the Lease constitutes the valid and binding
obligation of Landlord, enforceable in accordance with its terms; that the
making of this Lease and the performance thereof will not violate any present
zoning laws or ordinances or the terms or provisions of any mortgage, lease or
other agreement to which Landlord is a party or under which Landlord is
otherwise bound, or which restricts Landlord in any way with respect to the use
or disposition of the Premises; that Landlord has no knowledge of any pending
zoning changes affecting the Premises; that the Premises and Building will be
kept in compliance by Landlord, at its cost, with all applicable laws and
regulations enacted from and after the date of this Lease; that the Premises
are presently zoned so as to permit the operation of the Premises as
contemplated in this Lease; and that the Premises presently include full legal
access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's option,
shall be subordinate to any mortgage or deed of trust (now or hereafter placed
upon the Premises),
-16-
<PAGE> 17
and to any and all advances made under any mortgage or deed of trust and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Tenant agrees to execute such documents as may be further required to evidence
such subordination or to make this Lease prior to the lien of any mortgage or
deed of trust, as the case may be, subject to the following sentence.
Notwithstanding the foregoing, Tenant shall only be obligated to subordinate
its leasehold interest to any mortgage, deed of trust, or ground lease now or
hereafter placed upon the Premises if the holder of such mortgage or deed of
trust or the landlord under such ground lease delivers to Tenant a non-
disturbance agreement, using the form of document then being employed by such
holder provided it is reasonably acceptable to Tenant, which will provide that
Tenant, notwithstanding any default of Landlord thereunder, shall have the
right to remain in possession of the Premises described herein in accordance
with the terms and provisions of this Lease for so long as Tenant shall not be
in default under this Lease. Upon the mutual execution of this Lease, Landlord
shall deliver such a non-disturbance agreement from any present lender having a
deed of trust or mortgage on the Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act in
any matter provided for herein by and through its building manager or any other
person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be given
to Landlord hereunder shall be in writing, and shall be deemed duly served
three days after deposited in the United States Mail, with proper postage
prepaid, certified or registered, return receipt requested, addressed to
Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of this Lease, except
that the monthly rent for each respective Option Period will be increased in
the manner set forth in subparagraph B below. Tenant will exercise its option
by giving Landlord written notice at least 180 days prior to the expiration of
the Primary Lease Term, or the expiration of the then current Option Period, as
the case may be.
-17-
<PAGE> 18
B. Landlord and Tenant agree that the monthly rent for each
Option Period will be determined set forth in this paragraph. For the first
month of the first year of the subject Option Period, the Rent due hereunder
will be adjusted in accordance with the increase, if any, which has occurred in
the Consumer Price Index, Denver-Boulder area for all Urban Consumers, U.S.
City Average - All Items Index (CPI-U, 1982-84 equals 100), published by the
United States Department of Labor, Bureau of Labor Statistics (the "INDEX")
from the Commencement Date or the last day of a prior Rent adjustment,
whichever is later, to the date of the present adjustment. Such adjusted Rent
rate will be the Rent for the then Option Period. If the Index is discontinued,
Landlord and Tenant shall agree upon comparable statistics on the cost of
living for the computations under this subparagraph B, and such statistics
shall be published by an agency of the United States Government or by a
responsible financial periodical or recognized authority. If Landlord and
Tenant fail to agree on a replacement index, they will submit the question of a
replacement index to an arbitrator in accordance with the rules and regulations
of the American Arbitration Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip the
Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply for,
diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits or
approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense, as
part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental
-18-
<PAGE> 19
regulations. All sign construction shall be in accordance with such local sign
ordinances and applicable governmental regulation. Tenant shall obtain, and
Landlord shall cooperate with Tenant's applications therefor, any and all
permits as are required under such governmental regulations.
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and hold
harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's rental and other payment obligations under this Lease
shall be abated entirely during the period beyond the 24 hours that Tenant is
required to be closed for business or abated in proportion to the amount of
lost business suffered by Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold
-19-
<PAGE> 20
harmless Landlord, its directors, officers, employees, and agents and assignees
or successors to Landlord's interest in the Premises, their directors,
officers, employees, and agents from and against any and all losses, claims,
damages, penalties and liability including all out-of-pocket litigation costs
and reasonable attorneys' fees (i) including all damages, directly or
indirectly arising out of the use, generation, storage, release or disposal of
Hazardous Materials by Tenant, its agents or contractors, and (ii) including,
without limitation, the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans to
the full extent that such is attributable, directly or indirectly, to the use,
generation, storage, release or disposal of Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Premises at the
time in question. In the event of any transfer or transfers of the title to the
Premises, the Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released,
from and after the date of such transfer or conveyance, from all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that the
grantee assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an interest in the
hands of Landlord or the then grantor at the time of such transfer shall be
turned over to the grantee. Any amount then due and payable to Tenant by
Landlord or the then grantor under any provisions of this Lease shall be paid
to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease shall
not work a merger, and such termination or mutual cancellation shall, at the
option of Landlord, either terminate all subleases and subtenancies or operate
as an assignment to Landlord of any or all of such subleases or subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30 days after demand, and if the other
party is Tenant, such expenditures may be offset against Rent due under this
Lease but only if Landlord does not pay such amount within such 30-day period.
Notwithstanding anything in this paragraph to the contrary, no prior notice to
the non-complying party shall be necessary if the failure to comply involves
emergency repairs under this Lease reasonably necessary for the safety and
preservation of the Premises or the furnishings and equipment located therein
or the health or safety of the occupants or employees thereof.
-20-
<PAGE> 21
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter of
convenience only and shall be considered to be of no effect in the construction
of any provision or provisions of this Lease.
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day permitted
for the performance of any act required or permitted under this Lease falls on
a Saturday, Sunday or holiday, the time for such performance will be extended
to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any obligation
of Tenant, other than the payment of Rent, which is delayed or not performed
due to acts of God, strike, riot, war, weather, failure to obtain labor and
materials at a reasonable cost, or any other reason beyond the control of the
Landlord or Tenant shall not constitute a default hereunder and shall be
performed within a reasonable time after the end of such cause for delay or
non-performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before delinquency,
any and all taxes levied or assessed and which become payable during the term
hereof upon all of Tenant's income, leasehold improvements, equipment,
furniture, fixtures and personal property owned by Tenant located in the
Premises. In the event that any or all of Tenant's leasehold improvements,
equipment, furniture, fixtures and personal property shall be assessed and
taxed with the Building, Tenant shall pay such taxes applicable to Tenant's
property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or
-21-
<PAGE> 22
permit them to be brought in its name; however, Landlord will not be subjected
to any liability for the payment of any costs or expenses in connection with
any contest or proceedings, and Tenant will indemnify Landlord against and save
Landlord harmless from any costs and expenses in this regard.
L. Any consent of Landlord or Tenant hereunder shall not be
unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
N. This Lease will be construed and enforced in accordance
with the laws of the State of Colorado.
-22-
<PAGE> 23
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day
and year first above written.
"LANDLORD"
By:/s/ GEORGE EVANS
---------------------------------------
George Evans
Date: May 15, 1996
-------------------------------------
Address: 8157 E. Hunters Hill Dr.
---------------------------------
Englewood, CO 80112
------------------------------------------
By: /s/ LARRY DAVIDSON
---------------------------------------
Larry Davidson
Date: May 15, 1996
-------------------------------------
Address: 9504 Southern Hills Cr.
---------------------------------
Littleton, CO 80124
------------------------------------------
"TENANT"
RentX Industries, Inc., a Delaware
corporation
By: /s/ RICHARD M. TYLER
--------------------------------------
Its: Richard M. Tyler
--------------------------------------
Date: May 15, 1996
------------------------------------
Address: 1522 Blake Street,
Denver, Colorado 80202
-23-
<PAGE> 24
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
[LEGAL DESCRIPTION OMITTED]
A-1
<PAGE> 25
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
Mortgage held by Bank One, Loan No. 2702160651
Deed of Trust dated February 14, 1989, for the benefit of First Colorado Bank &
Trust, N.A., recorded in Book 841 at Page 574, Douglas County, Colorado
B-1
<PAGE> 1
EXHIBIT 10.35
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made this 15th day of May 1996,
between George Evans and Larry Davidson (collectively, "Landlord") and RentX
Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 4,000 rentable square foot building located at
15350 East Hampden Avenue, Aurora, Colorado (the "Building"), together with a
non-exclusive license, subject to the provisions hereof, to use all
appurtenances thereto, including, but not limited to, any parking area and
access roads, and other areas related to the use of the Building (collectively,
the "Premises").
2. TERM. The term of this Lease shall commence as of May 15,
1996 (the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant
shall pay to Landlord the annual sum of $43,110.84 (the "Rent") which sum shall
be payable in twelve equal monthly installments of $3,592.57 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in
advance without notice at the office of Landlord or to such other person or at
such other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this
is a "triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied
against the Premises by any governmental or quasi-governmental authority. The
foregoing shall include any taxes, assessments, surcharges, or service or other
fees of a nature not presently in effect which shall hereafter be levied on the
Premises as a result of the use, ownership or operation of the Premises or for
any other reason, whether in lieu of or in addition to any current real estate
taxes and assessments. Expenses incurred by Tenant for tax consultants and in
contesting the amount or validity of any such taxes or assessments shall be
included in such computations. Assessments shall include any and all so-called
special assessments, license tax, business license fee, business license tax,
commercial rental tax, levy, charge or tax, imposed by any authority having the
direct power to tax, including any city, county, state or federal government,
or any school, agricultural, lighting, water, drainage or other improvement or
special district thereof, against the Premises, or the Building, or against any
legal or equitable interest of Landlord therein. Taxes and assessment shall
exclude Landlord's income taxes or similar taxes. Any special assessments will
be amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk
coverage; public liability insurance; and any other insurance carried by Tenant
or Landlord relating to this Lease. All such insurance shall be in such
amounts as set forth in this Lease.
<PAGE> 2
C. Any capital improvements, repairs and replacements
made in or to the Premises. The cost of any capital improvement shall be
amortized over the useful life of such item and Tenant will pay its percentage
share (which shall be determined by dividing the square footage of the Building
by the square footage of all buildings benefitted by such improvement,
including the Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by
fire, windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated
by condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may estimate the amount of Operating Expenses for the then
current year based on the most currently available information to Landlord.
Upon the determination of the actual Operating Expenses for such year, Landlord
shall deliver to Tenant a comparative statement which shall show a comparison
of the estimated Operating Expenses to the actual Operating Expenses for the
applicable year. If the estimated Operating Expenses exceed the actual
Operating Expenses, Landlord shall immediately remit such excess to Tenant. If
the estimated Operating Expenses are less than the actual Operating Expenses,
Tenant shall immediately pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only
-2-
<PAGE> 3
after paying such tax or posting such security that Landlord reasonably
requires in order to protect the Leased Premises against loss or forfeiture.
Upon the conclusion of any such protest proceedings, Tenant will pay its share
of the tax, as finally determined, in accordance with this Lease the payment of
which tax may have been deferred during the prosecution of the proceedings,
together with any costs, fees, interest, penalties, or other related
liabilities. Landlord will not be required to join in any contest or
proceedings unless the provisions of any law or regulations then in effect
require that the proceedings be brought by or in the name of Landlord. In that
event, Landlord will join in the proceedings or permit them to be brought in
its name; however, Landlord will not be subjected to any liability for the
payment of any costs or expenses in connection with any contest or proceedings,
and Tenant will indemnify Landlord against and save Landlord harmless from any
costs and expenses in this regard.
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and
equipment rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit
waste to be committed, nor shall Tenant permit any nuisance in or about the
Premises.
C. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or
hereafter enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services.
If an interruption of services which materially affects Tenant's use and
enjoyment of the Premises continues for more than 30 consecutive calendar days,
Tenant shall have the right to terminate this Lease upon written notice to
Landlord, and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant
in the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-3-
<PAGE> 4
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph
4 above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain
the Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace
all structural components of the Premises and the roof of the Building, and if
a repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The
cost of any such capital improvement shall be amortized over the useful life of
such item and Tenant agrees to pay its percentage share (which shall be
determined by dividing the square footage of the Building by the square footage
of all buildings benefitted by such improvement, including the Building) of the
annual amortized amount. Such payment will be made by Tenant as set forth in
Paragraph 4 above. Landlord shall do all acts required to comply with all
applicable laws, ordinances, regulations and rules of any public authority
relating to the Premises, except to the extent that the foregoing are solely a
result of Tenant's use of the Premises. Tenant shall do all acts required to
comply with all applicable laws, ordinances, regulations and rules of any
public authority relating solely to Tenant's use of the Premises. If a repair
is required as a result of Tenant's negligence and such repair cost is not
covered by insurance proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive business days, then Tenant
shall be entitled to an abatement of rent commencing with the fourth business
day that the same are unusable; provided, however, that Tenant shall not be
entitled to a pro rata abatement of rent under the foregoing due to unusability
(i) caused directly or indirectly by any act or omission of Tenant or any of
Tenant's servants, employees, agents, contractors, visitors or licensees, (ii)
where Tenant makes a decoration, alteration, improvement or addition which
directly causes such unusability, or (iii) where the repair in question is one
which Tenant is obligated to furnish under the provisions of this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions
or improvements (other than any non-structural change or decorating alteration
to the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or
-4-
<PAGE> 5
delayed. Landlord may condition its consent to any alterations, additions or
improvements upon such reasonable requirements as Landlord may deem necessary
in its reasonable discretion, including without limitation the manner in which
the work is done and the right to approve the contractor by whom the work is to
be performed.
(2) All items installed in the Premises by Tenant
and all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring
Landlord's consent prior to the commencement of any such work, Tenant shall
upon request deliver to Landlord, certificates issued by insurance companies
qualified to do business in the state where the Premises are located,
evidencing that Workmen's Compensation, general liability insurance and
property damage insurance, all in amounts, with companies and on forms
reasonably satisfactory to Landlord, are in full force and effect and
maintained by all contractors and subcontractors engaged by Tenant to perform
such work. All such policies shall name Landlord as an additional insured.
Each such certificate shall provide that the insurance policy may not be
canceled or modified without 10 days' prior written notice to Landlord.
Further, Tenant shall permit Landlord to post notices in the Premises in
locations which will be visible by persons performing any work on the Premises
stating that Landlord is not responsible for the payment for such work and
setting forth such other information as Landlord may deem necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the
right to enter the Premises at all reasonable times after 24 hours' prior
written notice, except in emergencies, for the purpose of: (1) examining or
inspecting the same; (2) showing the same to prospective purchasers or tenants
of the Building during the last six months of the Primary Lease Term or during
the last six months of any option period, if this Lease is extended; provided,
however, if such prospective purchaser or tenant is viewed by Tenant as a
"competitor" in the industry, then Landlord will use best efforts to restrict
such prospective purchaser's or tenant's access to areas where Tenant has
confidential information (such restricted access may mean certain areas may not
be available for view or require that such party be accompanied by a
representative of Tenant when entering such areas); and (3) making such
alterations, repairs, improvements or additions to the Building which are the
obligation of Landlord, in a manner which will not unreasonably interfere with
Tenant's use of the Premises. If Tenant shall not be personally present to
open and permit entry into the Premises at any time when such entry by Landlord
is necessary or permitted hereunder, Landlord may enter by means of a master
key without liability to Tenant, except for any failure to exercise due care
for Tenant's property, and without affecting this Lease. Such entry shall not
be construed as a manifestation by the Landlord of an intent to terminate this
Lease. Tenant shall not, without the prior consent of Landlord, change the
locks or install additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all
costs for work done by Tenant or caused to be done by Tenant on the Premises of
a character which may result in liens on Landlord's interest therein. Tenant
will keep the Premises free and clear of all mechanics' liens and other liens
on account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any
liens be filed or recorded against the Premises for work or materials supplied
to Tenant, or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be removed of record within 30 days after
notice from Landlord. If Tenant
-5-
<PAGE> 6
desires to contest any claim of lien, Tenant shall furnish to Landlord adequate
security in the amount of 100% of the amount of the claim, plus estimated costs
and interest, and, if a final judgment establishing the validity or existence
of any lien for any amount is entered, Tenant shall pay and satisfy the same at
once. If Tenant shall be in default in paying any charge for which a
mechanic's lien or suit to foreclose the lien has been recorded or filed, and
shall not have caused the same to be released of record or shall not have given
Landlord security as aforesaid, Landlord may (but without being required to do
so) pay such lien or claim and any costs or obtain a bond or title insurance
protection against such lien, and the amount so paid, together with reasonable
attorneys' fees incurred in connection therewith, shall be immediately due from
Tenant to Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises or any part thereof, when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Tenant, its agents, contractors, or employees. Tenant
further indemnifies and agrees to hold Landlord harmless from and to defend
Landlord against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, or employees, and from and against all costs, reasonable
attorneys' and legal assistants' fees and liabilities incurred as a result of
any such claim or any action or proceeding brought thereon. Tenant shall not
be liable to Landlord for any damage by or from any act or negligence of any
owner or occupant of adjoining or contiguous property. Tenant agrees to pay
for all damage to the Premises caused by Tenant's misuse of the Premises.
Tenant shall not be required to indemnify Landlord for Landlord's own
negligence or misconduct or the negligence or misconduct of Landlord's agents,
contractors or employees. Landlord hereby indemnifies and agrees to hold
Tenant harmless from and to defend Tenant against, any and all claims of
liability for any injury (including death) or damage to any person or property
whatsoever occurring in or about the Building, or Premises when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Landlord, its agents, contractors, or employees. Landlord
further indemnifies and agrees to hold Tenant harmless from, and to defend
Tenant against any and all claims arising from any breach or default in
performance of any obligation on Landlord's part to be performed under the
terms of this Lease, or arising from any act or negligence of Landlord, or any
of its agents, contractors or employees, and from and against all costs,
attorneys' and legal assistants' fees, expenses and liabilities incurred as a
result of any such claim or any action or proceeding brought thereon. Landlord
shall not be liable to Tenant for any damage by or from any act or negligence
of any other occupant of the Building, or by any owner or occupant of adjoining
or contiguous property. Landlord shall not be required to indemnify Tenant for
Tenant's own negligence or misconduct or the negligence or misconduct of
Tenant's agents, contractors or employees.
B. Neither Landlord nor its agents shall be liable for
any damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act or negligence
-6-
<PAGE> 7
of Tenant, or of its agents or employees, Tenant upon reasonable prior written
notice from Landlord, shall defend the same at Tenant's expense. In case any
action or proceeding is brought against Tenant by reason of any obligation on
Landlord's part to be performed under the terms of this Lease, or arising from
any act or negligence of Landlord, or of its agents, or employees, Landlord,
upon reasonable prior written notice from Tenant, shall defend the same at
Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance
in the amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or
other insured casualty, Tenant shall deliver the insurance proceeds received
for the Building, excluding the amounts received for Tenant's Property and the
amount of any deductible paid by Tenant, to Landlord, and the damage shall be
repaired by and at the expense of Landlord, regardless of the extent of
available insurance proceeds, provided that such repairs and restoration can,
in Landlord's reasonable opinion, be made within 120 days after the occurrence
of such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30
days after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth
the approximate length of time Landlord estimates will be required to complete
such repairs and restoration. If Landlord estimates it cannot make such
repairs and restoration within said 120-day period, then either party, by
written notice to the other, may cancel this Lease as of the date of occurrence
of such damage, provided that such notice is given to the other party within 15
days after Landlord notifies Tenant of the estimated time for completion of
such repairs and restoration. If no notice is given by either party to
terminate this Lease, this Lease shall continue in effect and the Rent shall be
apportioned in the manner provided above. Landlord agrees that if Landlord
exercises the foregoing termination option, Tenant shall have the right to
reinstate the Lease by giving Landlord written notice of such reinstatement
within 15 days after receipt of Landlord's termination notice, and upon such
reinstatement, Landlord shall deliver all insurance proceeds to Tenant, who
will commence and complete such repair and restoration work.
C. Landlord and Tenant hereby waive any and all rights
of recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or
-7-
<PAGE> 8
provisions waiving the insurer's rights of subrogation with respect to claims
against the other, and each shall notify its insurance companies of the
existence of the waiver and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises untenantable, is taken
by right of eminent domain or by condemnation, or is conveyed in lieu of any
such taking, then this Lease may be terminated at the option of Tenant. Such
option shall be exercised by Tenant giving notice to Landlord of such
termination within 30 days after such taking or conveyance; whereupon this
Lease shall forthwith terminate and the Rent shall be duly apportioned as of
the date of such taking or conveyance. Upon such termination, Tenant shall
surrender to Landlord the Premises and all of Tenant's interest therein under
this Lease, and Landlord may re-enter and take possession of the Premises or
remove Tenant therefrom. If any portion of the Premises is taken which does
not materially affect Tenant's right to use the remainder of the Premises for
the purposes set forth herein, this Lease shall continue in full force and
effect, and Landlord shall promptly perform any repair or restoration work
required to restore the Premises, insofar as possible, to former condition, and
the rental owing hereunder shall be adjusted, if necessary, in such just manner
and proportion as the part so taken (and its effect on Tenant's ability to use
the remainder of the Premises) bears to the whole. In the event of taking or
conveyance as described herein, Landlord shall receive the award or
consideration for the lands and improvements so taken; provided, however, that
Landlord shall have no interest in any award made for Tenant's loss of business
or value of its leasehold interest or for the taking of Tenant's fixtures or
property, or for Tenant's relocation expenses. Landlord and Tenant shall
cooperate with one another in making claims for condemnation awards.
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to
be used or occupied by any persons other than Tenant and the employees of
Tenant, nor shall Tenant permit any part of the Premises to be used or occupied
by any licensee or concessionaire, or permit any persons to be upon the
Premises other than Tenant, and employees, customers and others having lawful
business with Tenant without the prior written consent of Landlord, not to be
unreasonably withheld or delayed. Tenant shall have the right to assign or
part with the possession of the Premises without the prior written consent of
Landlord, provided that such assignment or sublease is to an entity (i)
controlled by, controlling, or under common control with Tenant or (ii) which
acquires, by merger or otherwise, substantially all of the assets or business
of Tenant. Tenant may collaterally assign this Lease to any lender of Tenant
without obtaining Landlord's consent thereto.
B. Tenant may sublet all or any part of the Premises to
any subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time
and from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this
-8-
<PAGE> 9
Paragraph 15 shall be conditioned upon receipt by Tenant of a nondisturbance
agreement pursuant to the provisions of Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following
events shall constitute an "event of default":
A. Tenant shall fail to pay when due any installment of
Rent, and such default shall continue for 10 days after receipt of written
notice from Landlord;
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
C. This Lease or the Premises or any part thereof shall
be taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or
insolvency or for reorganization or arrangement under the bankruptcy laws of
the United States or under any insolvency act of any state, or shall
voluntarily take advantage of any such law or act by answer or otherwise, or
shall be dissolved, or shall make an assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law
or insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be
performed, and such non-performance shall continue for a period of 30 days
after written notice thereof by Landlord to Tenant; provided that if the
curative action to be taken by Tenant cannot, for reasons beyond Tenant's
reasonable control be completed within 30 days, then so long as Tenant promptly
initiates and diligently provides such cure, Tenant will not be deemed in
default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as
hereinabove described, Landlord shall have the right, at its election, then or
at any time thereafter and while any such event of default shall continue,
either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the
Premises and repossess the same as of Landlord's former estate, and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both, and without prejudice to any remedies for arrears of Rent. Should
Landlord elect to re-enter as provided in this subparagraph (2), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord shall without terminating this Lease, use
reasonable efforts to relet the Premises in Landlord's or Tenant's name, but
for the account of Tenant, for such term or terms (which may
-9-
<PAGE> 10
be greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions and upon such other
terms as Landlord may reasonably determine, and Landlord may collect and
receive the rents therefor. Landlord shall in no way be responsible or liable
for any failure to relet the Premises after exercising good faith efforts
therefor, but shall make every reasonable effort to mitigate its damages. No
such re-entry or taking possession of the Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant. No notice from Landlord
hereunder or under a forcible entry and detainer statute or similar law shall
constitute an election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right following any such re-
entry or reletting to exercise its right to terminate this Lease by giving
Tenant written notice to that effect, in which event the Lease will terminate
as specified in said notice.
B. In the event that Landlord does not elect to
terminate this Lease and elects to take possession as provided in subparagraph
A(2) hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly
on the days on which the Rent would have been payable hereunder if possession
had not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a
result of an uncured default by Tenant, as permitted in subparagraph A(1)
hereof, Tenant shall remain liable to Landlord for damages in an amount equal
to the Rent and other sums which would have been owed by Tenant hereunder for
the balance of the term had this Lease not been terminated, less the net
proceeds, if any, of any reletting of the Premises by Landlord subsequent to
such termination, after deducting all Landlord's expenses in connection with
such reletting, including, but without limitation, the expenses enumerated
above. Landlord shall be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
hereunder if this Lease had not been terminated, and Landlord shall be entitled
to receive the same from Tenant on each such day. Landlord agrees to use good
faith efforts to mitigate its damages in the event of Tenant's default.
Alternatively, at the option of Landlord, Landlord shall be entitled to recover
forthwith against Tenant, as damages for the loss of the bargain and not as a
penalty, an aggregate sum which, at the time of such termination of this Lease,
represents the amount, if any, by which the aggregate of the Rent and all other
sums payable by Tenant hereunder which would have accrued for the balance of
the term exceeds the aggregate rental value of the Premises (such rental value
to be computed on the basis of a tenant paying not only Rent, but also such
other charges as are required to be paid by Tenant under the terms of this
Lease) for the balance of such term, both discounted to present worth at the
Federal Reserve discount rate plus one percent (1%).
D. Suit or suits for the recovery of the amounts and
damages set forth herein may be brought by Landlord, from time to time, at
Landlord's election; and nothing herein shall be deemed to require Landlord to
await the date that this Lease or the term hereof would have expired had there
been no such default by Tenant, or no such termination, as the case may be.
Each right and remedy provided for in this Lease shall be cumulative and shall
be in addition to every other right or remedy provided for in this Lease or now
or hereafter existing at law or in equity or by statute or otherwise,
including, but not limited to, suits for injunctive relief and specific
performance. The exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease as now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies
-10-
<PAGE> 11
provided for in this Lease as now or hereafter existing at law or in equity or
by statute or otherwise. All costs incurred by Landlord in connection with
collecting any amounts and damages owed by Tenant pursuant to the provisions of
this Lease, including reasonable attorneys' fees from the date any such matter
is turned over to an attorney, shall also be recoverable by Landlord from
Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach. Notwithstanding any termination
of this Lease, the same shall continue in full force and effect as to any
provisions hereof which require observance or performance by Landlord or Tenant
subsequent to termination.
(1) Nothing contained in this Paragraph 17 shall
limit or prejudice the right of Landlord to prove and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding an amount equal to the maximum allowed by any statute or
rule of law governing such proceeding and in effect at the time when such
damages are to be proved.
(2) Notwithstanding anything in this Paragraph 17
to the contrary, any such proceeding or action involving bankruptcy,
insolvency, reorganization, arrangement, assignment for the benefit of
creditors, or appointment of a receiver or trustee, as specified in
subparagraphs 16D and 16E above, shall be considered to be an event of default
only when such proceeding, action or remedy shall be taken or brought by or
against the then holder of the leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are
not paid within 30 days after they are due shall bear interest at the rate of
10% per annum from the 31st day after the due date of such payment until
received by Landlord. Similarly, any amounts paid by Landlord to cure any
defaults of Tenant hereunder, which Landlord shall have the right, but not the
obligation to do, shall, if not repaid by Tenant within 30 days after demand by
Landlord, thereafter bear interest at the above rate until received by
Landlord.
G. Landlord hereby waives any statutory or common law
rights it may have granting Landlord a lien or the right to foreclose on the
personal property of Tenant and/or the tenant improvements installed in the
Premises by Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any
-11-
<PAGE> 12
other person, but with an obligation by Landlord to account therefor. Tenant
shall pay Landlord for all expenses incurred in connection with the disposition
of such property.
19. HOLDING OVER. Should Tenant hold over after the termination
of this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to-month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
20. BROKER'S FEE. Tenant and Landlord each represent and warrant
to the other that it has had no dealings with any person, firm, broker or
finder in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and that no broker or other person,
firm or entity is entitled to any commission or finder's fee in connection with
said transaction. Tenant and Landlord do each hereby agree to indemnify,
protect, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party, including any costs, expenses, attorneys' fees reasonably incurred with
respect thereto.
21. SURRENDER AND NOTICE. Upon the expiration or other
termination of the term of this Lease, Tenant shall promptly quit the Premises
and surrender the Premises to Landlord broom clean, in good order and
condition, except for ordinary wear and tear and loss by fire or other
casualty. Tenant may remove Tenant's Property and all of its movable furniture
and other effects and such alterations, additions and improvements that Tenant
installed pursuant to Paragraph 26 hereof. In the event that Tenant fails to
vacate the Premises in a timely manner as required, Tenant shall be responsible
to Landlord for all reasonable costs incurred by Landlord as a result of such
failure, including, but not limited to, any amounts required to be paid to
third parties who were to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in
this Lease to the contrary, Landlord represents and warrants to Tenant that it
is the sole owner in fee simple of the Leased Premises, that no mortgages,
deeds of trusts or liens or encumbrances of any nature presently encumber
Landlord's title to the Premises except as set forth on Exhibit B, attached
hereto and incorporated herein by this reference; that none of said
encumbrances shall prohibit or impede the use of the Premises as contemplated
herein or create any financial obligation on the part of Tenant except as
expressly set forth herein; that Landlord has the full right, power and
authority to enter into this Lease and make the agreements contained herein on
its part to be performed; that the execution, delivery and performance of this
Lease has been duly authorized by Landlord; that the Lease constitutes the
valid and binding obligation of Landlord, enforceable in accordance with its
terms; that the making of this Lease and the performance thereof will not
violate any present zoning laws or ordinances or the terms or provisions of any
mortgage, lease or other agreement to which Landlord is a party or under which
Landlord is otherwise bound, or which restricts Landlord in any way with
respect to the use or disposition of the Premises; that Landlord has no
knowledge of any pending zoning changes affecting the Premises; that the
Premises and Building will be kept in compliance by Landlord, at its cost, with
all applicable laws and regulations enacted from and after the date of this
Lease; that the Premises are presently zoned so as to permit the operation of
the
-12-
<PAGE> 13
Premises as contemplated in this Lease; and that the Premises presently include
full legal access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's
option, shall be subordinate to any mortgage or deed of trust (now or hereafter
placed upon the Premises), and to any and all advances made under any mortgage
or deed of trust and to all renewals, modifications, consolidations,
replacements and extensions thereof. Tenant agrees to execute such documents
as may be further required to evidence such subordination or to make this Lease
prior to the lien of any mortgage or deed of trust, as the case may be, subject
to the following sentence. Notwithstanding the foregoing, Tenant shall only be
obligated to subordinate its leasehold interest to any mortgage, deed of trust,
or ground lease now or hereafter placed upon the Premises if the holder of such
mortgage or deed of trust or the landlord under such ground lease delivers to
Tenant a non-disturbance agreement, using the form of document then being
employed by such holder provided it is reasonably acceptable to Tenant, which
will provide that Tenant, notwithstanding any default of Landlord thereunder,
shall have the right to remain in possession of the Premises described herein
in accordance with the terms and provisions of this Lease for so long as Tenant
shall not be in default under this Lease. Upon the mutual execution of this
Lease, Landlord shall deliver such a non-disturbance agreement from any present
lender having a deed of trust or mortgage on the Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act
in any matter provided for herein by and through its building manager or any
other person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be
given to Landlord hereunder shall be in writing, and shall be deemed duly
served three days after deposited in the United States Mail, with proper
postage prepaid, certified or registered, return receipt requested, addressed
to Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of
-13-
<PAGE> 14
this Lease, except that the monthly rent for each respective Option Period will
be increased in the manner set forth in subparagraph B below. Tenant will
exercise its option by giving Landlord written notice at least 180 days prior
to the expiration of the Primary Lease Term, or the expiration of the then
current Option Period, as the case may be.
B. Landlord and Tenant agree that the monthly rent for
each Option Period will be determined set forth in this paragraph. For the
first month of the first year of the subject Option Period, the Rent due
hereunder will be adjusted in accordance with the increase, if any, which has
occurred in the Consumer Price Index, Denver-Boulder area for all Urban
Consumers, U.S. City Average - All Items Index (CPI-U, 1982-84 equals 100),
published by the United States Department of Labor, Bureau of Labor Statistics
(the "INDEX") from the Commencement Date or the last day of a prior Rent
adjustment, whichever is later, to the date of the present adjustment. Such
adjusted Rent rate will be the Rent for the then Option Period. If the Index
is discontinued, Landlord and Tenant shall agree upon comparable statistics on
the cost of living for the computations under this subparagraph B, and such
statistics shall be published by an agency of the United States Government or
by a responsible financial periodical or recognized authority. If Landlord and
Tenant fail to agree on a replacement index, they will submit the question of a
replacement index to an arbitrator in accordance with the rules and regulations
of the American Arbitration Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip
the Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply
for, diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits
-14-
<PAGE> 15
or approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense,
as part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental regulations. All sign construction shall be
in accordance with such local sign ordinances and applicable governmental
regulation. Tenant shall obtain, and Landlord shall cooperate with Tenant's
applications therefor, any and all permits as are required under such
governmental regulations.
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and
hold harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's
-15-
<PAGE> 16
rental and other payment obligations under this Lease shall be abated entirely
during the period beyond the 24 hours that Tenant is required to be closed for
business or abated in proportion to the amount of lost business suffered by
Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold harmless Landlord, its directors, officers,
employees, and agents and assignees or successors to Landlord's interest in the
Premises, their directors, officers, employees, and agents from and against any
and all losses, claims, damages, penalties and liability including all out-of-
pocket litigation costs and reasonable attorneys' fees (i) including all
damages, directly or indirectly arising out of the use, generation, storage,
release or disposal of Hazardous Materials by Tenant, its agents or
contractors, and (ii) including, without limitation, the cost of any required
or necessary repair, clean-up or detoxification and the preparation of any
closure or other required plans to the full extent that such is attributable,
directly or indirectly, to the use, generation, storage, release or disposal of
Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Premises at the
time in question. In the event of any transfer or transfers of the title to
the Premises, the Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released,
from and after the date of such transfer or conveyance, from all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that the
grantee assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an interest in the
hands of Landlord or the then grantor at the time of such transfer shall be
turned over to the grantee. Any amount then due and payable to Tenant by
Landlord or the then grantor under any provisions of this Lease shall be paid
to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease
shall not work a merger, and such termination or mutual cancellation shall, at
the option of Landlord, either terminate all subleases and subtenancies or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30
-16-
<PAGE> 17
days after demand, and if the other party is Tenant, such expenditures may be
offset against Rent due under this Lease but only if Landlord does not pay such
amount within such 30-day period. Notwithstanding anything in this paragraph
to the contrary, no prior notice to the non-complying party shall be necessary
if the failure to comply involves emergency repairs under this Lease reasonably
necessary for the safety and preservation of the Premises or the furnishings
and equipment located therein or the health or safety of the occupants or
employees thereof.
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter
of convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day
permitted for the performance of any act required or permitted under this Lease
falls on a Saturday, Sunday or holiday, the time for such performance will be
extended to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any
obligation of Tenant, other than the payment of Rent, which is delayed or not
performed due to acts of God, strike, riot, war, weather, failure to obtain
labor and materials at a reasonable cost, or any other reason beyond the
control of the Landlord or Tenant shall not constitute a default hereunder and
shall be performed within a reasonable time after the end of such cause for
delay or non-performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all of Tenant's income, leasehold improvements,
equipment, furniture, fixtures and personal property owned by Tenant located in
the Premises. In the event that any or all of Tenant's leasehold
-17-
<PAGE> 18
improvements, equipment, furniture, fixtures and personal property shall be
assessed and taxed with the Building, Tenant shall pay such taxes applicable to
Tenant's property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or permit them to be brought in its name; however, Landlord will not be
subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
L. Any consent of Landlord or Tenant hereunder shall not
be unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
N. This Lease will be construed and enforced in
accordance with the laws of the State of Colorado.
-18-
<PAGE> 19
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
"LANDLORD"
By: /s/ GEORGE EVANS
--------------------------------------------
George Evans
Date: May 15, 1996
------------------------------------------
Address: 8157 E. Hunters Hill Dr.
---------------------------------------
Englewood, CO 80112
-----------------------------------------------
By: /s/ LARRY DAVIDSON
--------------------------------------------
Larry Davidson
Date: May 15, 1996
------------------------------------------
Address: 9504 Southern Hills Cr.
---------------------------------------
Littleton, CO 80124
---------------------------------------
"TENANT"
RentX Industries, Inc., a Delaware corporation
By: /s/ RICHARD M. TYLER
--------------------------------------------
Its: Richard M. Tyler
-------------------------------------------
Date: May 15, 1996
------------------------------------------
Address: 1522 Blake Street,
Denver, Colorado 80202
-19-
<PAGE> 20
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
[LEGAL DESCRIPTION OMITTED]
A-1
<PAGE> 21
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
Mortgage Holder: World Savings, Loan No. 329770-2
Deed of Trust dated August 25, 1978, for the benefit of Majestic Savings and
Loan recorded in Book 2852 at Page 472, Arapahoe County, Colorado
Deed of Trust dated April 16, 1986, for the benefit of First Colorado Bank and
Trust, N.A., recorded in Book 4789 at Page 295, Arapahoe County, Colorado
Deed of Trust dated May 20, 1991, for the benefit of First Colorado Bank &
Trust, N.A., recorded in Book 6175 at Page 269, Arapahoe County, Colorado
B-1
<PAGE> 1
EXHIBIT 10.36
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made as of the 15th day of May,
1996, between George Evans and Larry Davidson (collectively, "Landlord") and
RentX Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 3,000 rentable square foot building located at
5860 E. Evans, Denver, Colorado (the "Building"), together with a non-exclusive
license, subject to the provisions hereof, to use all appurtenances thereto,
including, but not limited to, any parking area and access roads, and other
areas related to the use of the Building (collectively, the "Premises").
2. TERM. The term of this Lease shall commence as of May 15,
1996 (the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant
shall pay to Landlord the annual sum of $20,024.40 (the "Rent") which sum shall
be payable in twelve equal monthly installments of $1,668.70 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in
advance without notice at the office of Landlord or to such other person or at
such other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this
is a "triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied
against the Premises by any governmental or quasi-governmental authority. The
foregoing shall include any taxes, assessments, surcharges, or service or other
fees of a nature not presently in effect which shall hereafter be levied on the
Premises as a result of the use, ownership or operation of the Premises or for
any other reason, whether in lieu of or in addition to any current real estate
taxes and assessments. Expenses incurred by Tenant for tax consultants and in
contesting the amount or validity of any such taxes or assessments shall be
included in such computations. Assessments shall include any and all so-called
special assessments, license tax, business license fee, business license tax,
commercial rental tax, levy, charge or tax, imposed by any authority having the
direct power to tax, including any city, county, state or federal government,
or any school, agricultural, lighting, water, drainage or other improvement or
special district thereof, against the Premises, or the Building, or against any
legal or equitable interest of Landlord therein. Taxes and assessment shall
exclude Landlord's income taxes or similar taxes. Any special assessments will
be amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk
coverage; public liability insurance; and any other insurance carried by Tenant
or Landlord relating to this Lease. All such insurance shall be in such
amounts as set forth in this Lease.
<PAGE> 2
C. Any capital improvements, repairs and replacements
made in or to the Premises. The cost of any capital improvement shall be
amortized over the useful life of such item and Tenant will pay its percentage
share (which shall be determined by dividing the square footage of the Building
by the square footage of all buildings benefitted by such improvement,
including the Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by
fire, windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated
by condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may estimate the amount of Operating Expenses for the then
current year based on the most currently available information to Landlord.
Upon the determination of the actual Operating Expenses for such year, Landlord
shall deliver to Tenant a comparative statement which shall show a comparison
of the estimated Operating Expenses to the actual Operating Expenses for the
applicable year. If the estimated Operating Expenses exceed the actual
Operating Expenses, Landlord shall immediately remit such excess to Tenant. If
the estimated Operating Expenses are less than the actual Operating Expenses,
Tenant shall immediately pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only
-2-
<PAGE> 3
after paying such tax or posting such security that Landlord reasonably
requires in order to protect the Leased Premises against loss or forfeiture.
Upon the conclusion of any such protest proceedings, Tenant will pay its share
of the tax, as finally determined, in accordance with this Lease the payment of
which tax may have been deferred during the prosecution of the proceedings,
together with any costs, fees, interest, penalties, or other related
liabilities. Landlord will not be required to join in any contest or
proceedings unless the provisions of any law or regulations then in effect
require that the proceedings be brought by or in the name of Landlord. In that
event, Landlord will join in the proceedings or permit them to be brought in
its name; however, Landlord will not be subjected to any liability for the
payment of any costs or expenses in connection with any contest or proceedings,
and Tenant will indemnify Landlord against and save Landlord harmless from any
costs and expenses in this regard.
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and
equipment rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit
waste to be committed, nor shall Tenant permit any nuisance in or about the
Premises.
C. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or
hereafter enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services.
If an interruption of services which materially affects Tenant's use and
enjoyment of the Premises continues for more than 30 consecutive calendar days,
Tenant shall have the right to terminate this Lease upon written notice to
Landlord, and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant
in the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-3-
<PAGE> 4
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph
4 above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain
the Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace
all structural components of the Premises and the roof of the Building, and if
a repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The
cost of any such capital improvement shall be amortized over the useful life of
such item and Tenant agrees to pay its percentage share (which shall be
determined by dividing the square footage of the Building by the square footage
of all buildings benefitted by such improvement, including the Building) of the
annual amortized amount. Such payment will be made by Tenant as set forth in
Paragraph 4 above. Landlord shall do all acts required to comply with all
applicable laws, ordinances, regulations and rules of any public authority
relating to the Premises, except to the extent that the foregoing are solely a
result of Tenant's use of the Premises. Tenant shall do all acts required to
comply with all applicable laws, ordinances, regulations and rules of any
public authority relating solely to Tenant's use of the Premises. If a repair
is required as a result of Tenant's negligence and such repair cost is not
covered by insurance proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive business days, then Tenant
shall be entitled to an abatement of rent commencing with the fourth business
day that the same are unusable; provided, however, that Tenant shall not be
entitled to a pro rata abatement of rent under the foregoing due to unusability
(i) caused directly or indirectly by any act or omission of Tenant or any of
Tenant's servants, employees, agents, contractors, visitors or licensees, (ii)
where Tenant makes a decoration, alteration, improvement or addition which
directly causes such unusability, or (iii) where the repair in question is one
which Tenant is obligated to furnish under the provisions of this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions
or improvements (other than any non- structural change or decorating alteration
to the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or
-4-
<PAGE> 5
delayed. Landlord may condition its consent to any alterations, additions or
improvements upon such reasonable requirements as Landlord may deem necessary
in its reasonable discretion, including without limitation the manner in which
the work is done and the right to approve the contractor by whom the work is to
be performed.
(2) All items installed in the Premises by Tenant
and all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring
Landlord's consent prior to the commencement of any such work, Tenant shall
upon request deliver to Landlord, certificates issued by insurance companies
qualified to do business in the state where the Premises are located,
evidencing that Workmen's Compensation, general liability insurance and
property damage insurance, all in amounts, with companies and on forms
reasonably satisfactory to Landlord, are in full force and effect and
maintained by all contractors and subcontractors engaged by Tenant to perform
such work. All such policies shall name Landlord as an additional insured.
Each such certificate shall provide that the insurance policy may not be
canceled or modified without 10 days' prior written notice to Landlord.
Further, Tenant shall permit Landlord to post notices in the Premises in
locations which will be visible by persons performing any work on the Premises
stating that Landlord is not responsible for the payment for such work and
setting forth such other information as Landlord may deem necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the
right to enter the Premises at all reasonable times after 24 hours' prior
written notice, except in emergencies, for the purpose of: (1) examining or
inspecting the same; (2) showing the same to prospective purchasers or tenants
of the Building during the last six months of the Primary Lease Term or during
the last six months of any option period, if this Lease is extended; provided,
however, if such prospective purchaser or tenant is viewed by Tenant as a
"competitor" in the industry, then Landlord will use best efforts to restrict
such prospective purchaser's or tenant's access to areas where Tenant has
confidential information (such restricted access may mean certain areas may not
be available for view or require that such party be accompanied by a
representative of Tenant when entering such areas); and (3) making such
alterations, repairs, improvements or additions to the Building which are the
obligation of Landlord, in a manner which will not unreasonably interfere with
Tenant's use of the Premises. If Tenant shall not be personally present to
open and permit entry into the Premises at any time when such entry by Landlord
is necessary or permitted hereunder, Landlord may enter by means of a master
key without liability to Tenant, except for any failure to exercise due care
for Tenant's property, and without affecting this Lease. Such entry shall not
be construed as a manifestation by the Landlord of an intent to terminate this
Lease. Tenant shall not, without the prior consent of Landlord, change the
locks or install additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all
costs for work done by Tenant or caused to be done by Tenant on the Premises of
a character which may result in liens on Landlord's interest therein. Tenant
will keep the Premises free and clear of all mechanics' liens and other liens
on account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any
liens be filed or recorded against the Premises for work or materials supplied
to Tenant, or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be removed of record within 30 days after
notice from Landlord. If Tenant
-5-
<PAGE> 6
desires to contest any claim of lien, Tenant shall furnish to Landlord adequate
security in the amount of 100% of the amount of the claim, plus estimated costs
and interest, and, if a final judgment establishing the validity or existence
of any lien for any amount is entered, Tenant shall pay and satisfy the same at
once. If Tenant shall be in default in paying any charge for which a
mechanic's lien or suit to foreclose the lien has been recorded or filed, and
shall not have caused the same to be released of record or shall not have given
Landlord security as aforesaid, Landlord may (but without being required to do
so) pay such lien or claim and any costs or obtain a bond or title insurance
protection against such lien, and the amount so paid, together with reasonable
attorneys' fees incurred in connection therewith, shall be immediately due from
Tenant to Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises or any part thereof, when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Tenant, its agents, contractors, or employees. Tenant
further indemnifies and agrees to hold Landlord harmless from and to defend
Landlord against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, or employees, and from and against all costs, reasonable
attorneys' and legal assistants' fees and liabilities incurred as a result of
any such claim or any action or proceeding brought thereon. Tenant shall not
be liable to Landlord for any damage by or from any act or negligence of any
owner or occupant of adjoining or contiguous property. Tenant agrees to pay
for all damage to the Premises caused by Tenant's misuse of the Premises.
Tenant shall not be required to indemnify Landlord for Landlord's own
negligence or misconduct or the negligence or misconduct of Landlord's agents,
contractors or employees. Landlord hereby indemnifies and agrees to hold
Tenant harmless from and to defend Tenant against, any and all claims of
liability for any injury (including death) or damage to any person or property
whatsoever occurring in or about the Building, or Premises when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Landlord, its agents, contractors, or employees. Landlord
further indemnifies and agrees to hold Tenant harmless from, and to defend
Tenant against any and all claims arising from any breach or default in
performance of any obligation on Landlord's part to be performed under the
terms of this Lease, or arising from any act or negligence of Landlord, or any
of its agents, contractors or employees, and from and against all costs,
attorneys' and legal assistants' fees, expenses and liabilities incurred as a
result of any such claim or any action or proceeding brought thereon. Landlord
shall not be liable to Tenant for any damage by or from any act or negligence
of any other occupant of the Building, or by any owner or occupant of adjoining
or contiguous property. Landlord shall not be required to indemnify Tenant for
Tenant's own negligence or misconduct or the negligence or misconduct of
Tenant's agents, contractors or employees.
B. Neither Landlord nor its agents shall be liable for
any damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act or negligence
-6-
<PAGE> 7
of Tenant, or of its agents or employees, Tenant upon reasonable prior written
notice from Landlord, shall defend the same at Tenant's expense. In case any
action or proceeding is brought against Tenant by reason of any obligation on
Landlord's part to be performed under the terms of this Lease, or arising from
any act or negligence of Landlord, or of its agents, or employees, Landlord,
upon reasonable prior written notice from Tenant, shall defend the same at
Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance
in the amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or
other insured casualty, Tenant shall deliver the insurance proceeds received
for the Building, excluding the amounts received for Tenant's Property and the
amount of any deductible paid by Tenant, to Landlord, and the damage shall be
repaired by and at the expense of Landlord, regardless of the extent of
available insurance proceeds, provided that such repairs and restoration can,
in Landlord's reasonable opinion, be made within 120 days after the occurrence
of such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30
days after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth
the approximate length of time Landlord estimates will be required to complete
such repairs and restoration. If Landlord estimates it cannot make such
repairs and restoration within said 120-day period, then either party, by
written notice to the other, may cancel this Lease as of the date of occurrence
of such damage, provided that such notice is given to the other party within 15
days after Landlord notifies Tenant of the estimated time for completion of
such repairs and restoration. If no notice is given by either party to
terminate this Lease, this Lease shall continue in effect and the Rent shall be
apportioned in the manner provided above. Landlord agrees that if Landlord
exercises the foregoing termination option, Tenant shall have the right to
reinstate the Lease by giving Landlord written notice of such reinstatement
within 15 days after receipt of Landlord's termination notice, and upon such
reinstatement, Landlord shall deliver all insurance proceeds to Tenant, who
will commence and complete such repair and restoration work.
C. Landlord and Tenant hereby waive any and all rights
of recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or
-7-
<PAGE> 8
provisions waiving the insurer's rights of subrogation with respect to claims
against the other, and each shall notify its insurance companies of the
existence of the waiver and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises untenantable, is taken
by right of eminent domain or by condemnation, or is conveyed in lieu of any
such taking, then this Lease may be terminated at the option of Tenant. Such
option shall be exercised by Tenant giving notice to Landlord of such
termination within 30 days after such taking or conveyance; whereupon this
Lease shall forthwith terminate and the Rent shall be duly apportioned as of
the date of such taking or conveyance. Upon such termination, Tenant shall
surrender to Landlord the Premises and all of Tenant's interest therein under
this Lease, and Landlord may re-enter and take possession of the Premises or
remove Tenant therefrom. If any portion of the Premises is taken which does
not materially affect Tenant's right to use the remainder of the Premises for
the purposes set forth herein, this Lease shall continue in full force and
effect, and Landlord shall promptly perform any repair or restoration work
required to restore the Premises, insofar as possible, to former condition, and
the rental owing hereunder shall be adjusted, if necessary, in such just manner
and proportion as the part so taken (and its effect on Tenant's ability to use
the remainder of the Premises) bears to the whole. In the event of taking or
conveyance as described herein, Landlord shall receive the award or
consideration for the lands and improvements so taken; provided, however, that
Landlord shall have no interest in any award made for Tenant's loss of business
or value of its leasehold interest or for the taking of Tenant's fixtures or
property, or for Tenant's relocation expenses. Landlord and Tenant shall
cooperate with one another in making claims for condemnation awards.
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to
be used or occupied by any persons other than Tenant and the employees of
Tenant, nor shall Tenant permit any part of the Premises to be used or occupied
by any licensee or concessionaire, or permit any persons to be upon the
Premises other than Tenant, and employees, customers and others having lawful
business with Tenant without the prior written consent of Landlord, not to be
unreasonably withheld or delayed. Tenant shall have the right to assign or
part with the possession of the Premises without the prior written consent of
Landlord, provided that such assignment or sublease is to an entity (i)
controlled by, controlling, or under common control with Tenant or (ii) which
acquires, by merger or otherwise, substantially all of the assets or business
of Tenant. Tenant may collaterally assign this Lease to any lender of Tenant
without obtaining Landlord's consent thereto.
B. Tenant may sublet all or any part of the Premises to
any subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time
and from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this
-8-
<PAGE> 9
Paragraph 15 shall be conditioned upon receipt by Tenant of a nondisturbance
agreement pursuant to the provisions of Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following
events shall constitute an "event of default":
A. Tenant shall fail to pay when due any installment of
Rent, and such default shall continue for 10 days after receipt of written
notice from Landlord;
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
C. This Lease or the Premises or any part thereof shall
be taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or
insolvency or for reorganization or arrangement under the bankruptcy laws of
the United States or under any insolvency act of any state, or shall
voluntarily take advantage of any such law or act by answer or otherwise, or
shall be dissolved, or shall make an assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law
or insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be
performed, and such non-performance shall continue for a period of 30 days
after written notice thereof by Landlord to Tenant; provided that if the
curative action to be taken by Tenant cannot, for reasons beyond Tenant's
reasonable control be completed within 30 days, then so long as Tenant promptly
initiates and diligently provides such cure, Tenant will not be deemed in
default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as
hereinabove described, Landlord shall have the right, at its election, then or
at any time thereafter and while any such event of default shall continue,
either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the
Premises and repossess the same as of Landlord's former estate, and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both, and without prejudice to any remedies for arrears of Rent. Should
Landlord elect to re-enter as provided in this subparagraph (2), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord shall without terminating this Lease, use
reasonable efforts to relet the Premises in Landlord's or Tenant's name, but
for the account of Tenant, for such term or terms (which may
-9-
<PAGE> 10
be greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions and upon such other
terms as Landlord may reasonably determine, and Landlord may collect and
receive the rents therefor. Landlord shall in no way be responsible or liable
for any failure to relet the Premises after exercising good faith efforts
therefor, but shall make every reasonable effort to mitigate its damages. No
such re- entry or taking possession of the Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant. No notice from Landlord
hereunder or under a forcible entry and detainer statute or similar law shall
constitute an election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right following any such
re-entry or reletting to exercise its right to terminate this Lease by giving
Tenant written notice to that effect, in which event the Lease will terminate
as specified in said notice.
B. In the event that Landlord does not elect to
terminate this Lease and elects to take possession as provided in subparagraph
A(2) hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly
on the days on which the Rent would have been payable hereunder if possession
had not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a
result of an uncured default by Tenant, as permitted in subparagraph A(1)
hereof, Tenant shall remain liable to Landlord for damages in an amount equal
to the Rent and other sums which would have been owed by Tenant hereunder for
the balance of the term had this Lease not been terminated, less the net
proceeds, if any, of any reletting of the Premises by Landlord subsequent to
such termination, after deducting all Landlord's expenses in connection with
such reletting, including, but without limitation, the expenses enumerated
above. Landlord shall be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
hereunder if this Lease had not been terminated, and Landlord shall be entitled
to receive the same from Tenant on each such day. Landlord agrees to use good
faith efforts to mitigate its damages in the event of Tenant's default.
Alternatively, at the option of Landlord, Landlord shall be entitled to recover
forthwith against Tenant, as damages for the loss of the bargain and not as a
penalty, an aggregate sum which, at the time of such termination of this Lease,
represents the amount, if any, by which the aggregate of the Rent and all other
sums payable by Tenant hereunder which would have accrued for the balance of
the term exceeds the aggregate rental value of the Premises (such rental value
to be computed on the basis of a tenant paying not only Rent, but also such
other charges as are required to be paid by Tenant under the terms of this
Lease) for the balance of such term, both discounted to present worth at the
Federal Reserve discount rate plus one percent (1%).
D. Suit or suits for the recovery of the amounts and
damages set forth herein may be brought by Landlord, from time to time, at
Landlord's election; and nothing herein shall be deemed to require Landlord to
await the date that this Lease or the term hereof would have expired had there
been no such default by Tenant, or no such termination, as the case may be.
Each right and remedy provided for in this Lease shall be cumulative and shall
be in addition to every other right or remedy provided for in this Lease or now
or hereafter existing at law or in equity or by statute or otherwise,
including, but not limited to, suits for injunctive relief and specific
performance. The exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease as now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies
-10-
<PAGE> 11
provided for in this Lease as now or hereafter existing at law or in equity or
by statute or otherwise. All costs incurred by Landlord in connection with
collecting any amounts and damages owed by Tenant pursuant to the provisions of
this Lease, including reasonable attorneys' fees from the date any such matter
is turned over to an attorney, shall also be recoverable by Landlord from
Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach. Notwithstanding any termination
of this Lease, the same shall continue in full force and effect as to any
provisions hereof which require observance or performance by Landlord or Tenant
subsequent to termination.
(1) Nothing contained in this Paragraph 17 shall
limit or prejudice the right of Landlord to prove and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding an amount equal to the maximum allowed by any statute or
rule of law governing such proceeding and in effect at the time when such
damages are to be proved.
(2) Notwithstanding anything in this Paragraph 17
to the contrary, any such proceeding or action involving bankruptcy,
insolvency, reorganization, arrangement, assignment for the benefit of
creditors, or appointment of a receiver or trustee, as specified in
subparagraphs 16D and 16E above, shall be considered to be an event of default
only when such proceeding, action or remedy shall be taken or brought by or
against the then holder of the leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are
not paid within 30 days after they are due shall bear interest at the rate of
10% per annum from the 31st day after the due date of such payment until
received by Landlord. Similarly, any amounts paid by Landlord to cure any
defaults of Tenant hereunder, which Landlord shall have the right, but not the
obligation to do, shall, if not repaid by Tenant within 30 days after demand by
Landlord, thereafter bear interest at the above rate until received by
Landlord.
G. Landlord hereby waives any statutory or common law
rights it may have granting Landlord a lien or the right to foreclose on the
personal property of Tenant and/or the tenant improvements installed in the
Premises by Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any
-11-
<PAGE> 12
other person, but with an obligation by Landlord to account therefor. Tenant
shall pay Landlord for all expenses incurred in connection with the disposition
of such property.
19. HOLDING OVER. Should Tenant hold over after the termination
of this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to- month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
20. BROKER'S FEE. Tenant and Landlord each represent and warrant
to the other that it has had no dealings with any person, firm, broker or
finder in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and that no broker or other person,
firm or entity is entitled to any commission or finder's fee in connection with
said transaction. Tenant and Landlord do each hereby agree to indemnify,
protect, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party, including any costs, expenses, attorneys' fees reasonably incurred with
respect thereto.
21. SURRENDER AND NOTICE. Upon the expiration or other
termination of the term of this Lease, Tenant shall promptly quit the Premises
and surrender the Premises to Landlord broom clean, in good order and
condition, except for ordinary wear and tear and loss by fire or other
casualty. Tenant may remove Tenant's Property and all of its movable furniture
and other effects and such alterations, additions and improvements that Tenant
installed pursuant to Paragraph 26 hereof. In the event that Tenant fails to
vacate the Premises in a timely manner as required, Tenant shall be responsible
to Landlord for all reasonable costs incurred by Landlord as a result of such
failure, including, but not limited to, any amounts required to be paid to
third parties who were to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in
this Lease to the contrary, Landlord represents and warrants to Tenant that it
is the sole owner in fee simple of the Leased Premises, that no mortgages,
deeds of trusts or liens or encumbrances of any nature presently encumber
Landlord's title to the Premises except as set forth on Exhibit B, attached
hereto and incorporated herein by this reference; that none of said
encumbrances shall prohibit or impede the use of the Premises as contemplated
herein or create any financial obligation on the part of Tenant except as
expressly set forth herein; that Landlord has the full right, power and
authority to enter into this Lease and make the agreements contained herein on
its part to be performed; that the execution, delivery and performance of this
Lease has been duly authorized by Landlord; that the Lease constitutes the
valid and binding obligation of Landlord, enforceable in accordance with its
terms; that the making of this Lease and the performance thereof will not
violate any present zoning laws or ordinances or the terms or provisions of any
mortgage, lease or other agreement to which Landlord is a party or under which
Landlord is otherwise bound, or which restricts Landlord in any way with
respect to the use or disposition of the Premises; that Landlord has no
knowledge of any pending zoning changes affecting the Premises; that the
Premises and Building will be kept in compliance by Landlord, at its cost, with
all applicable laws and regulations enacted from and after the date of this
Lease; that the Premises are presently zoned so as to permit the operation of
the
-12-
<PAGE> 13
Premises as contemplated in this Lease; and that the Premises presently include
full legal access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's
option, shall be subordinate to any mortgage or deed of trust (now or hereafter
placed upon the Premises), and to any and all advances made under any mortgage
or deed of trust and to all renewals, modifications, consolidations,
replacements and extensions thereof. Tenant agrees to execute such documents
as may be further required to evidence such subordination or to make this Lease
prior to the lien of any mortgage or deed of trust, as the case may be, subject
to the following sentence. Notwithstanding the foregoing, Tenant shall only be
obligated to subordinate its leasehold interest to any mortgage, deed of trust,
or ground lease now or hereafter placed upon the Premises if the holder of such
mortgage or deed of trust or the landlord under such ground lease delivers to
Tenant a non-disturbance agreement, using the form of document then being
employed by such holder provided it is reasonably acceptable to Tenant, which
will provide that Tenant, notwithstanding any default of Landlord thereunder,
shall have the right to remain in possession of the Premises described herein
in accordance with the terms and provisions of this Lease for so long as Tenant
shall not be in default under this Lease. Upon the mutual execution of this
Lease, Landlord shall deliver such a non-disturbance agreement from any present
lender having a deed of trust or mortgage on the Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act
in any matter provided for herein by and through its building manager or any
other person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be
given to Landlord hereunder shall be in writing, and shall be deemed duly
served three days after deposited in the United States Mail, with proper
postage prepaid, certified or registered, return receipt requested, addressed
to Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of
-13-
<PAGE> 14
this Lease, except that the monthly rent for each respective Option Period will
be increased in the manner set forth in subparagraph B below. Tenant will
exercise its option by giving Landlord written notice at least 180 days prior
to the expiration of the Primary Lease Term, or the expiration of the then
current Option Period, as the case may be.
B. Landlord and Tenant agree that the monthly rent for
each Option Period will be determined set forth in this paragraph. For the
first month of the first year of the subject Option Period, the Rent due
hereunder will be adjusted in accordance with the increase, if any, which has
occurred in the Consumer Price Index, Denver-Boulder area for all Urban
Consumers, U.S. City Average - All Items Index (CPI-U, 1982-84 equals 100),
published by the United States Department of Labor, Bureau of Labor Statistics
(the "INDEX") from the Commencement Date or the last day of a prior Rent
adjustment, whichever is later, to the date of the present adjustment. Such
adjusted Rent rate will be the Rent for the then Option Period. If the Index
is discontinued, Landlord and Tenant shall agree upon comparable statistics on
the cost of living for the computations under this subparagraph B, and such
statistics shall be published by an agency of the United States Government or
by a responsible financial periodical or recognized authority. If Landlord and
Tenant fail to agree on a replacement index, they will submit the question of a
replacement index to an arbitrator in accordance with the rules and regulations
of the American Arbitration Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip
the Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply
for, diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits
-14-
<PAGE> 15
or approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense,
as part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental regulations. All sign construction shall be
in accordance with such local sign ordinances and applicable governmental
regulation. Tenant shall obtain, and Landlord shall cooperate with Tenant's
applications therefor, any and all permits as are required under such
governmental regulations.
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and
hold harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's
-15-
<PAGE> 16
rental and other payment obligations under this Lease shall be abated entirely
during the period beyond the 24 hours that Tenant is required to be closed for
business or abated in proportion to the amount of lost business suffered by
Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold harmless Landlord, its directors, officers,
employees, and agents and assignees or successors to Landlord's interest in the
Premises, their directors, officers, employees, and agents from and against any
and all losses, claims, damages, penalties and liability including all
out-of-pocket litigation costs and reasonable attorneys' fees (i) including all
damages, directly or indirectly arising out of the use, generation, storage,
release or disposal of Hazardous Materials by Tenant, its agents or
contractors, and (ii) including, without limitation, the cost of any required
or necessary repair, clean-up or detoxification and the preparation of any
closure or other required plans to the full extent that such is attributable,
directly or indirectly, to the use, generation, storage, release or disposal of
Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Premises at the
time in question. In the event of any transfer or transfers of the title to
the Premises, the Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released,
from and after the date of such transfer or conveyance, from all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that the
grantee assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an interest in the
hands of Landlord or the then grantor at the time of such transfer shall be
turned over to the grantee. Any amount then due and payable to Tenant by
Landlord or the then grantor under any provisions of this Lease shall be paid
to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease
shall not work a merger, and such termination or mutual cancellation shall, at
the option of Landlord, either terminate all subleases and subtenancies or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30
-16-
<PAGE> 17
days after demand, and if the other party is Tenant, such expenditures may be
offset against Rent due under this Lease but only if Landlord does not pay such
amount within such 30-day period. Notwithstanding anything in this paragraph
to the contrary, no prior notice to the non-complying party shall be necessary
if the failure to comply involves emergency repairs under this Lease reasonably
necessary for the safety and preservation of the Premises or the furnishings
and equipment located therein or the health or safety of the occupants or
employees thereof.
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter
of convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day
permitted for the performance of any act required or permitted under this Lease
falls on a Saturday, Sunday or holiday, the time for such performance will be
extended to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any
obligation of Tenant, other than the payment of Rent, which is delayed or not
performed due to acts of God, strike, riot, war, weather, failure to obtain
labor and materials at a reasonable cost, or any other reason beyond the
control of the Landlord or Tenant shall not constitute a default hereunder and
shall be performed within a reasonable time after the end of such cause for
delay or non- performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all of Tenant's income, leasehold improvements,
equipment, furniture, fixtures and personal property owned by Tenant located in
the Premises. In the event that any or all of Tenant's leasehold
-17-
<PAGE> 18
improvements, equipment, furniture, fixtures and personal property shall be
assessed and taxed with the Building, Tenant shall pay such taxes applicable to
Tenant's property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or permit them to be brought in its name; however, Landlord will not be
subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
L. Any consent of Landlord or Tenant hereunder shall not
be unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
N. This Lease will be construed and enforced in
accordance with the laws of the State of Colorado.
-18-
<PAGE> 19
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
"LANDLORD"
By: /s/ GEORGE A. EVANS
-------------------------------------------
George Evans
Date: May 15, 1996
-----------------------------------------
Address: 8157 E. Hunters Hill Dr.
-------------------------------------
Englewood, CO 80112
----------------------------------------------
By: /s/ LARRY DAVIDSON
-------------------------------------------
Larry Davidson
Date: May 15, 1997
-----------------------------------------
Address: 9504 Southern Hills Cr.
-------------------------------------
Littleton, CO 80124
----------------------------------------------
"TENANT"
RentX Industries, Inc., a Delaware corporation
By: /s/ RICHARD M. TYLER
------------------------------------------
Its: Richard M. Tyler, President
------------------------------------------
Date: May 15, 1996
----------------------------------------
Address: 1522 Blake Street,
Denver, Colorado 80202
-19-
<PAGE> 20
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
[LEGAL DESCRIPTION OMITTED]
A-1
<PAGE> 21
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
First Deed of Trust dated May 20, 1991 held by Colorado National Bank, Loan No.
1735012629
Second and Third Deed of Trusts held by Bank One, Loan No. 2167173686 and Loan
No. 2700799369
B-1
<PAGE> 1
EXHIBIT 10.37
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made as of the 15th day of May,
1996, between George Evans and Larry Davidson (collectively, "Landlord") and
RentX Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 3,630 rentable square foot building located at
2131 S. Jasmine, Denver, Colorado (the "Building"), together with a
non-exclusive license, subject to the provisions hereof, to use all
appurtenances thereto, including, but not limited to, any parking area and
access roads, and other areas related to the use of the Building (collectively,
the "Premises").
2. TERM. The term of this Lease shall commence as of May 15,
1996 (the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant
shall pay to Landlord the annual sum of $17,184.84 (the "Rent") which sum shall
be payable in twelve equal monthly installments of $1,432.07 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in
advance without notice at the office of Landlord or to such other person or at
such other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this
is a "triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied
against the Premises by any governmental or quasi-governmental authority. The
foregoing shall include any taxes, assessments, surcharges, or service or other
fees of a nature not presently in effect which shall hereafter be levied on the
Premises as a result of the use, ownership or operation of the Premises or for
any other reason, whether in lieu of or in addition to any current real estate
taxes and assessments. Expenses incurred by Tenant for tax consultants and in
contesting the amount or validity of any such taxes or assessments shall be
included in such computations. Assessments shall include any and all so-called
special assessments, license tax, business license fee, business license tax,
commercial rental tax, levy, charge or tax, imposed by any authority having the
direct power to tax, including any city, county, state or federal government,
or any school, agricultural, lighting, water, drainage or other improvement or
special district thereof, against the Premises, or the Building, or against any
legal or equitable interest of Landlord therein. Taxes and assessment shall
exclude Landlord's income taxes or similar taxes. Any special assessments will
be amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk
coverage; public liability insurance; and any other insurance carried by Tenant
or Landlord relating to this Lease. All such insurance shall be in such
amounts as set forth in this Lease.
<PAGE> 2
C. Any capital improvements, repairs and replacements
made in or to the Premises. The cost of any capital improvement shall be
amortized over the useful life of such item and Tenant will pay its percentage
share (which shall be determined by dividing the square footage of the Building
by the square footage of all buildings benefitted by such improvement,
including the Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by
fire, windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated
by condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may estimate the amount of Operating Expenses for the then
current year based on the most currently available information to Landlord.
Upon the determination of the actual Operating Expenses for such year, Landlord
shall deliver to Tenant a comparative statement which shall show a comparison
of the estimated Operating Expenses to the actual Operating Expenses for the
applicable year. If the estimated Operating Expenses exceed the actual
Operating Expenses, Landlord shall immediately remit such excess to Tenant. If
the estimated Operating Expenses are less than the actual Operating Expenses,
Tenant shall immediately pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only after paying
such tax or posting such security that Landlord reasonably requires in order to
protect the Leased
-2-
<PAGE> 3
Premises against loss or forfeiture. Upon the conclusion of any such protest
proceedings, Tenant will pay its share of the tax, as finally determined, in
accordance with this Lease the payment of which tax may have been deferred
during the prosecution of the proceedings, together with any costs, fees,
interest, penalties, or other related liabilities. Landlord will not be
required to join in any contest or proceedings unless the provisions of any law
or regulations then in effect require that the proceedings be brought by or in
the name of Landlord. In that event, Landlord will join in the proceedings or
permit them to be brought in its name; however, Landlord will not be subjected
to any liability for the payment of any costs or expenses in connection with
any contest or proceedings, and Tenant will indemnify Landlord against and save
Landlord harmless from any costs and expenses in this regard.
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and
equipment rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit
waste to be committed, nor shall Tenant permit any nuisance in or about the
Premises.
C. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or
hereafter enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services.
If an interruption of services which materially affects Tenant's use and
enjoyment of the Premises continues for more than 30 consecutive calendar days,
Tenant shall have the right to terminate this Lease upon written notice to
Landlord, and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant
in the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-3-
<PAGE> 4
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph
4 above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain
the Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace
all structural components of the Premises and the roof of the Building, and if
a repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The
cost of any such capital improvement shall be amortized over the useful life of
such item and Tenant agrees to pay its percentage share (which shall be
determined by dividing the square footage of the Building by the square footage
of all buildings benefitted by such improvement, including the Building) of the
annual amortized amount. Such payment will be made by Tenant as set forth in
Paragraph 4 above. Landlord shall do all acts required to comply with all
applicable laws, ordinances, regulations and rules of any public authority
relating to the Premises, except to the extent that the foregoing are solely a
result of Tenant's use of the Premises. Tenant shall do all acts required to
comply with all applicable laws, ordinances, regulations and rules of any
public authority relating solely to Tenant's use of the Premises. If a repair
is required as a result of Tenant's negligence and such repair cost is not
covered by insurance proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive business days, then Tenant
shall be entitled to an abatement of rent commencing with the fourth business
day that the same are unusable; provided, however, that Tenant shall not be
entitled to a pro rata abatement of rent under the foregoing due to unusability
(i) caused directly or indirectly by any act or omission of Tenant or any of
Tenant's servants, employees, agents, contractors, visitors or licensees, (ii)
where Tenant makes a decoration, alteration, improvement or addition which
directly causes such unusability, or (iii) where the repair in question is one
which Tenant is obligated to furnish under the provisions of this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions
or improvements (other than any non-structural change or decorating alteration
to the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Landlord may condition its consent to any alterations,
additions or improvements upon such reasonable
-4-
<PAGE> 5
requirements as Landlord may deem necessary in its reasonable discretion,
including without limitation the manner in which the work is done and the right
to approve the contractor by whom the work is to be performed.
(2) All items installed in the Premises by Tenant
and all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring
Landlord's consent prior to the commencement of any such work, Tenant shall
upon request deliver to Landlord, certificates issued by insurance companies
qualified to do business in the state where the Premises are located,
evidencing that Workmen's Compensation, general liability insurance and
property damage insurance, all in amounts, with companies and on forms
reasonably satisfactory to Landlord, are in full force and effect and
maintained by all contractors and subcontractors engaged by Tenant to perform
such work. All such policies shall name Landlord as an additional insured.
Each such certificate shall provide that the insurance policy may not be
canceled or modified without 10 days' prior written notice to Landlord.
Further, Tenant shall permit Landlord to post notices in the Premises in
locations which will be visible by persons performing any work on the Premises
stating that Landlord is not responsible for the payment for such work and
setting forth such other information as Landlord may deem necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the
right to enter the Premises at all reasonable times after 24 hours' prior
written notice, except in emergencies, for the purpose of: (1) examining or
inspecting the same; (2) showing the same to prospective purchasers or tenants
of the Building during the last six months of the Primary Lease Term or during
the last six months of any option period, if this Lease is extended; provided,
however, if such prospective purchaser or tenant is viewed by Tenant as a
"competitor" in the industry, then Landlord will use best efforts to restrict
such prospective purchaser's or tenant's access to areas where Tenant has
confidential information (such restricted access may mean certain areas may not
be available for view or require that such party be accompanied by a
representative of Tenant when entering such areas); and (3) making such
alterations, repairs, improvements or additions to the Building which are the
obligation of Landlord, in a manner which will not unreasonably interfere with
Tenant's use of the Premises. If Tenant shall not be personally present to
open and permit entry into the Premises at any time when such entry by Landlord
is necessary or permitted hereunder, Landlord may enter by means of a master
key without liability to Tenant, except for any failure to exercise due care
for Tenant's property, and without affecting this Lease. Such entry shall not
be construed as a manifestation by the Landlord of an intent to terminate this
Lease. Tenant shall not, without the prior consent of Landlord, change the
locks or install additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all
costs for work done by Tenant or caused to be done by Tenant on the Premises of
a character which may result in liens on Landlord's interest therein. Tenant
will keep the Premises free and clear of all mechanics' liens and other liens
on account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any
liens be filed or recorded against the Premises for work or materials supplied
to Tenant, or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be removed of record within 30 days after
notice from Landlord. If Tenant desires to contest any claim of lien, Tenant
shall furnish to Landlord adequate security in the amount of 100% of the amount
of the claim, plus estimated costs and interest, and, if a final judgment
establishing the validity or
-5-
<PAGE> 6
existence of any lien for any amount is entered, Tenant shall pay and satisfy
the same at once. If Tenant shall be in default in paying any charge for which
a mechanic's lien or suit to foreclose the lien has been recorded or filed, and
shall not have caused the same to be released of record or shall not have given
Landlord security as aforesaid, Landlord may (but without being required to do
so) pay such lien or claim and any costs or obtain a bond or title insurance
protection against such lien, and the amount so paid, together with reasonable
attorneys' fees incurred in connection therewith, shall be immediately due from
Tenant to Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises or any part thereof, when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Tenant, its agents, contractors, or employees. Tenant
further indemnifies and agrees to hold Landlord harmless from and to defend
Landlord against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, or employees, and from and against all costs, reasonable
attorneys' and legal assistants' fees and liabilities incurred as a result of
any such claim or any action or proceeding brought thereon. Tenant shall not
be liable to Landlord for any damage by or from any act or negligence of any
owner or occupant of adjoining or contiguous property. Tenant agrees to pay
for all damage to the Premises caused by Tenant's misuse of the Premises.
Tenant shall not be required to indemnify Landlord for Landlord's own
negligence or misconduct or the negligence or misconduct of Landlord's agents,
contractors or employees. Landlord hereby indemnifies and agrees to hold
Tenant harmless from and to defend Tenant against, any and all claims of
liability for any injury (including death) or damage to any person or property
whatsoever occurring in or about the Building, or Premises when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Landlord, its agents, contractors, or employees. Landlord
further indemnifies and agrees to hold Tenant harmless from, and to defend
Tenant against any and all claims arising from any breach or default in
performance of any obligation on Landlord's part to be performed under the
terms of this Lease, or arising from any act or negligence of Landlord, or any
of its agents, contractors or employees, and from and against all costs,
attorneys' and legal assistants' fees, expenses and liabilities incurred as a
result of any such claim or any action or proceeding brought thereon. Landlord
shall not be liable to Tenant for any damage by or from any act or negligence
of any other occupant of the Building, or by any owner or occupant of adjoining
or contiguous property. Landlord shall not be required to indemnify Tenant for
Tenant's own negligence or misconduct or the negligence or misconduct of
Tenant's agents, contractors or employees.
B. Neither Landlord nor its agents shall be liable for
any damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act or negligence of Tenant, or of its
agents or employees, Tenant upon reasonable prior written notice from Landlord,
shall defend the same at Tenant's expense. In case any action or proceeding is
brought against Tenant by reason of any obligation on Landlord's part to be
performed under the terms of this Lease, or arising from any act or negligence
-6-
<PAGE> 7
of Landlord, or of its agents, or employees, Landlord, upon reasonable prior
written notice from Tenant, shall defend the same at Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance
in the amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or
other insured casualty, Tenant shall deliver the insurance proceeds received
for the Building, excluding the amounts received for Tenant's Property and the
amount of any deductible paid by Tenant, to Landlord, and the damage shall be
repaired by and at the expense of Landlord, regardless of the extent of
available insurance proceeds, provided that such repairs and restoration can,
in Landlord's reasonable opinion, be made within 120 days after the occurrence
of such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30
days after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth
the approximate length of time Landlord estimates will be required to complete
such repairs and restoration. If Landlord estimates it cannot make such
repairs and restoration within said 120-day period, then either party, by
written notice to the other, may cancel this Lease as of the date of occurrence
of such damage, provided that such notice is given to the other party within 15
days after Landlord notifies Tenant of the estimated time for completion of
such repairs and restoration. If no notice is given by either party to
terminate this Lease, this Lease shall continue in effect and the Rent shall be
apportioned in the manner provided above. Landlord agrees that if Landlord
exercises the foregoing termination option, Tenant shall have the right to
reinstate the Lease by giving Landlord written notice of such reinstatement
within 15 days after receipt of Landlord's termination notice, and upon such
reinstatement, Landlord shall deliver all insurance proceeds to Tenant, who
will commence and complete such repair and restoration work.
C. Landlord and Tenant hereby waive any and all rights
of recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or provisions waiving
the insurer's rights of subrogation with respect to claims against the other,
and each shall notify its insurance companies of the existence of the waiver
and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises
-7-
<PAGE> 8
untenantable, is taken by right of eminent domain or by condemnation, or is
conveyed in lieu of any such taking, then this Lease may be terminated at the
option of Tenant. Such option shall be exercised by Tenant giving notice to
Landlord of such termination within 30 days after such taking or conveyance;
whereupon this Lease shall forthwith terminate and the Rent shall be duly
apportioned as of the date of such taking or conveyance. Upon such
termination, Tenant shall surrender to Landlord the Premises and all of
Tenant's interest therein under this Lease, and Landlord may re-enter and take
possession of the Premises or remove Tenant therefrom. If any portion of the
Premises is taken which does not materially affect Tenant's right to use the
remainder of the Premises for the purposes set forth herein, this Lease shall
continue in full force and effect, and Landlord shall promptly perform any
repair or restoration work required to restore the Premises, insofar as
possible, to former condition, and the rental owing hereunder shall be
adjusted, if necessary, in such just manner and proportion as the part so taken
(and its effect on Tenant's ability to use the remainder of the Premises) bears
to the whole. In the event of taking or conveyance as described herein,
Landlord shall receive the award or consideration for the lands and
improvements so taken; provided, however, that Landlord shall have no interest
in any award made for Tenant's loss of business or value of its leasehold
interest or for the taking of Tenant's fixtures or property, or for Tenant's
relocation expenses. Landlord and Tenant shall cooperate with one another in
making claims for condemnation awards.
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to
be used or occupied by any persons other than Tenant and the employees of
Tenant, nor shall Tenant permit any part of the Premises to be used or occupied
by any licensee or concessionaire, or permit any persons to be upon the
Premises other than Tenant, and employees, customers and others having lawful
business with Tenant without the prior written consent of Landlord, not to be
unreasonably withheld or delayed. Tenant shall have the right to assign or
part with the possession of the Premises without the prior written consent of
Landlord, provided that such assignment or sublease is to an entity (i)
controlled by, controlling, or under common control with Tenant or (ii) which
acquires, by merger or otherwise, substantially all of the assets or business
of Tenant. Tenant may collaterally assign this Lease to any lender of Tenant
without obtaining Landlord's consent thereto.
B. Tenant may sublet all or any part of the Premises to
any subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time
and from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this Paragraph 15 shall be conditioned upon
receipt by Tenant of a nondisturbance agreement pursuant to the provisions of
Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following
events shall constitute an "event of default":
-8-
<PAGE> 9
A. Tenant shall fail to pay when due any installment of
Rent, and such default shall continue for 10 days after receipt of written
notice from Landlord;
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
C. This Lease or the Premises or any part thereof shall
be taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or
insolvency or for reorganization or arrangement under the bankruptcy laws of
the United States or under any insolvency act of any state, or shall
voluntarily take advantage of any such law or act by answer or otherwise, or
shall be dissolved, or shall make an assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law
or insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be
performed, and such non-performance shall continue for a period of 30 days
after written notice thereof by Landlord to Tenant; provided that if the
curative action to be taken by Tenant cannot, for reasons beyond Tenant's
reasonable control be completed within 30 days, then so long as Tenant promptly
initiates and diligently provides such cure, Tenant will not be deemed in
default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as
hereinabove described, Landlord shall have the right, at its election, then or
at any time thereafter and while any such event of default shall continue,
either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the
Premises and repossess the same as of Landlord's former estate, and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both, and without prejudice to any remedies for arrears of Rent. Should
Landlord elect to re-enter as provided in this subparagraph (2), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord shall without terminating this Lease, use
reasonable efforts to relet the Premises in Landlord's or Tenant's name, but
for the account of Tenant, for such term or terms (which may be greater or less
than the period which would otherwise have constituted the balance of the term
of this Lease) and on such conditions and upon such other terms as Landlord may
reasonably determine, and Landlord may collect and receive the rents therefor.
Landlord shall in no way be responsible or liable for any failure to relet the
Premises after exercising good faith efforts therefor, but shall make every
reasonable effort to mitigate its damages. No such re-entry or taking
possession of the Premises by Landlord shall be construed as an election on
Landlord's part to terminate this Lease unless a written notice of such
intention is given to Tenant. No notice from Landlord hereunder or under a
forcible entry and detainer statute or similar law shall constitute an election
-9-
<PAGE> 10
by Landlord to terminate this Lease unless such notice specifically so states.
Landlord reserves the right following any such re-entry or reletting to
exercise its right to terminate this Lease by giving Tenant written notice to
that effect, in which event the Lease will terminate as specified in said
notice.
B. In the event that Landlord does not elect to
terminate this Lease and elects to take possession as provided in subparagraph
A(2) hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly
on the days on which the Rent would have been payable hereunder if possession
had not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a
result of an uncured default by Tenant, as permitted in subparagraph A(1)
hereof, Tenant shall remain liable to Landlord for damages in an amount equal
to the Rent and other sums which would have been owed by Tenant hereunder for
the balance of the term had this Lease not been terminated, less the net
proceeds, if any, of any reletting of the Premises by Landlord subsequent to
such termination, after deducting all Landlord's expenses in connection with
such reletting, including, but without limitation, the expenses enumerated
above. Landlord shall be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
hereunder if this Lease had not been terminated, and Landlord shall be entitled
to receive the same from Tenant on each such day. Landlord agrees to use good
faith efforts to mitigate its damages in the event of Tenant's default.
Alternatively, at the option of Landlord, Landlord shall be entitled to recover
forthwith against Tenant, as damages for the loss of the bargain and not as a
penalty, an aggregate sum which, at the time of such termination of this Lease,
represents the amount, if any, by which the aggregate of the Rent and all other
sums payable by Tenant hereunder which would have accrued for the balance of
the term exceeds the aggregate rental value of the Premises (such rental value
to be computed on the basis of a tenant paying not only Rent, but also such
other charges as are required to be paid by Tenant under the terms of this
Lease) for the balance of such term, both discounted to present worth at the
Federal Reserve discount rate plus one percent (1%).
D. Suit or suits for the recovery of the amounts and
damages set forth herein may be brought by Landlord, from time to time, at
Landlord's election; and nothing herein shall be deemed to require Landlord to
await the date that this Lease or the term hereof would have expired had there
been no such default by Tenant, or no such termination, as the case may be.
Each right and remedy provided for in this Lease shall be cumulative and shall
be in addition to every other right or remedy provided for in this Lease or now
or hereafter existing at law or in equity or by statute or otherwise,
including, but not limited to, suits for injunctive relief and specific
performance. The exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease as now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease as now or hereafter existing at
law or in equity or by statute or otherwise. All costs incurred by Landlord in
connection with collecting any amounts and damages owed by Tenant pursuant to
the provisions of this Lease, including reasonable attorneys' fees from the
date any such matter is turned over to an attorney, shall also be recoverable
by Landlord from Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such
-10-
<PAGE> 11
breach or any such agreement, term, covenant or condition. No agreement, term,
covenant or condition hereof to be performed or complied with by Tenant, and no
breach thereof, shall be waived, altered or modified except by written
instrument executed by Landlord. No waiver of any breach shall affect or alter
this Lease; but each and every agreement, term, covenant and condition hereof
shall continue in full force and effect with respect to any other then existing
or subsequent breach. Notwithstanding any termination of this Lease, the same
shall continue in full force and effect as to any provisions hereof which
require observance or performance by Landlord or Tenant subsequent to
termination.
(1) Nothing contained in this Paragraph 17 shall
limit or prejudice the right of Landlord to prove and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding an amount equal to the maximum allowed by any statute or
rule of law governing such proceeding and in effect at the time when such
damages are to be proved.
(2) Notwithstanding anything in this Paragraph 17
to the contrary, any such proceeding or action involving bankruptcy,
insolvency, reorganization, arrangement, assignment for the benefit of
creditors, or appointment of a receiver or trustee, as specified in
subparagraphs 16D and 16E above, shall be considered to be an event of default
only when such proceeding, action or remedy shall be taken or brought by or
against the then holder of the leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are
not paid within 30 days after they are due shall bear interest at the rate of
10% per annum from the 31st day after the due date of such payment until
received by Landlord. Similarly, any amounts paid by Landlord to cure any
defaults of Tenant hereunder, which Landlord shall have the right, but not the
obligation to do, shall, if not repaid by Tenant within 30 days after demand by
Landlord, thereafter bear interest at the above rate until received by
Landlord.
G. Landlord hereby waives any statutory or common law
rights it may have granting Landlord a lien or the right to foreclose on the
personal property of Tenant and/or the tenant improvements installed in the
Premises by Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any other person, but with an obligation by
Landlord to account therefor. Tenant shall pay Landlord for all expenses
incurred in connection with the disposition of such property.
19. HOLDING OVER. Should Tenant hold over after the termination
of this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to-month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
-11-
<PAGE> 12
20. BROKER'S FEE. Tenant and Landlord each represent and warrant
to the other that it has had no dealings with any person, firm, broker or
finder in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and that no broker or other person,
firm or entity is entitled to any commission or finder's fee in connection with
said transaction. Tenant and Landlord do each hereby agree to indemnify,
protect, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party, including any costs, expenses, attorneys' fees reasonably incurred with
respect thereto.
21. SURRENDER AND NOTICE. Upon the expiration or other
termination of the term of this Lease, Tenant shall promptly quit the Premises
and surrender the Premises to Landlord broom clean, in good order and
condition, except for ordinary wear and tear and loss by fire or other
casualty. Tenant may remove Tenant's Property and all of its movable furniture
and other effects and such alterations, additions and improvements that Tenant
installed pursuant to Paragraph 26 hereof. In the event that Tenant fails to
vacate the Premises in a timely manner as required, Tenant shall be responsible
to Landlord for all reasonable costs incurred by Landlord as a result of such
failure, including, but not limited to, any amounts required to be paid to
third parties who were to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in
this Lease to the contrary, Landlord represents and warrants to Tenant that it
is the sole owner in fee simple of the Leased Premises, that no mortgages,
deeds of trusts or liens or encumbrances of any nature presently encumber
Landlord's title to the Premises except as set forth on Exhibit B, attached
hereto and incorporated herein by this reference; that none of said
encumbrances shall prohibit or impede the use of the Premises as contemplated
herein or create any financial obligation on the part of Tenant except as
expressly set forth herein; that Landlord has the full right, power and
authority to enter into this Lease and make the agreements contained herein on
its part to be performed; that the execution, delivery and performance of this
Lease has been duly authorized by Landlord; that the Lease constitutes the
valid and binding obligation of Landlord, enforceable in accordance with its
terms; that the making of this Lease and the performance thereof will not
violate any present zoning laws or ordinances or the terms or provisions of any
mortgage, lease or other agreement to which Landlord is a party or under which
Landlord is otherwise bound, or which restricts Landlord in any way with
respect to the use or disposition of the Premises; that Landlord has no
knowledge of any pending zoning changes affecting the Premises; that the
Premises and Building will be kept in compliance by Landlord, at its cost, with
all applicable laws and regulations enacted from and after the date of this
Lease; that the Premises are presently zoned so as to permit the operation of
the Premises as contemplated in this Lease; and that the Premises presently
include full legal access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's
option, shall be subordinate to any mortgage or deed of trust (now or hereafter
placed upon the Premises), and to any and all advances made under any mortgage
or deed of trust and to all renewals, modifications, consolidations,
replacements and extensions thereof. Tenant agrees to execute such documents
as may be further required to evidence such subordination or to make this Lease
prior to the lien of any mortgage or deed of trust, as the case may be, subject
to the following sentence. Notwithstanding the foregoing, Tenant shall only be
obligated to subordinate its
-12-
<PAGE> 13
leasehold interest to any mortgage, deed of trust, or ground lease now or
hereafter placed upon the Premises if the holder of such mortgage or deed of
trust or the landlord under such ground lease delivers to Tenant a
non-disturbance agreement, using the form of document then being employed by
such holder provided it is reasonably acceptable to Tenant, which will provide
that Tenant, notwithstanding any default of Landlord thereunder, shall have the
right to remain in possession of the Premises described herein in accordance
with the terms and provisions of this Lease for so long as Tenant shall not be
in default under this Lease. Upon the mutual execution of this Lease, Landlord
shall deliver such a non-disturbance agreement from any present lender having a
deed of trust or mortgage on the Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act
in any matter provided for herein by and through its building manager or any
other person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be
given to Landlord hereunder shall be in writing, and shall be deemed duly
served three days after deposited in the United States Mail, with proper
postage prepaid, certified or registered, return receipt requested, addressed
to Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of this Lease, except
that the monthly rent for each respective Option Period will be increased in
the manner set forth in subparagraph B below. Tenant will exercise its option
by giving Landlord written notice at least 180 days prior to the expiration of
the Primary Lease Term, or the expiration of the then current Option Period, as
the case may be.
B. Landlord and Tenant agree that the monthly rent for
each Option Period will be determined set forth in this paragraph. For the
first month of the first year of the subject Option Period, the Rent due
hereunder will be adjusted in accordance with the increase, if any, which has
occurred in the Consumer Price Index, Denver-Boulder area for all Urban
Consumers, U.S. City Average - All Items Index (CPI-U, 1982-84 equals 100),
published
-13-
<PAGE> 14
by the United States Department of Labor, Bureau of Labor Statistics (the
"INDEX") from the Commencement Date or the last day of a prior Rent adjustment,
whichever is later, to the date of the present adjustment. Such adjusted Rent
rate will be the Rent for the then Option Period. If the Index is
discontinued, Landlord and Tenant shall agree upon comparable statistics on the
cost of living for the computations under this subparagraph B, and such
statistics shall be published by an agency of the United States Government or
by a responsible financial periodical or recognized authority. If Landlord and
Tenant fail to agree on a replacement index, they will submit the question of a
replacement index to an arbitrator in accordance with the rules and regulations
of the American Arbitration Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip
the Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply
for, diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits or
approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense,
as part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental regulations. All sign construction shall be
in accordance with such local sign ordinances and applicable governmental
regulation. Tenant shall obtain, and Landlord shall cooperate with Tenant's
applications therefor, any and all permits as are required under such
governmental regulations.
-14-
<PAGE> 15
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and
hold harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's rental and other payment obligations under this Lease
shall be abated entirely during the period beyond the 24 hours that Tenant is
required to be closed for business or abated in proportion to the amount of
lost business suffered by Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold harmless Landlord, its directors, officers,
employees, and agents and assignees or successors to Landlord's interest in the
Premises, their directors, officers, employees, and agents from and against any
and all losses, claims, damages, penalties and liability including all
out-of-pocket litigation costs and reasonable attorneys' fees (i) including all
damages, directly or indirectly arising out of the use, generation, storage,
release or disposal of Hazardous Materials by Tenant,
-15-
<PAGE> 16
its agents or contractors, and (ii) including, without limitation, the cost of
any required or necessary repair, clean-up or detoxification and the
preparation of any closure or other required plans to the full extent that such
is attributable, directly or indirectly, to the use, generation, storage,
release or disposal of Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Premises at the
time in question. In the event of any transfer or transfers of the title to
the Premises, the Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released,
from and after the date of such transfer or conveyance, from all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that the
grantee assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an interest in the
hands of Landlord or the then grantor at the time of such transfer shall be
turned over to the grantee. Any amount then due and payable to Tenant by
Landlord or the then grantor under any provisions of this Lease shall be paid
to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease
shall not work a merger, and such termination or mutual cancellation shall, at
the option of Landlord, either terminate all subleases and subtenancies or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30 days after demand, and if the other
party is Tenant, such expenditures may be offset against Rent due under this
Lease but only if Landlord does not pay such amount within such 30-day period.
Notwithstanding anything in this paragraph to the contrary, no prior notice to
the non-complying party shall be necessary if the failure to comply involves
emergency repairs under this Lease reasonably necessary for the safety and
preservation of the Premises or the furnishings and equipment located therein
or the health or safety of the occupants or employees thereof.
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
-16-
<PAGE> 17
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter
of convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day
permitted for the performance of any act required or permitted under this Lease
falls on a Saturday, Sunday or holiday, the time for such performance will be
extended to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any
obligation of Tenant, other than the payment of Rent, which is delayed or not
performed due to acts of God, strike, riot, war, weather, failure to obtain
labor and materials at a reasonable cost, or any other reason beyond the
control of the Landlord or Tenant shall not constitute a default hereunder and
shall be performed within a reasonable time after the end of such cause for
delay or non-performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all of Tenant's income, leasehold improvements,
equipment, furniture, fixtures and personal property owned by Tenant located in
the Premises. In the event that any or all of Tenant's leasehold improvements,
equipment, furniture, fixtures and personal property shall be assessed and
taxed with the Building, Tenant shall pay such taxes applicable to Tenant's
property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or permit them to be brought in its name; however, Landlord will not be
subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
-17-
<PAGE> 18
L. Any consent of Landlord or Tenant hereunder shall not
be unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
N. This Lease will be construed and enforced in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
"LANDLORD"
By: /s/ GEORGE A. EVANS
-------------------------------------------
George Evans
Date: May 15 1996
-----------------------------------------
Address: 8157 E. Hunters Hill Dr.
-------------------------------------
Englewood, CO 80112
----------------------------------------------
By: /s/ LARRY DAVIDSON
-------------------------------------------
Larry Davidson
Date: May 15, 1997
-----------------------------------------
Address: 9504 Southern Hills Cr.
-------------------------------------
Littleton, CO 80124
----------------------------------------------
"TENANT"
RentX Industries, Inc., a Delaware corporation
By: /s/ RICHARD M. TYLER
------------------------------------------
Its: Richard M. Tyler, President
------------------------------------------
Date: May 15, 1996
----------------------------------------
Address: 1522 Blake Street,
Denver, Colorado 80202
-18-
<PAGE> 19
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
[LEGAL DESCRIPTION OMITTED]
A-1
<PAGE> 20
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
Mortgages held by Bank One, Loan No. 2164451101 and Colsen Services, which is
serviced by Community Economic Development at 1111 Osage Street, Suite 110,
Denver, Colorado 80204
Deed of Trust dated January 15, 1992 for the benefit of Affiliated National
Bank-University Hills recorded at Reception No. 92-0007042, Denver County,
Colorado
Deed of Trust dated August 31, 1992 for the benefit of Community Economic
Development Company of Colorado recorded at Reception 92-0100485, Denver
County, Colorado
B-1
<PAGE> 1
EXHIBIT 10.38
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made as of the 15th day of May,
1996, between George Evans and Larry Davidson (collectively, "Landlord") and
RentX Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 4,000 rentable square foot building located at
2250 S. Fraser, Aurora, Colorado (the "Building"), together with a
non-exclusive license, subject to the provisions hereof, to use all
appurtenances thereto, including, but not limited to, any parking area and
access roads, and other areas related to the use of the Building (collectively,
the "Premises").
2. TERM. The term of this Lease shall commence as of May 15, 1996
(the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant shall
pay to Landlord the annual sum of $30,619.32 (the "Rent") which sum shall be
payable in twelve equal monthly installments of $2,551.61 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in advance
without notice at the office of Landlord or to such other person or at such
other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this is a
"triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied against the
Premises by any governmental or quasi- governmental authority. The foregoing
shall include any taxes, assessments, surcharges, or service or other fees of a
nature not presently in effect which shall hereafter be levied on the Premises
as a result of the use, ownership or operation of the Premises or for any other
reason, whether in lieu of or in addition to any current real estate taxes and
assessments. Expenses incurred by Tenant for tax consultants and in contesting
the amount or validity of any such taxes or assessments shall be included in
such computations. Assessments shall include any and all so-called special
assessments, license tax, business license fee, business license tax,
commercial rental tax, levy, charge or tax, imposed by any authority having the
direct power to tax, including any city, county, state or federal government,
or any school, agricultural, lighting, water, drainage or other improvement or
special district thereof, against the Premises, or the Building, or against any
legal or equitable interest of Landlord therein. Taxes and assessment shall
exclude Landlord's income taxes or similar taxes. Any special assessments will
be amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk coverage;
public liability insurance; and any other insurance carried by Tenant or
Landlord relating to this Lease. All such insurance shall be in such amounts as
set forth in this Lease.
<PAGE> 2
C. Any capital improvements, repairs and replacements made in
or to the Premises. The cost of any capital improvement shall be amortized over
the useful life of such item and Tenant will pay its percentage share (which
shall be determined by dividing the square footage of the Building by the
square footage of all buildings benefitted by such improvement, including the
Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by fire,
windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated by
condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may estimate the amount of Operating Expenses for the then
current year based on the most currently available information to Landlord.
Upon the determination of the actual Operating Expenses for such year, Landlord
shall deliver to Tenant a comparative statement which shall show a comparison
of the estimated Operating Expenses to the actual Operating Expenses for the
applicable year. If the estimated Operating Expenses exceed the actual
Operating Expenses, Landlord shall immediately remit such excess to Tenant. If
the estimated Operating Expenses are less than the actual Operating Expenses,
Tenant shall immediately pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only
-2-
<PAGE> 3
after paying such tax or posting such security that Landlord reasonably
requires in order to protect the Leased Premises against loss or forfeiture.
Upon the conclusion of any such protest proceedings, Tenant will pay its share
of the tax, as finally determined, in accordance with this Lease the payment of
which tax may have been deferred during the prosecution of the proceedings,
together with any costs, fees, interest, penalties, or other related
liabilities. Landlord will not be required to join in any contest or
proceedings unless the provisions of any law or regulations then in effect
require that the proceedings be brought by or in the name of Landlord. In that
event, Landlord will join in the proceedings or permit them to be brought in
its name; however, Landlord will not be subjected to any liability for the
payment of any costs or expenses in connection with any contest or proceedings,
and Tenant will indemnify Landlord against and save Landlord harmless from any
costs and expenses in this regard.
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and equipment
rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit waste to
be committed, nor shall Tenant permit any nuisance in or about the Premises.
C. Tenant shall not use the Premises or permit anything to be
done in or about the Premises which will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force or hereafter
enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services. If
an interruption of services which materially affects Tenant's use and enjoyment
of the Premises continues for more than 30 consecutive calendar days, Tenant
shall have the right to terminate this Lease upon written notice to Landlord,
and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant in
the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-3-
<PAGE> 4
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph 4
above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain the
Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace all
structural components of the Premises and the roof of the Building, and if a
repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The cost
of any such capital improvement shall be amortized over the useful life of such
item and Tenant agrees to pay its percentage share (which shall be determined
by dividing the square footage of the Building by the square footage of all
buildings benefitted by such improvement, including the Building) of the annual
amortized amount. Such payment will be made by Tenant as set forth in Paragraph
4 above. Landlord shall do all acts required to comply with all applicable
laws, ordinances, regulations and rules of any public authority relating to the
Premises, except to the extent that the foregoing are solely a result of
Tenant's use of the Premises. Tenant shall do all acts required to comply with
all applicable laws, ordinances, regulations and rules of any public authority
relating solely to Tenant's use of the Premises. If a repair is required as a
result of Tenant's negligence and such repair cost is not covered by insurance
proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive business days, then Tenant
shall be entitled to an abatement of rent commencing with the fourth business
day that the same are unusable; provided, however, that Tenant shall not be
entitled to a pro rata abatement of rent under the foregoing due to unusability
(i) caused directly or indirectly by any act or omission of Tenant or any of
Tenant's servants, employees, agents, contractors, visitors or licensees,
(ii) where Tenant makes a decoration, alteration, improvement or addition which
directly causes such unusability, or (iii) where the repair in question is one
which Tenant is obligated to furnish under the provisions of this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions or
improvements (other than any non-structural change or decorating alteration to
the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or
-4-
<PAGE> 5
delayed. Landlord may condition its consent to any alterations, additions or
improvements upon such reasonable requirements as Landlord may deem necessary
in its reasonable discretion, including without limitation the manner in which
the work is done and the right to approve the contractor by whom the work is to
be performed.
(2) All items installed in the Premises by Tenant and
all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring Landlord's
consent prior to the commencement of any such work, Tenant shall upon request
deliver to Landlord, certificates issued by insurance companies qualified to do
business in the state where the Premises are located, evidencing that Workmen's
Compensation, general liability insurance and property damage insurance, all in
amounts, with companies and on forms reasonably satisfactory to Landlord, are
in full force and effect and maintained by all contractors and subcontractors
engaged by Tenant to perform such work. All such policies shall name Landlord
as an additional insured. Each such certificate shall provide that the
insurance policy may not be canceled or modified without 10 days' prior written
notice to Landlord. Further, Tenant shall permit Landlord to post notices in
the Premises in locations which will be visible by persons performing any work
on the Premises stating that Landlord is not responsible for the payment for
such work and setting forth such other information as Landlord may deem
necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the right
to enter the Premises at all reasonable times after 24 hours' prior written
notice, except in emergencies, for the purpose of: (1) examining or inspecting
the same; (2) showing the same to prospective purchasers or tenants of the
Building during the last six months of the Primary Lease Term or during the
last six months of any option period, if this Lease is extended; provided,
however, if such prospective purchaser or tenant is viewed by Tenant as a
"competitor" in the industry, then Landlord will use best efforts to restrict
such prospective purchaser's or tenant's access to areas where Tenant has
confidential information (such restricted access may mean certain areas may not
be available for view or require that such party be accompanied by a
representative of Tenant when entering such areas); and (3) making such
alterations, repairs, improvements or additions to the Building which are the
obligation of Landlord, in a manner which will not unreasonably interfere with
Tenant's use of the Premises. If Tenant shall not be personally present to open
and permit entry into the Premises at any time when such entry by Landlord is
necessary or permitted hereunder, Landlord may enter by means of a master key
without liability to Tenant, except for any failure to exercise due care for
Tenant's property, and without affecting this Lease. Such entry shall not be
construed as a manifestation by the Landlord of an intent to terminate this
Lease. Tenant shall not, without the prior consent of Landlord, change the
locks or install additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all costs
for work done by Tenant or caused to be done by Tenant on the Premises of a
character which may result in liens on Landlord's interest therein. Tenant will
keep the Premises free and clear of all mechanics' liens and other liens on
account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any liens
be filed or recorded against the Premises for work or materials supplied to
Tenant, or should any action affecting the title thereto be commenced, Tenant
shall cause such liens to be removed of record within 30 days after notice from
Landlord. If Tenant
-5-
<PAGE> 6
desires to contest any claim of lien, Tenant shall furnish to Landlord adequate
security in the amount of 100% of the amount of the claim, plus estimated costs
and interest, and, if a final judgment establishing the validity or existence
of any lien for any amount is entered, Tenant shall pay and satisfy the same at
once. If Tenant shall be in default in paying any charge for which a mechanic's
lien or suit to foreclose the lien has been recorded or filed, and shall not
have caused the same to be released of record or shall not have given Landlord
security as aforesaid, Landlord may (but without being required to do so) pay
such lien or claim and any costs or obtain a bond or title insurance protection
against such lien, and the amount so paid, together with reasonable attorneys'
fees incurred in connection therewith, shall be immediately due from Tenant to
Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises or any part thereof, when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Tenant, its agents, contractors, or employees. Tenant
further indemnifies and agrees to hold Landlord harmless from and to defend
Landlord against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, or employees, and from and against all costs, reasonable
attorneys' and legal assistants' fees and liabilities incurred as a result of
any such claim or any action or proceeding brought thereon. Tenant shall not be
liable to Landlord for any damage by or from any act or negligence of any owner
or occupant of adjoining or contiguous property. Tenant agrees to pay for all
damage to the Premises caused by Tenant's misuse of the Premises. Tenant shall
not be required to indemnify Landlord for Landlord's own negligence or
misconduct or the negligence or misconduct of Landlord's agents, contractors or
employees. Landlord hereby indemnifies and agrees to hold Tenant harmless from
and to defend Tenant against, any and all claims of liability for any injury
(including death) or damage to any person or property whatsoever occurring in
or about the Building, or Premises when such injury or damage is caused in
whole or in part by the act, neglect, fault or omission to act on the part of
Landlord, its agents, contractors, or employees. Landlord further indemnifies
and agrees to hold Tenant harmless from, and to defend Tenant against any and
all claims arising from any breach or default in performance of any obligation
on Landlord's part to be performed under the terms of this Lease, or arising
from any act or negligence of Landlord, or any of its agents, contractors or
employees, and from and against all costs, attorneys' and legal assistants'
fees, expenses and liabilities incurred as a result of any such claim or any
action or proceeding brought thereon. Landlord shall not be liable to Tenant
for any damage by or from any act or negligence of any other occupant of the
Building, or by any owner or occupant of adjoining or contiguous property.
Landlord shall not be required to indemnify Tenant for Tenant's own negligence
or misconduct or the negligence or misconduct of Tenant's agents, contractors
or employees.
B. Neither Landlord nor its agents shall be liable for any
damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act or negligence
-6-
<PAGE> 7
of Tenant, or of its agents or employees, Tenant upon reasonable prior written
notice from Landlord, shall defend the same at Tenant's expense. In case any
action or proceeding is brought against Tenant by reason of any obligation on
Landlord's part to be performed under the terms of this Lease, or arising from
any act or negligence of Landlord, or of its agents, or employees, Landlord,
upon reasonable prior written notice from Tenant, shall defend the same at
Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance in the
amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or other
insured casualty, Tenant shall deliver the insurance proceeds received for the
Building, excluding the amounts received for Tenant's Property and the amount
of any deductible paid by Tenant, to Landlord, and the damage shall be repaired
by and at the expense of Landlord, regardless of the extent of available
insurance proceeds, provided that such repairs and restoration can, in
Landlord's reasonable opinion, be made within 120 days after the occurrence of
such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30 days
after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth the
approximate length of time Landlord estimates will be required to complete such
repairs and restoration. If Landlord estimates it cannot make such repairs and
restoration within said 120-day period, then either party, by written notice to
the other, may cancel this Lease as of the date of occurrence of such damage,
provided that such notice is given to the other party within 15 days after
Landlord notifies Tenant of the estimated time for completion of such repairs
and restoration. If no notice is given by either party to terminate this Lease,
this Lease shall continue in effect and the Rent shall be apportioned in the
manner provided above. Landlord agrees that if Landlord exercises the foregoing
termination option, Tenant shall have the right to reinstate the Lease by
giving Landlord written notice of such reinstatement within 15 days after
receipt of Landlord's termination notice, and upon such reinstatement, Landlord
shall deliver all insurance proceeds to Tenant, who will commence and complete
such repair and restoration work.
C. Landlord and Tenant hereby waive any and all rights of
recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or
-7-
<PAGE> 8
provisions waiving the insurer's rights of subrogation with respect to claims
against the other, and each shall notify its insurance companies of the
existence of the waiver and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises untenantable, is taken
by right of eminent domain or by condemnation, or is conveyed in lieu of any
such taking, then this Lease may be terminated at the option of Tenant. Such
option shall be exercised by Tenant giving notice to Landlord of such
termination within 30 days after such taking or conveyance; whereupon this
Lease shall forthwith terminate and the Rent shall be duly apportioned as of
the date of such taking or conveyance. Upon such termination, Tenant shall
surrender to Landlord the Premises and all of Tenant's interest therein under
this Lease, and Landlord may re-enter and take possession of the Premises or
remove Tenant therefrom. If any portion of the Premises is taken which does not
materially affect Tenant's right to use the remainder of the Premises for the
purposes set forth herein, this Lease shall continue in full force and effect,
and Landlord shall promptly perform any repair or restoration work required to
restore the Premises, insofar as possible, to former condition, and the rental
owing hereunder shall be adjusted, if necessary, in such just manner and
proportion as the part so taken (and its effect on Tenant's ability to use the
remainder of the Premises) bears to the whole. In the event of taking or
conveyance as described herein, Landlord shall receive the award or
consideration for the lands and improvements so taken; provided, however, that
Landlord shall have no interest in any award made for Tenant's loss of business
or value of its leasehold interest or for the taking of Tenant's fixtures or
property, or for Tenant's relocation expenses. Landlord and Tenant shall
cooperate with one another in making claims for condemnation awards.
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to be
used or occupied by any persons other than Tenant and the employees of Tenant,
nor shall Tenant permit any part of the Premises to be used or occupied by any
licensee or concessionaire, or permit any persons to be upon the Premises other
than Tenant, and employees, customers and others having lawful business with
Tenant without the prior written consent of Landlord, not to be unreasonably
withheld or delayed. Tenant shall have the right to assign or part with the
possession of the Premises without the prior written consent of Landlord,
provided that such assignment or sublease is to an entity (i) controlled by,
controlling, or under common control with Tenant or (ii) which acquires, by
merger or otherwise, substantially all of the assets or business of Tenant.
Tenant may collaterally assign this Lease to any lender of Tenant without
obtaining Landlord's consent thereto.
B. Tenant may sublet all or any part of the Premises to any
subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time and
from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this
-8-
<PAGE> 9
Paragraph 15 shall be conditioned upon receipt by Tenant of a nondisturbance
agreement pursuant to the provisions of Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following events
shall constitute an "event of default":
A. Tenant shall fail to pay when due any installment of Rent,
and such default shall continue for 10 days after receipt of written notice
from Landlord;
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
C. This Lease or the Premises or any part thereof shall be
taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or insolvency
or for reorganization or arrangement under the bankruptcy laws of the United
States or under any insolvency act of any state, or shall voluntarily take
advantage of any such law or act by answer or otherwise, or shall be dissolved,
or shall make an assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other agreements,
terms, covenants or conditions hereof on Tenant's part to be performed, and
such non-performance shall continue for a period of 30 days after written
notice thereof by Landlord to Tenant; provided that if the curative action to
be taken by Tenant cannot, for reasons beyond Tenant's reasonable control be
completed within 30 days, then so long as Tenant promptly initiates and
diligently provides such cure, Tenant will not be deemed in default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as hereinabove
described, Landlord shall have the right, at its election, then or at any time
thereafter and while any such event of default shall continue, either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the Premises and
repossess the same as of Landlord's former estate, and expel Tenant and those
claiming through or under Tenant, and remove the effects of both, and without
prejudice to any remedies for arrears of Rent. Should Landlord elect to re-
enter as provided in this subparagraph (2), or should Landlord take possession
pursuant to legal proceedings or pursuant to any notice provided for by law,
Landlord shall without terminating this Lease, use reasonable efforts to relet
the Premises in Landlord's or Tenant's name, but for the account of Tenant, for
such term or terms (which may
-9-
<PAGE> 10
be greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions and upon such other
terms as Landlord may reasonably determine, and Landlord may collect and
receive the rents therefor. Landlord shall in no way be responsible or liable
for any failure to relet the Premises after exercising good faith efforts
therefor, but shall make every reasonable effort to mitigate its damages. No
such re-entry or taking possession of the Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant. No notice from Landlord
hereunder or under a forcible entry and detainer statute or similar law shall
constitute an election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right following any such re-entry
or reletting to exercise its right to terminate this Lease by giving Tenant
written notice to that effect, in which event the Lease will terminate as
specified in said notice.
B. In the event that Landlord does not elect to terminate
this Lease and elects to take possession as provided in subparagraph A(2)
hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly on
the days on which the Rent would have been payable hereunder if possession had
not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a result of
an uncured default by Tenant, as permitted in subparagraph A(1) hereof, Tenant
shall remain liable to Landlord for damages in an amount equal to the Rent and
other sums which would have been owed by Tenant hereunder for the balance of
the term had this Lease not been terminated, less the net proceeds, if any, of
any reletting of the Premises by Landlord subsequent to such termination, after
deducting all Landlord's expenses in connection with such reletting, including,
but without limitation, the expenses enumerated above. Landlord shall be
entitled to collect such damages from Tenant monthly on the days on which the
Rent and other amounts would have been payable hereunder if this Lease had not
been terminated, and Landlord shall be entitled to receive the same from Tenant
on each such day. Landlord agrees to use good faith efforts to mitigate its
damages in the event of Tenant's default. Alternatively, at the option of
Landlord, Landlord shall be entitled to recover forthwith against Tenant, as
damages for the loss of the bargain and not as a penalty, an aggregate sum
which, at the time of such termination of this Lease, represents the amount, if
any, by which the aggregate of the Rent and all other sums payable by Tenant
hereunder which would have accrued for the balance of the term exceeds the
aggregate rental value of the Premises (such rental value to be computed on the
basis of a tenant paying not only Rent, but also such other charges as are
required to be paid by Tenant under the terms of this Lease) for the balance of
such term, both discounted to present worth at the Federal Reserve discount
rate plus one percent (1%).
D. Suit or suits for the recovery of the amounts and damages
set forth herein may be brought by Landlord, from time to time, at Landlord's
election; and nothing herein shall be deemed to require Landlord to await the
date that this Lease or the term hereof would have expired had there been no
such default by Tenant, or no such termination, as the case may be. Each right
and remedy provided for in this Lease shall be cumulative and shall be in
addition to every other right or remedy provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise, including,
but not limited to, suits for injunctive relief and specific performance. The
exercise or beginning of the exercise by Landlord of any one or more of the
rights or remedies provided for in this Lease as now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by Landlord of any or all other rights or remedies
-10-
<PAGE> 11
provided for in this Lease as now or hereafter existing at law or in equity or
by statute or otherwise. All costs incurred by Landlord in connection with
collecting any amounts and damages owed by Tenant pursuant to the provisions of
this Lease, including reasonable attorneys' fees from the date any such matter
is turned over to an attorney, shall also be recoverable by Landlord from
Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach. Notwithstanding any termination
of this Lease, the same shall continue in full force and effect as to any
provisions hereof which require observance or performance by Landlord or Tenant
subsequent to termination.
(1) Nothing contained in this Paragraph 17 shall limit
or prejudice the right of Landlord to prove and obtain as liquidated damages in
any bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding an amount equal to the maximum allowed by any statute or rule of law
governing such proceeding and in effect at the time when such damages are to be
proved.
(2) Notwithstanding anything in this Paragraph 17 to
the contrary, any such proceeding or action involving bankruptcy, insolvency,
reorganization, arrangement, assignment for the benefit of creditors, or
appointment of a receiver or trustee, as specified in subparagraphs 16D and 16E
above, shall be considered to be an event of default only when such proceeding,
action or remedy shall be taken or brought by or against the then holder of the
leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are not
paid within 30 days after they are due shall bear interest at the rate of 10%
per annum from the 31st day after the due date of such payment until received
by Landlord. Similarly, any amounts paid by Landlord to cure any defaults of
Tenant hereunder, which Landlord shall have the right, but not the obligation
to do, shall, if not repaid by Tenant within 30 days after demand by Landlord,
thereafter bear interest at the above rate until received by Landlord.
G. Landlord hereby waives any statutory or common law rights
it may have granting Landlord a lien or the right to foreclose on the personal
property of Tenant and/or the tenant improvements installed in the Premises by
Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any
-11-
<PAGE> 12
other person, but with an obligation by Landlord to account therefor. Tenant
shall pay Landlord for all expenses incurred in connection with the disposition
of such property.
19. HOLDING OVER. Should Tenant hold over after the termination of
this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to-month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
20. BROKER'S FEE. Tenant and Landlord each represent and warrant to
the other that it has had no dealings with any person, firm, broker or finder
in connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction. Tenant and Landlord do each hereby agree to indemnify, protect,
defend and hold the other harmless from and against liability for compensation
or charges which may be claimed by any such unnamed broker, finder or other
similar party by reason of any dealings or actions of the indemnifying party,
including any costs, expenses, attorneys' fees reasonably incurred with respect
thereto.
21. SURRENDER AND NOTICE. Upon the expiration or other termination of
the term of this Lease, Tenant shall promptly quit the Premises and surrender
the Premises to Landlord broom clean, in good order and condition, except for
ordinary wear and tear and loss by fire or other casualty. Tenant may remove
Tenant's Property and all of its movable furniture and other effects and such
alterations, additions and improvements that Tenant installed pursuant to
Paragraph 26 hereof. In the event that Tenant fails to vacate the Premises in a
timely manner as required, Tenant shall be responsible to Landlord for all
reasonable costs incurred by Landlord as a result of such failure, including,
but not limited to, any amounts required to be paid to third parties who were
to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in this
Lease to the contrary, Landlord represents and warrants to Tenant that it is
the sole owner in fee simple of the Leased Premises, that no mortgages, deeds
of trusts or liens or encumbrances of any nature presently encumber Landlord's
title to the Premises except as set forth on Exhibit B, attached hereto and
incorporated herein by this reference; that none of said encumbrances shall
prohibit or impede the use of the Premises as contemplated herein or create any
financial obligation on the part of Tenant except as expressly set forth
herein; that Landlord has the full right, power and authority to enter into
this Lease and make the agreements contained herein on its part to be
performed; that the execution, delivery and performance of this Lease has been
duly authorized by Landlord; that the Lease constitutes the valid and binding
obligation of Landlord, enforceable in accordance with its terms; that the
making of this Lease and the performance thereof will not violate any present
zoning laws or ordinances or the terms or provisions of any mortgage, lease or
other agreement to which Landlord is a party or under which Landlord is
otherwise bound, or which restricts Landlord in any way with respect to the use
or disposition of the Premises; that Landlord has no knowledge of any pending
zoning changes affecting the Premises; that the Premises and Building will be
kept in compliance by Landlord, at its cost, with all applicable laws and
regulations enacted from and after the date of this Lease; that the Premises
are presently zoned so as to permit the operation of the
-12-
<PAGE> 13
Premises as contemplated in this Lease; and that the Premises presently include
full legal access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's option,
shall be subordinate to any mortgage or deed of trust (now or hereafter placed
upon the Premises), and to any and all advances made under any mortgage or deed
of trust and to all renewals, modifications, consolidations, replacements and
extensions thereof. Tenant agrees to execute such documents as may be further
required to evidence such subordination or to make this Lease prior to the lien
of any mortgage or deed of trust, as the case may be, subject to the following
sentence. Notwithstanding the foregoing, Tenant shall only be obligated to
subordinate its leasehold interest to any mortgage, deed of trust, or ground
lease now or hereafter placed upon the Premises if the holder of such mortgage
or deed of trust or the landlord under such ground lease delivers to Tenant a
non-disturbance agreement, using the form of document then being employed by
such holder provided it is reasonably acceptable to Tenant, which will provide
that Tenant, notwithstanding any default of Landlord thereunder, shall have the
right to remain in possession of the Premises described herein in accordance
with the terms and provisions of this Lease for so long as Tenant shall not be
in default under this Lease. Upon the mutual execution of this Lease, Landlord
shall deliver such a non-disturbance agreement from any present lender having a
deed of trust or mortgage on the Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act in
any matter provided for herein by and through its building manager or any other
person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be given
to Landlord hereunder shall be in writing, and shall be deemed duly served
three days after deposited in the United States Mail, with proper postage
prepaid, certified or registered, return receipt requested, addressed to
Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of
-13-
<PAGE> 14
this Lease, except that the monthly rent for each respective Option Period will
be increased in the manner set forth in subparagraph B below. Tenant will
exercise its option by giving Landlord written notice at least 180 days prior
to the expiration of the Primary Lease Term, or the expiration of the then
current Option Period, as the case may be.
B. Landlord and Tenant agree that the monthly rent for each
Option Period will be determined set forth in this paragraph. For the first
month of the first year of the subject Option Period, the Rent due hereunder
will be adjusted in accordance with the increase, if any, which has occurred in
the Consumer Price Index, Denver-Boulder area for all Urban Consumers, U.S.
City Average - All Items Index (CPI-U, 1982-84 equals 100), published by the
United States Department of Labor, Bureau of Labor Statistics (the "INDEX")
from the Commencement Date or the last day of a prior Rent adjustment,
whichever is later, to the date of the present adjustment. Such adjusted Rent
rate will be the Rent for the then Option Period. If the Index is discontinued,
Landlord and Tenant shall agree upon comparable statistics on the cost of
living for the computations under this subparagraph B, and such statistics
shall be published by an agency of the United States Government or by a
responsible financial periodical or recognized authority. If Landlord and
Tenant fail to agree on a replacement index, they will submit the question of a
replacement index to an arbitrator in accordance with the rules and regulations
of the American Arbitration Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip the
Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply for,
diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits
-14-
<PAGE> 15
or approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense, as
part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental regulations. All sign construction shall be
in accordance with such local sign ordinances and applicable governmental
regulation. Tenant shall obtain, and Landlord shall cooperate with Tenant's
applications therefor, any and all permits as are required under such
governmental regulations.
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and hold
harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's
-15-
<PAGE> 16
rental and other payment obligations under this Lease shall be abated entirely
during the period beyond the 24 hours that Tenant is required to be closed for
business or abated in proportion to the amount of lost business suffered by
Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold harmless Landlord, its directors, officers,
employees, and agents and assignees or successors to Landlord's interest in the
Premises, their directors, officers, employees, and agents from and against any
and all losses, claims, damages, penalties and liability including all out-of-
pocket litigation costs and reasonable attorneys' fees (i) including all
damages, directly or indirectly arising out of the use, generation, storage,
release or disposal of Hazardous Materials by Tenant, its agents or
contractors, and (ii) including, without limitation, the cost of any required
or necessary repair, clean-up or detoxification and the preparation of any
closure or other required plans to the full extent that such is attributable,
directly or indirectly, to the use, generation, storage, release or disposal of
Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Premises at the
time in question. In the event of any transfer or transfers of the title to the
Premises, the Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released,
from and after the date of such transfer or conveyance, from all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that the
grantee assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an interest in the
hands of Landlord or the then grantor at the time of such transfer shall be
turned over to the grantee. Any amount then due and payable to Tenant by
Landlord or the then grantor under any provisions of this Lease shall be paid
to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease shall
not work a merger, and such termination or mutual cancellation shall, at the
option of Landlord, either terminate all subleases and subtenancies or operate
as an assignment to Landlord of any or all of such subleases or subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30
-16-
<PAGE> 17
days after demand, and if the other party is Tenant, such expenditures may be
offset against Rent due under this Lease but only if Landlord does not pay such
amount within such 30-day period. Notwithstanding anything in this paragraph to
the contrary, no prior notice to the non-complying party shall be necessary if
the failure to comply involves emergency repairs under this Lease reasonably
necessary for the safety and preservation of the Premises or the furnishings
and equipment located therein or the health or safety of the occupants or
employees thereof.
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter of
convenience only and shall be considered to be of no effect in the construction
of any provision or provisions of this Lease.
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day permitted
for the performance of any act required or permitted under this Lease falls on
a Saturday, Sunday or holiday, the time for such performance will be extended
to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any obligation
of Tenant, other than the payment of Rent, which is delayed or not performed
due to acts of God, strike, riot, war, weather, failure to obtain labor and
materials at a reasonable cost, or any other reason beyond the control of the
Landlord or Tenant shall not constitute a default hereunder and shall be
performed within a reasonable time after the end of such cause for delay or
non-performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before delinquency,
any and all taxes levied or assessed and which become payable during the term
hereof upon all of Tenant's income, leasehold improvements, equipment,
furniture, fixtures and personal property owned by Tenant located in the
Premises. In the event that any or all of Tenant's leasehold
-17-
<PAGE> 18
improvements, equipment, furniture, fixtures and personal property shall be
assessed and taxed with the Building, Tenant shall pay such taxes applicable to
Tenant's property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or permit them to be brought in its name; however, Landlord will not be
subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
L. Any consent of Landlord or Tenant hereunder shall not be
unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
N. This Lease will be construed and enforced in accordance
with the laws of the State of Colorado.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day
and year first above written.
"LANDLORD"
By: /s/ GEORGE A. EVANS
-------------------------------------------
George Evans
Date: May 15, 1996
-----------------------------------------
Address: 8157 E. Hunters Hill Dr.
-------------------------------------
Englewood, CO 80112
----------------------------------------------
By: /s/ LARRY DAVIDSON
-------------------------------------------
Larry Davidson
Date: May 15, 1997
-----------------------------------------
Address: 9504 Southern Hills Cr.
-------------------------------------
Littleton, CO 80124
----------------------------------------------
"TENANT"
RentX Industries, Inc., a Delaware corporation
By: /s/ RICHARD M. TYLER
------------------------------------------
Its: Richard M. Tyler, President
------------------------------------------
Date: May 15, 1996
----------------------------------------
Address: 1522 Blake Street,
Denver, Colorado 80202
-18-
<PAGE> 19
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
The North 135.26 feet of Lot 5, Block 2, Kennedy Heights,
together with that part of Fraser Street adjoining said land on the west as
vacated August 26, 1982 in Book 3687 at Page 6,
County of Arapahoe,
State of Colorado.
A-1
<PAGE> 20
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
Assumption Agreement dated May 12, 1994, for the benefit of World Savings and
Loan Association, recorded in Book 7573 at Page 469, Arapahoe County, Colorado
Deed of Trust dated April 11, 1979, for the benefit of World Savings and Loan
Association as successor in interest to Majestic Savings and Loan Association,
recorded in Book 2972 at Page 403, Arapahoe County, Colorado
Deed of Trust dated September 30, 1994 for benefit of Cathora Corporation,
recorded in Book 7922 at Page 484, Arapahoe County, Colorado
B-1
<PAGE> 1
EXHIBIT 10.39
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made as of the 15th day of May,
1996, between George Evans and Larry Davidson (collectively, "Landlord") and
RentX Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 7,000 rentable square foot building located at
600 Fraser Street, Aurora, Colorado (the "Building"), together with a non-
exclusive license, subject to the provisions hereof, to use all appurtenances
thereto, including, but not limited to, any parking area and access roads, and
other areas related to the use of the Building (collectively, the "Premises").
2. TERM. The term of this Lease shall commence as of May 15,
1996 (the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant
shall pay to Landlord the annual sum of $44,861.76 (the "Rent") which sum shall
be payable in twelve equal monthly installments of $3,738.48 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in
advance without notice at the office of Landlord or to such other person or at
such other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this
is a "triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied
against the Premises by any governmental or quasi-governmental authority. The
foregoing shall include any taxes, assessments, surcharges, or service or other
fees of a nature not presently in effect which shall hereafter be levied on the
Premises as a result of the use, ownership or operation of the Premises or for
any other reason, whether in lieu of or in addition to any current real estate
taxes and assessments. Expenses incurred by Tenant for tax consultants and in
contesting the amount or validity of any such taxes or assessments shall be
included in such computations.
<PAGE> 2
Assessments shall include any and all so-called special assessments, license
tax, business license fee, business license tax, commercial rental tax, levy,
charge or tax, imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, water, drainage or other improvement or special
district thereof, against the Premises, or the Building, or against any legal
or equitable interest of Landlord therein. Taxes and assessment shall exclude
Landlord's income taxes or similar taxes. Any special assessments will be
amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk
coverage; public liability insurance; and any other insurance carried by Tenant
or Landlord relating to this Lease. All such insurance shall be in such
amounts as set forth in this Lease.
C. Any capital improvements, repairs and replacements
made in or to the Premises. The cost of any capital improvement shall be
amortized over the useful life of such item and Tenant will pay its percentage
share (which shall be determined by dividing the square footage of the Building
by the square footage of all buildings benefitted by such improvement,
including the Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by
fire, windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated
by condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may estimate the amount of Operating Expenses for the then
current year based on the most currently
-2-
<PAGE> 3
available information to Landlord. Upon the determination of the actual
Operating Expenses for such year, Landlord shall deliver to Tenant a
comparative statement which shall show a comparison of the estimated Operating
Expenses to the actual Operating Expenses for the applicable year. If the
estimated Operating Expenses exceed the actual Operating Expenses, Landlord
shall immediately remit such excess to Tenant. If the estimated Operating
Expenses are less than the actual Operating Expenses, Tenant shall immediately
pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only after paying
such tax or posting such security that Landlord reasonably requires in order to
protect the Leased Premises against loss or forfeiture. Upon the conclusion of
any such protest proceedings, Tenant will pay its share of the tax, as finally
determined, in accordance with this Lease the payment of which tax may have
been deferred during the prosecution of the proceedings, together with any
costs, fees, interest, penalties, or other related liabilities. Landlord will
not be required to join in any contest or proceedings unless the provisions of
any law or regulations then in effect require that the proceedings be brought
by or in the name of Landlord. In that event, Landlord will join in the
proceedings or permit them to be brought in its name; however, Landlord will
not be subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
-3-
<PAGE> 4
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and
equipment rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit
waste to be committed, nor shall Tenant permit any nuisance in or about the
Premises.
C. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or
hereafter enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services.
If an interruption of services which materially affects Tenant's use and
enjoyment of the Premises continues for more than 30 consecutive calendar days,
Tenant shall have the right to terminate this Lease upon written notice to
Landlord, and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant
in the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-4-
<PAGE> 5
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph
4 above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain
the Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace
all structural components of the Premises and the roof of the Building, and if
a repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The
cost of any such capital improvement shall be amortized over the useful life of
such item and Tenant agrees to pay its percentage share (which shall be
determined by dividing the square footage of the Building by the square footage
of all buildings benefitted by such improvement, including the Building) of the
annual amortized amount. Such payment will be made by Tenant as set forth in
Paragraph 4 above. Landlord shall do all acts required to comply with all
applicable laws, ordinances, regulations and rules of any public authority
relating to the Premises, except to the extent that the foregoing are solely a
result of Tenant's use of the Premises. Tenant shall do all acts required to
comply with all applicable laws, ordinances, regulations and rules of any
public authority relating solely to Tenant's use of the Premises. If a repair
is required as a result of Tenant's negligence and such repair cost is not
covered by insurance proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive
-5-
<PAGE> 6
business days, then Tenant shall be entitled to an abatement of rent commencing
with the fourth business day that the same are unusable; provided, however,
that Tenant shall not be entitled to a pro rata abatement of rent under the
foregoing due to unusability (i) caused directly or indirectly by any act or
omission of Tenant or any of Tenant's servants, employees, agents, contractors,
visitors or licensees, (ii) where Tenant makes a decoration, alteration,
improvement or addition which directly causes such unusability, or (iii) where
the repair in question is one which Tenant is obligated to furnish under the
provisions of this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions
or improvements (other than any non-structural change or decorating alteration
to the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Landlord may condition its consent to any alterations,
additions or improvements upon such reasonable requirements as Landlord may
deem necessary in its reasonable discretion, including without limitation the
manner in which the work is done and the right to approve the contractor by
whom the work is to be performed.
(2) All items installed in the Premises by Tenant
and all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring
Landlord's consent prior to the commencement of any such work, Tenant shall
upon request deliver to Landlord, certificates issued by insurance companies
qualified to do business in the state where the Premises are located,
evidencing that Workmen's Compensation, general liability insurance and
property damage insurance, all in amounts, with companies and on forms
reasonably satisfactory to Landlord, are in full force and effect and
maintained by all contractors and subcontractors engaged by Tenant to perform
such work. All such policies shall name Landlord as an additional insured.
Each such certificate shall provide that the insurance policy may not be
canceled or modified without 10 days' prior written notice to Landlord.
Further, Tenant shall permit Landlord to post notices in the Premises in
locations which will be visible by persons performing any work on the Premises
stating that Landlord is not responsible for the payment for such work and
setting forth such other information as Landlord may deem necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the
right to enter the Premises at all reasonable times after 24 hours' prior
written notice, except in emergencies, for the purpose of: (1) examining or
inspecting the same; (2) showing the same to prospective purchasers or tenants
of the Building during the last six months of the Primary Lease Term or
-6-
<PAGE> 7
during the last six months of any option period, if this Lease is extended;
provided, however, if such prospective purchaser or tenant is viewed by Tenant
as a "competitor" in the industry, then Landlord will use best efforts to
restrict such prospective purchaser's or tenant's access to areas where Tenant
has confidential information (such restricted access may mean certain areas may
not be available for view or require that such party be accompanied by a
representative of Tenant when entering such areas); and (3) making such
alterations, repairs, improvements or additions to the Building which are the
obligation of Landlord, in a manner which will not unreasonably interfere with
Tenant's use of the Premises. If Tenant shall not be personally present to
open and permit entry into the Premises at any time when such entry by Landlord
is necessary or permitted hereunder, Landlord may enter by means of a master
key without liability to Tenant, except for any failure to exercise due care
for Tenant's property, and without affecting this Lease. Such entry shall not
be construed as a manifestation by the Landlord of an intent to terminate this
Lease. Tenant shall not, without the prior consent of Landlord, change the
locks or install additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all
costs for work done by Tenant or caused to be done by Tenant on the Premises of
a character which may result in liens on Landlord's interest therein. Tenant
will keep the Premises free and clear of all mechanics' liens and other liens
on account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any
liens be filed or recorded against the Premises for work or materials supplied
to Tenant, or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be removed of record within 30 days after
notice from Landlord. If Tenant desires to contest any claim of lien, Tenant
shall furnish to Landlord adequate security in the amount of 100% of the amount
of the claim, plus estimated costs and interest, and, if a final judgment
establishing the validity or existence of any lien for any amount is entered,
Tenant shall pay and satisfy the same at once. If Tenant shall be in default
in paying any charge for which a mechanic's lien or suit to foreclose the lien
has been recorded or filed, and shall not have caused the same to be released
of record or shall not have given Landlord security as aforesaid, Landlord may
(but without being required to do so) pay such lien or claim and any costs or
obtain a bond or title insurance protection against such lien, and the amount
so paid, together with reasonable attorneys' fees incurred in connection
therewith, shall be immediately due from Tenant to Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises
-7-
<PAGE> 8
or any part thereof, when such injury or damage is caused in whole or in part
by the act, neglect, fault or omission to act on the part of Tenant, its
agents, contractors, or employees. Tenant further indemnifies and agrees to
hold Landlord harmless from and to defend Landlord against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from
any act or negligence of Tenant, or any of its agents, contractors, or
employees, and from and against all costs, reasonable attorneys' and legal
assistants' fees and liabilities incurred as a result of any such claim or any
action or proceeding brought thereon. Tenant shall not be liable to Landlord
for any damage by or from any act or negligence of any owner or occupant of
adjoining or contiguous property. Tenant agrees to pay for all damage to the
Premises caused by Tenant's misuse of the Premises. Tenant shall not be
required to indemnify Landlord for Landlord's own negligence or misconduct or
the negligence or misconduct of Landlord's agents, contractors or employees.
Landlord hereby indemnifies and agrees to hold Tenant harmless from and to
defend Tenant against, any and all claims of liability for any injury
(including death) or damage to any person or property whatsoever occurring in
or about the Building, or Premises when such injury or damage is caused in
whole or in part by the act, neglect, fault or omission to act on the part of
Landlord, its agents, contractors, or employees. Landlord further indemnifies
and agrees to hold Tenant harmless from, and to defend Tenant against any and
all claims arising from any breach or default in performance of any obligation
on Landlord's part to be performed under the terms of this Lease, or arising
from any act or negligence of Landlord, or any of its agents, contractors or
employees, and from and against all costs, attorneys' and legal assistants'
fees, expenses and liabilities incurred as a result of any such claim or any
action or proceeding brought thereon. Landlord shall not be liable to Tenant
for any damage by or from any act or negligence of any other occupant of the
Building, or by any owner or occupant of adjoining or contiguous property.
Landlord shall not be required to indemnify Tenant for Tenant's own negligence
or misconduct or the negligence or misconduct of Tenant's agents, contractors
or employees.
B. Neither Landlord nor its agents shall be liable for
any damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or
-8-
<PAGE> 9
arising from any act or negligence of Tenant, or of its agents or employees,
Tenant upon reasonable prior written notice from Landlord, shall defend the
same at Tenant's expense. In case any action or proceeding is brought against
Tenant by reason of any obligation on Landlord's part to be performed under the
terms of this Lease, or arising from any act or negligence of Landlord, or of
its agents, or employees, Landlord, upon reasonable prior written notice from
Tenant, shall defend the same at Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance
in the amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or
other insured casualty, Tenant shall deliver the insurance proceeds received
for the Building, excluding the amounts received for Tenant's Property and the
amount of any deductible paid by Tenant, to Landlord, and the damage shall be
repaired by and at the expense of Landlord, regardless of the extent of
available insurance proceeds, provided that such repairs and restoration can,
in Landlord's reasonable opinion, be made within 120 days after the occurrence
of such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30
days after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth
the approximate length of time Landlord estimates will be required to complete
such repairs and restoration. If Landlord estimates it cannot make such
repairs and restoration within said 120-day period, then either party, by
written notice to the other, may cancel this Lease as of the date of occurrence
of such damage, provided that such
-9-
<PAGE> 10
notice is given to the other party within 15 days after Landlord notifies
Tenant of the estimated time for completion of such repairs and restoration.
If no notice is given by either party to terminate this Lease, this Lease shall
continue in effect and the Rent shall be apportioned in the manner provided
above. Landlord agrees that if Landlord exercises the foregoing termination
option, Tenant shall have the right to reinstate the Lease by giving Landlord
written notice of such reinstatement within 15 days after receipt of Landlord's
termination notice, and upon such reinstatement, Landlord shall deliver all
insurance proceeds to Tenant, who will commence and complete such repair and
restoration work.
C. Landlord and Tenant hereby waive any and all rights
of recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or provisions waiving
the insurer's rights of subrogation with respect to claims against the other,
and each shall notify its insurance companies of the existence of the waiver
and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises untenantable, is taken
by right of eminent domain or by condemnation, or is conveyed in lieu of any
such taking, then this Lease may be terminated at the option of Tenant. Such
option shall be exercised by Tenant giving notice to Landlord of such
termination within 30 days after such taking or conveyance; whereupon this
Lease shall forthwith terminate and the Rent shall be duly apportioned as of
the date of such taking or conveyance. Upon such termination, Tenant shall
surrender to Landlord the Premises and all of Tenant's interest therein under
this Lease, and Landlord may re-enter and take possession of the Premises or
remove Tenant therefrom. If any portion of the Premises is taken which does
not materially affect Tenant's right to use the remainder of the Premises for
the purposes set forth herein, this Lease shall continue in full force and
effect, and Landlord shall promptly perform any repair or restoration work
required to restore the Premises, insofar as possible, to former condition, and
the rental owing hereunder shall be adjusted, if necessary, in such just manner
and proportion as the part so taken (and its effect on Tenant's ability to use
the remainder of the Premises) bears to the whole. In the event of taking or
conveyance as described herein, Landlord shall receive the award or
consideration for the lands and improvements so taken; provided, however, that
Landlord shall have no interest in any award made for Tenant's loss of business
or value of its leasehold interest or for the taking of Tenant's fixtures or
property, or for Tenant's relocation expenses. Landlord and Tenant shall
cooperate with one another in making claims for condemnation awards.
-10-
<PAGE> 11
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to
be used or occupied by any persons other than Tenant and the employees of
Tenant, nor shall Tenant permit any part of the Premises to be used or occupied
by any licensee or concessionaire, or permit any persons to be upon the
Premises other than Tenant, and employees, customers and others having lawful
business with Tenant without the prior written consent of Landlord, not to be
unreasonably withheld or delayed. Tenant shall have the right to assign or
part with the possession of the Premises without the prior written consent of
Landlord, provided that such assignment or sublease is to an entity (i)
controlled by, controlling, or under common control with Tenant or (ii) which
acquires, by merger or otherwise, substantially all of the assets or business
of Tenant. Tenant may collaterally assign this Lease to any lender of Tenant
without obtaining Landlord's consent thereto.
B. Tenant may sublet all or any part of the Premises to
any subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time
and from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this Paragraph 15 shall be conditioned upon
receipt by Tenant of a nondisturbance agreement pursuant to the provisions of
Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following
events shall constitute an "event of default":
A. Tenant shall fail to pay when due any installment of
Rent, and such default shall continue for 10 days after receipt of written
notice from Landlord;
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
-11-
<PAGE> 12
C. This Lease or the Premises or any part thereof shall
be taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or
insolvency or for reorganization or arrangement under the bankruptcy laws of
the United States or under any insolvency act of any state, or shall
voluntarily take advantage of any such law or act by answer or otherwise, or
shall be dissolved, or shall make an assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law
or insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be
performed, and such non-performance shall continue for a period of 30 days
after written notice thereof by Landlord to Tenant; provided that if the
curative action to be taken by Tenant cannot, for reasons beyond Tenant's
reasonable control be completed within 30 days, then so long as Tenant promptly
initiates and diligently provides such cure, Tenant will not be deemed in
default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as
hereinabove described, Landlord shall have the right, at its election, then or
at any time thereafter and while any such event of default shall continue,
either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the
Premises and repossess the same as of Landlord's former estate, and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both, and without prejudice to any remedies for arrears of Rent. Should
Landlord elect to re-enter as provided in this subparagraph (2), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord shall without terminating this Lease, use
reasonable efforts to relet the Premises in Landlord's or Tenant's name, but
for the account of Tenant, for such term or terms (which may be greater or less
than the period which would otherwise have constituted the
-12-
<PAGE> 13
balance of the term of this Lease) and on such conditions and upon such other
terms as Landlord may reasonably determine, and Landlord may collect and
receive the rents therefor. Landlord shall in no way be responsible or liable
for any failure to relet the Premises after exercising good faith efforts
therefor, but shall make every reasonable effort to mitigate its damages. No
such re-entry or taking possession of the Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant. No notice from Landlord
hereunder or under a forcible entry and detainer statute or similar law shall
constitute an election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right following any such re-
entry or reletting to exercise its right to terminate this Lease by giving
Tenant written notice to that effect, in which event the Lease will terminate
as specified in said notice.
B. In the event that Landlord does not elect to
terminate this Lease and elects to take possession as provided in subparagraph
A(2) hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly
on the days on which the Rent would have been payable hereunder if possession
had not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a
result of an uncured default by Tenant, as permitted in subparagraph A(1)
hereof, Tenant shall remain liable to Landlord for damages in an amount equal
to the Rent and other sums which would have been owed by Tenant hereunder for
the balance of the term had this Lease not been terminated, less the net
proceeds, if any, of any reletting of the Premises by Landlord subsequent to
such termination, after deducting all Landlord's expenses in connection with
such reletting, including, but without limitation, the expenses enumerated
above. Landlord shall be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
hereunder if this Lease had not been terminated, and Landlord shall be entitled
to receive the same from Tenant on each such day. Landlord agrees to use good
faith efforts to mitigate its damages in the event of Tenant's default.
Alternatively, at the option of Landlord, Landlord shall be entitled to recover
forthwith against Tenant, as damages for the loss of the bargain and not as a
penalty, an aggregate sum which, at the time of such termination of this Lease,
represents the amount, if any, by which the aggregate of the Rent and all other
sums payable by Tenant hereunder which would have accrued for the balance of
the term exceeds the aggregate rental value of the Premises (such rental value
to be computed on the basis of a tenant
-13-
<PAGE> 14
paying not only Rent, but also such other charges as are required to be paid by
Tenant under the terms of this Lease) for the balance of such term, both
discounted to present worth at the Federal Reserve discount rate plus one
percent (1%).
D. Suit or suits for the recovery of the amounts and
damages set forth herein may be brought by Landlord, from time to time, at
Landlord's election; and nothing herein shall be deemed to require Landlord to
await the date that this Lease or the term hereof would have expired had there
been no such default by Tenant, or no such termination, as the case may be.
Each right and remedy provided for in this Lease shall be cumulative and shall
be in addition to every other right or remedy provided for in this Lease or now
or hereafter existing at law or in equity or by statute or otherwise,
including, but not limited to, suits for injunctive relief and specific
performance. The exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease as now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease as now or hereafter existing at
law or in equity or by statute or otherwise. All costs incurred by Landlord in
connection with collecting any amounts and damages owed by Tenant pursuant to
the provisions of this Lease, including reasonable attorneys' fees from the
date any such matter is turned over to an attorney, shall also be recoverable
by Landlord from Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach. Notwithstanding any termination
of this Lease, the same shall continue in full force and effect as to any
provisions hereof which require observance or performance by Landlord or Tenant
subsequent to termination.
(1) Nothing contained in this Paragraph 17 shall
limit or prejudice the right of Landlord to prove and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding an amount equal to the maximum allowed by any statute or
rule of law governing such proceeding and in effect at the time when such
damages are to be proved.
(2) Notwithstanding anything in this Paragraph 17
to the contrary, any such proceeding or action involving bankruptcy,
insolvency, reorganization, arrangement, assignment for the benefit of
creditors, or appointment of a receiver or trustee, as
-14-
<PAGE> 15
specified in subparagraphs 16D and 16E above, shall be considered to be an
event of default only when such proceeding, action or remedy shall be taken or
brought by or against the then holder of the leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are
not paid within 30 days after they are due shall bear interest at the rate of
10% per annum from the 31st day after the due date of such payment until
received by Landlord. Similarly, any amounts paid by Landlord to cure any
defaults of Tenant hereunder, which Landlord shall have the right, but not the
obligation to do, shall, if not repaid by Tenant within 30 days after demand by
Landlord, thereafter bear interest at the above rate until received by
Landlord.
G. Landlord hereby waives any statutory or common law
rights it may have granting Landlord a lien or the right to foreclose on the
personal property of Tenant and/or the tenant improvements installed in the
Premises by Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any other person, but with an obligation by
Landlord to account therefor. Tenant shall pay Landlord for all expenses
incurred in connection with the disposition of such property.
19. HOLDING OVER. Should Tenant hold over after the termination
of this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to-month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
20. BROKER'S FEE. Tenant and Landlord each represent and warrant
to the other that it has had no dealings with any person, firm, broker or
finder in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and
-15-
<PAGE> 16
that no broker or other person, firm or entity is entitled to any commission or
finder's fee in connection with said transaction. Tenant and Landlord do each
hereby agree to indemnify, protect, defend and hold the other harmless from and
against liability for compensation or charges which may be claimed by any such
unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying party, including any costs, expenses, attorneys'
fees reasonably incurred with respect thereto.
21. SURRENDER AND NOTICE. Upon the expiration or other
termination of the term of this Lease, Tenant shall promptly quit the Premises
and surrender the Premises to Landlord broom clean, in good order and
condition, except for ordinary wear and tear and loss by fire or other
casualty. Tenant may remove Tenant's Property and all of its movable furniture
and other effects and such alterations, additions and improvements that Tenant
installed pursuant to Paragraph 26 hereof. In the event that Tenant fails to
vacate the Premises in a timely manner as required, Tenant shall be responsible
to Landlord for all reasonable costs incurred by Landlord as a result of such
failure, including, but not limited to, any amounts required to be paid to
third parties who were to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in
this Lease to the contrary, Landlord represents and warrants to Tenant that it
is the sole owner in fee simple of the Leased Premises, that no mortgages,
deeds of trusts or liens or encumbrances of any nature presently encumber
Landlord's title to the Premises except as set forth on Exhibit B, attached
hereto and incorporated herein by this reference; that none of said
encumbrances shall prohibit or impede the use of the Premises as contemplated
herein or create any financial obligation on the part of Tenant except as
expressly set forth herein; that Landlord has the full right, power and
authority to enter into this Lease and make the agreements contained herein on
its part to be performed; that the execution, delivery and performance of this
Lease has been duly authorized by Landlord; that the Lease constitutes the
valid and binding obligation of Landlord, enforceable in accordance with its
terms; that the making of this Lease and the performance thereof will not
violate any present zoning laws or ordinances or the terms or provisions of any
mortgage, lease or other agreement to which Landlord is a party or under which
Landlord is otherwise bound, or which restricts Landlord in any way with
respect to the use or disposition of the Premises; that Landlord has no
knowledge of any pending zoning changes affecting the Premises; that the
Premises and Building will be kept in compliance by Landlord, at its cost, with
all applicable laws and regulations enacted from and after the date of this
Lease; that the Premises are presently zoned so as to permit the operation of
the Premises as contemplated in this Lease; and that the Premises presently
include full legal access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's
option, shall be subordinate to any mortgage or deed of trust (now or hereafter
placed upon the Premises), and to any and all advances made under any mortgage
or deed of trust and to all renewals, modifications, consolidations,
replacements and extensions thereof. Tenant agrees to execute such documents
as may be further required to evidence such subordination or to make this Lease
-16-
<PAGE> 17
prior to the lien of any mortgage or deed of trust, as the case may be, subject
to the following sentence. Notwithstanding the foregoing, Tenant shall only be
obligated to subordinate its leasehold interest to any mortgage, deed of trust,
or ground lease now or hereafter placed upon the Premises if the holder of such
mortgage or deed of trust or the landlord under such ground lease delivers to
Tenant a non-disturbance agreement, using the form of document then being
employed by such holder provided it is reasonably acceptable to Tenant, which
will provide that Tenant, notwithstanding any default of Landlord thereunder,
shall have the right to remain in possession of the Premises described herein
in accordance with the terms and provisions of this Lease for so long as Tenant
shall not be in default under this Lease. Upon the mutual execution of this
Lease, Landlord shall deliver such a non-disturbance agreement from any present
lender having a deed of trust or mortgage on the Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act
in any matter provided for herein by and through its building manager or any
other person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be
given to Landlord hereunder shall be in writing, and shall be deemed duly
served three days after deposited in the United States Mail, with proper
postage prepaid, certified or registered, return receipt requested, addressed
to Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of this Lease, except
that the monthly rent for each respective Option Period will be increased in
the manner set forth in subparagraph B below. Tenant will exercise its option
by giving Landlord written notice at least 180 days prior to the expiration of
the Primary Lease Term, or the expiration of the then current Option Period, as
the case may be.
B. Landlord and Tenant agree that the monthly rent for
each Option Period will be determined set forth in this paragraph. For the
first month of the first year of the subject Option Period, the Rent due
hereunder will be adjusted in accordance with the
-17-
<PAGE> 18
increase, if any, which has occurred in the Consumer Price Index, Denver-
Boulder area for all Urban Consumers, U.S. City Average - All Items Index (CPI-
U, 1982-84 equals 100), published by the United States Department of Labor,
Bureau of Labor Statistics (the "INDEX") from the Commencement Date or the last
day of a prior Rent adjustment, whichever is later, to the date of the present
adjustment. Such adjusted Rent rate will be the Rent for the then Option
Period. If the Index is discontinued, Landlord and Tenant shall agree upon
comparable statistics on the cost of living for the computations under this
subparagraph B, and such statistics shall be published by an agency of the
United States Government or by a responsible financial periodical or recognized
authority. If Landlord and Tenant fail to agree on a replacement index, they
will submit the question of a replacement index to an arbitrator in accordance
with the rules and regulations of the American Arbitration Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip
the Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply
for, diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits or
approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense,
as part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental regulations. All sign construction shall be
in accordance with such local sign ordinances and applicable governmental
regulation. Tenant shall obtain, and Landlord shall cooperate with
-18-
<PAGE> 19
Tenant's applications therefor, any and all permits as are required under such
governmental regulations.
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and
hold harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's rental and other payment obligations under this Lease
shall be abated entirely during the period beyond the 24 hours that Tenant is
required to be closed for business or abated in proportion to the amount of
lost business suffered by Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold harmless Landlord, its directors, officers,
employees, and agents and assignees or successors to Landlord's interest in the
Premises, their directors, officers, employees, and agents from and
-19-
<PAGE> 20
against any and all losses, claims, damages, penalties and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees (i) including
all damages, directly or indirectly arising out of the use, generation,
storage, release or disposal of Hazardous Materials by Tenant, its agents or
contractors, and (ii) including, without limitation, the cost of any required
or necessary repair, clean-up or detoxification and the preparation of any
closure or other required plans to the full extent that such is attributable,
directly or indirectly, to the use, generation, storage, release or disposal of
Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Premises at the
time in question. In the event of any transfer or transfers of the title to
the Premises, the Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released,
from and after the date of such transfer or conveyance, from all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that the
grantee assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an interest in the
hands of Landlord or the then grantor at the time of such transfer shall be
turned over to the grantee. Any amount then due and payable to Tenant by
Landlord or the then grantor under any provisions of this Lease shall be paid
to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease
shall not work a merger, and such termination or mutual cancellation shall, at
the option of Landlord, either terminate all subleases and subtenancies or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30 days after demand, and if the other
party is Tenant, such expenditures may be offset against Rent due under this
Lease but only if Landlord does not pay such amount within such 30-day period.
Notwithstanding anything in this paragraph to the contrary, no prior notice to
the non-complying party shall be necessary if the failure to comply involves
emergency repairs under this Lease reasonably necessary for the safety and
preservation of the Premises or the furnishings and equipment located therein
or the health or safety of the occupants or employees thereof.
-20-
<PAGE> 21
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter
of convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day
permitted for the performance of any act required or permitted under this Lease
falls on a Saturday, Sunday or holiday, the time for such performance will be
extended to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any
obligation of Tenant, other than the payment of Rent, which is delayed or not
performed due to acts of God, strike, riot, war, weather, failure to obtain
labor and materials at a reasonable cost, or any other reason beyond the
control of the Landlord or Tenant shall not constitute a default hereunder and
shall be performed within a reasonable time after the end of such cause for
delay or non-performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all of Tenant's income, leasehold improvements,
equipment, furniture, fixtures and personal property owned by Tenant located in
the Premises. In the event that any or all of Tenant's leasehold improvements,
equipment, furniture, fixtures and personal property shall be assessed and
taxed with the Building, Tenant shall pay such taxes applicable to Tenant's
property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or
-21-
<PAGE> 22
permit them to be brought in its name; however, Landlord will not be subjected
to any liability for the payment of any costs or expenses in connection with
any contest or proceedings, and Tenant will indemnify Landlord against and save
Landlord harmless from any costs and expenses in this regard.
L. Any consent of Landlord or Tenant hereunder shall not
be unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
N. This Lease will be construed and enforced in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
"LANDLORD"
By: /s/ GEORGE A. EVANS
-------------------------------------------
George Evans
Date: May 15, 1996
-----------------------------------------
Address: 8157 E. Hunters Hill Dr.
-------------------------------------
Englewood, CO 80112
----------------------------------------------
By: /s/ LARRY DAVIDSON
-------------------------------------------
Larry Davidson
Date: May 15, 1997
-----------------------------------------
Address: 9504 Southern Hills Cr.
-------------------------------------
Littleton, CO 80124
----------------------------------------------
"TENANT"
RentX Industries, Inc., a Delaware corporation
By: /s/ RICHARD M. TYLER
------------------------------------------
Its: Richard M. Tyler, President
------------------------------------------
Date: May 15, 1996
----------------------------------------
Address: 1522 Blake Street,
Denver, Colorado 80202
-22-
<PAGE> 23
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
[LEGAL DESCRIPTION OMITTED]
A-1
<PAGE> 24
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
Mortgage held by Erma Bohlmann, 10813 W. Denham Drive, Sun City, Arizona 85351-
4649
Deed of Trust dated January 4, 1983 for the benefit of Erma Bohlmann recorded
in Book 3770 at Page 647, Arapahoe County, Colorado
Deed of Trust dated April 16, 1986 for the benefit of First Colorado Bank &
Trust, N.A., recorded in Book 4789 at Page 300, Arapahoe County, Colorado
Deed of Trust dated February 14, 1989, for the benefit of First Colorado Bank &
Trust, N.A., recorded in Book 5634 at Page 299, Arapahoe County, Colorado
B-1
<PAGE> 1
EXHIBIT 10.40
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made as of the 15th day of May,
1996, between George Evans and Larry Davidson (collectively, "Landlord") and
RentX Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 5,480 rentable square foot building located at
10685 S. Parker Road, Aurora, Colorado (the "Building"), together with a
non-exclusive license, subject to the provisions hereof, to use all
appurtenances thereto, including, but not limited to, any parking area and
access roads, and other areas related to the use of the Building (collectively,
the "Premises").
2. TERM. The term of this Lease shall commence as of May 15,
1996 (the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant
shall pay to Landlord the annual sum of $46,786.08 (the "Rent") which sum shall
be payable in twelve equal monthly installments of $3,898.84 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in
advance without notice at the office of Landlord or to such other person or at
such other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this
is a "triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied
against the Premises by any governmental or quasi-governmental authority. The
foregoing shall include any taxes, assessments, surcharges, or service or other
fees of a nature not presently in effect which shall hereafter be levied on the
Premises as a result of the use, ownership or operation of the Premises or for
any other reason, whether in lieu of or in addition to any current real estate
taxes and assessments. Expenses incurred by Tenant for tax consultants and in
contesting the amount or validity of any such taxes or assessments shall be
included in such computations. Assessments shall include any and all so-called
special assessments, license tax, business license fee, business license tax,
commercial rental tax, levy, charge or tax, imposed by any authority having the
direct power to tax, including any city, county, state or federal government,
or any school, agricultural, lighting, water, drainage or other improvement or
special district thereof, against the Premises, or the Building, or against any
legal or equitable interest of Landlord therein. Taxes and assessment shall
exclude Landlord's income taxes or similar taxes. Any special assessments will
be amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk
coverage; public liability insurance; and any other insurance carried by Tenant
or Landlord relating to this Lease. All such insurance shall be in such
amounts as set forth in this Lease.
<PAGE> 2
C. Any capital improvements, repairs and replacements
made in or to the Premises. The cost of any capital improvement shall be
amortized over the useful life of such item and Tenant will pay its percentage
share (which shall be determined by dividing the square footage of the Building
by the square footage of all buildings benefitted by such improvement,
including the Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by
fire, windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated
by condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may estimate the amount of Operating Expenses for the then
current year based on the most currently available information to Landlord.
Upon the determination of the actual Operating Expenses for such year, Landlord
shall deliver to Tenant a comparative statement which shall show a comparison
of the estimated Operating Expenses to the actual Operating Expenses for the
applicable year. If the estimated Operating Expenses exceed the actual
Operating Expenses, Landlord shall immediately remit such excess to Tenant. If
the estimated Operating Expenses are less than the actual Operating Expenses,
Tenant shall immediately pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only
-2-
<PAGE> 3
after paying such tax or posting such security that Landlord reasonably
requires in order to protect the Leased Premises against loss or forfeiture.
Upon the conclusion of any such protest proceedings, Tenant will pay its share
of the tax, as finally determined, in accordance with this Lease the payment of
which tax may have been deferred during the prosecution of the proceedings,
together with any costs, fees, interest, penalties, or other related
liabilities. Landlord will not be required to join in any contest or
proceedings unless the provisions of any law or regulations then in effect
require that the proceedings be brought by or in the name of Landlord. In that
event, Landlord will join in the proceedings or permit them to be brought in
its name; however, Landlord will not be subjected to any liability for the
payment of any costs or expenses in connection with any contest or proceedings,
and Tenant will indemnify Landlord against and save Landlord harmless from any
costs and expenses in this regard.
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and
equipment rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit
waste to be committed, nor shall Tenant permit any nuisance in or about the
Premises.
C. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or
hereafter enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services.
If an interruption of services which materially affects Tenant's use and
enjoyment of the Premises continues for more than 30 consecutive calendar days,
Tenant shall have the right to terminate this Lease upon written notice to
Landlord, and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant
in the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-3-
<PAGE> 4
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph
4 above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain
the Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace
all structural components of the Premises and the roof of the Building, and if
a repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The
cost of any such capital improvement shall be amortized over the useful life of
such item and Tenant agrees to pay its percentage share (which shall be
determined by dividing the square footage of the Building by the square footage
of all buildings benefitted by such improvement, including the Building) of the
annual amortized amount. Such payment will be made by Tenant as set forth in
Paragraph 4 above. Landlord shall do all acts required to comply with all
applicable laws, ordinances, regulations and rules of any public authority
relating to the Premises, except to the extent that the foregoing are solely a
result of Tenant's use of the Premises. Tenant shall do all acts required to
comply with all applicable laws, ordinances, regulations and rules of any
public authority relating solely to Tenant's use of the Premises. If a repair
is required as a result of Tenant's negligence and such repair cost is not
covered by insurance proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive business days, then Tenant
shall be entitled to an abatement of rent commencing with the fourth business
day that the same are unusable; provided, however, that Tenant shall not be
entitled to a pro rata abatement of rent under the foregoing due to unusability
(i) caused directly or indirectly by any act or omission of Tenant or any of
Tenant's servants, employees, agents, contractors, visitors or licensees, (ii)
where Tenant makes a decoration, alteration, improvement or addition which
directly causes such unusability, or (iii) where the repair in question is one
which Tenant is obligated to furnish under the provisions of this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions
or improvements (other than any non-structural change or decorating alteration
to the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or
-4-
<PAGE> 5
delayed. Landlord may condition its consent to any alterations, additions or
improvements upon such reasonable requirements as Landlord may deem necessary
in its reasonable discretion, including without limitation the manner in which
the work is done and the right to approve the contractor by whom the work is to
be performed.
(2) All items installed in the Premises by Tenant
and all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring
Landlord's consent prior to the commencement of any such work, Tenant shall
upon request deliver to Landlord, certificates issued by insurance companies
qualified to do business in the state where the Premises are located,
evidencing that Workmen's Compensation, general liability insurance and
property damage insurance, all in amounts, with companies and on forms
reasonably satisfactory to Landlord, are in full force and effect and
maintained by all contractors and subcontractors engaged by Tenant to perform
such work. All such policies shall name Landlord as an additional insured.
Each such certificate shall provide that the insurance policy may not be
canceled or modified without 10 days' prior written notice to Landlord.
Further, Tenant shall permit Landlord to post notices in the Premises in
locations which will be visible by persons performing any work on the Premises
stating that Landlord is not responsible for the payment for such work and
setting forth such other information as Landlord may deem necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the
right to enter the Premises at all reasonable times after 24 hours' prior
written notice, except in emergencies, for the purpose of: (1) examining or
inspecting the same; (2) showing the same to prospective purchasers or tenants
of the Building during the last six months of the Primary Lease Term or during
the last six months of any option period, if this Lease is extended; provided,
however, if such prospective purchaser or tenant is viewed by Tenant as a
"competitor" in the industry, then Landlord will use best efforts to restrict
such prospective purchaser's or tenant's access to areas where Tenant has
confidential information (such restricted access may mean certain areas may not
be available for view or require that such party be accompanied by a
representative of Tenant when entering such areas); and (3) making such
alterations, repairs, improvements or additions to the Building which are the
obligation of Landlord, in a manner which will not unreasonably interfere with
Tenant's use of the Premises. If Tenant shall not be personally present to
open and permit entry into the Premises at any time when such entry by Landlord
is necessary or permitted hereunder, Landlord may enter by means of a master
key without liability to Tenant, except for any failure to exercise due care
for Tenant's property, and without affecting this Lease. Such entry shall not
be construed as a manifestation by the Landlord of an intent to terminate this
Lease. Tenant shall not, without the prior consent of Landlord, change the
locks or install additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all
costs for work done by Tenant or caused to be done by Tenant on the Premises of
a character which may result in liens on Landlord's interest therein. Tenant
will keep the Premises free and clear of all mechanics' liens and other liens
on account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any
liens be filed or recorded against the Premises for work or materials supplied
to Tenant, or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be removed of record within 30 days after
notice from Landlord. If Tenant
-5-
<PAGE> 6
desires to contest any claim of lien, Tenant shall furnish to Landlord adequate
security in the amount of 100% of the amount of the claim, plus estimated costs
and interest, and, if a final judgment establishing the validity or existence
of any lien for any amount is entered, Tenant shall pay and satisfy the same at
once. If Tenant shall be in default in paying any charge for which a
mechanic's lien or suit to foreclose the lien has been recorded or filed, and
shall not have caused the same to be released of record or shall not have given
Landlord security as aforesaid, Landlord may (but without being required to do
so) pay such lien or claim and any costs or obtain a bond or title insurance
protection against such lien, and the amount so paid, together with reasonable
attorneys' fees incurred in connection therewith, shall be immediately due from
Tenant to Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises or any part thereof, when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Tenant, its agents, contractors, or employees. Tenant
further indemnifies and agrees to hold Landlord harmless from and to defend
Landlord against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, or employees, and from and against all costs, reasonable
attorneys' and legal assistants' fees and liabilities incurred as a result of
any such claim or any action or proceeding brought thereon. Tenant shall not
be liable to Landlord for any damage by or from any act or negligence of any
owner or occupant of adjoining or contiguous property. Tenant agrees to pay
for all damage to the Premises caused by Tenant's misuse of the Premises.
Tenant shall not be required to indemnify Landlord for Landlord's own
negligence or misconduct or the negligence or misconduct of Landlord's agents,
contractors or employees. Landlord hereby indemnifies and agrees to hold
Tenant harmless from and to defend Tenant against, any and all claims of
liability for any injury (including death) or damage to any person or property
whatsoever occurring in or about the Building, or Premises when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Landlord, its agents, contractors, or employees. Landlord
further indemnifies and agrees to hold Tenant harmless from, and to defend
Tenant against any and all claims arising from any breach or default in
performance of any obligation on Landlord's part to be performed under the
terms of this Lease, or arising from any act or negligence of Landlord, or any
of its agents, contractors or employees, and from and against all costs,
attorneys' and legal assistants' fees, expenses and liabilities incurred as a
result of any such claim or any action or proceeding brought thereon. Landlord
shall not be liable to Tenant for any damage by or from any act or negligence
of any other occupant of the Building, or by any owner or occupant of adjoining
or contiguous property. Landlord shall not be required to indemnify Tenant for
Tenant's own negligence or misconduct or the negligence or misconduct of
Tenant's agents, contractors or employees.
B. Neither Landlord nor its agents shall be liable for
any damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act or negligence
-6-
<PAGE> 7
of Tenant, or of its agents or employees, Tenant upon reasonable prior written
notice from Landlord, shall defend the same at Tenant's expense. In case any
action or proceeding is brought against Tenant by reason of any obligation on
Landlord's part to be performed under the terms of this Lease, or arising from
any act or negligence of Landlord, or of its agents, or employees, Landlord,
upon reasonable prior written notice from Tenant, shall defend the same at
Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance
in the amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or
other insured casualty, Tenant shall deliver the insurance proceeds received
for the Building, excluding the amounts received for Tenant's Property and the
amount of any deductible paid by Tenant, to Landlord, and the damage shall be
repaired by and at the expense of Landlord, regardless of the extent of
available insurance proceeds, provided that such repairs and restoration can,
in Landlord's reasonable opinion, be made within 120 days after the occurrence
of such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30
days after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth
the approximate length of time Landlord estimates will be required to complete
such repairs and restoration. If Landlord estimates it cannot make such
repairs and restoration within said 120-day period, then either party, by
written notice to the other, may cancel this Lease as of the date of occurrence
of such damage, provided that such notice is given to the other party within 15
days after Landlord notifies Tenant of the estimated time for completion of
such repairs and restoration. If no notice is given by either party to
terminate this Lease, this Lease shall continue in effect and the Rent shall be
apportioned in the manner provided above. Landlord agrees that if Landlord
exercises the foregoing termination option, Tenant shall have the right to
reinstate the Lease by giving Landlord written notice of such reinstatement
within 15 days after receipt of Landlord's termination notice, and upon such
reinstatement, Landlord shall deliver all insurance proceeds to Tenant, who
will commence and complete such repair and restoration work.
C. Landlord and Tenant hereby waive any and all rights
of recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or
-7-
<PAGE> 8
provisions waiving the insurer's rights of subrogation with respect to claims
against the other, and each shall notify its insurance companies of the
existence of the waiver and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises untenantable, is taken
by right of eminent domain or by condemnation, or is conveyed in lieu of any
such taking, then this Lease may be terminated at the option of Tenant. Such
option shall be exercised by Tenant giving notice to Landlord of such
termination within 30 days after such taking or conveyance; whereupon this
Lease shall forthwith terminate and the Rent shall be duly apportioned as of
the date of such taking or conveyance. Upon such termination, Tenant shall
surrender to Landlord the Premises and all of Tenant's interest therein under
this Lease, and Landlord may re-enter and take possession of the Premises or
remove Tenant therefrom. If any portion of the Premises is taken which does
not materially affect Tenant's right to use the remainder of the Premises for
the purposes set forth herein, this Lease shall continue in full force and
effect, and Landlord shall promptly perform any repair or restoration work
required to restore the Premises, insofar as possible, to former condition, and
the rental owing hereunder shall be adjusted, if necessary, in such just manner
and proportion as the part so taken (and its effect on Tenant's ability to use
the remainder of the Premises) bears to the whole. In the event of taking or
conveyance as described herein, Landlord shall receive the award or
consideration for the lands and improvements so taken; provided, however, that
Landlord shall have no interest in any award made for Tenant's loss of business
or value of its leasehold interest or for the taking of Tenant's fixtures or
property, or for Tenant's relocation expenses. Landlord and Tenant shall
cooperate with one another in making claims for condemnation awards.
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to
be used or occupied by any persons other than Tenant and the employees of
Tenant, nor shall Tenant permit any part of the Premises to be used or occupied
by any licensee or concessionaire, or permit any persons to be upon the
Premises other than Tenant, and employees, customers and others having lawful
business with Tenant without the prior written consent of Landlord, not to be
unreasonably withheld or delayed. Tenant shall have the right to assign or
part with the possession of the Premises without the prior written consent of
Landlord, provided that such assignment or sublease is to an entity (i)
controlled by, controlling, or under common control with Tenant or (ii) which
acquires, by merger or otherwise, substantially all of the assets or business
of Tenant. Tenant may collaterally assign this Lease to any lender of Tenant
without obtaining Landlord's consent thereto.
B. Tenant may sublet all or any part of the Premises to
any subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time
and from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this
-8-
<PAGE> 9
Paragraph 15 shall be conditioned upon receipt by Tenant of a nondisturbance
agreement pursuant to the provisions of Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following
events shall constitute an "event of default":
A. Tenant shall fail to pay when due any installment of
Rent, and such default shall continue for 10 days after receipt of written
notice from Landlord;
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
C. This Lease or the Premises or any part thereof shall
be taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or
insolvency or for reorganization or arrangement under the bankruptcy laws of
the United States or under any insolvency act of any state, or shall
voluntarily take advantage of any such law or act by answer or otherwise, or
shall be dissolved, or shall make an assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law
or insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be
performed, and such non-performance shall continue for a period of 30 days
after written notice thereof by Landlord to Tenant; provided that if the
curative action to be taken by Tenant cannot, for reasons beyond Tenant's
reasonable control be completed within 30 days, then so long as Tenant promptly
initiates and diligently provides such cure, Tenant will not be deemed in
default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as
hereinabove described, Landlord shall have the right, at its election, then or
at any time thereafter and while any such event of default shall continue,
either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the
Premises and repossess the same as of Landlord's former estate, and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both, and without prejudice to any remedies for arrears of Rent. Should
Landlord elect to re-enter as provided in this subparagraph (2), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord shall without terminating this Lease, use
reasonable efforts to relet the Premises in Landlord's or Tenant's name, but
for the account of Tenant, for such term or terms (which may
-9-
<PAGE> 10
be greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions and upon such other
terms as Landlord may reasonably determine, and Landlord may collect and
receive the rents therefor. Landlord shall in no way be responsible or liable
for any failure to relet the Premises after exercising good faith efforts
therefor, but shall make every reasonable effort to mitigate its damages. No
such re-entry or taking possession of the Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant. No notice from Landlord
hereunder or under a forcible entry and detainer statute or similar law shall
constitute an election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right following any such
re-entry or reletting to exercise its right to terminate this Lease by giving
Tenant written notice to that effect, in which event the Lease will terminate
as specified in said notice.
B. In the event that Landlord does not elect to
terminate this Lease and elects to take possession as provided in subparagraph
A(2) hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly
on the days on which the Rent would have been payable hereunder if possession
had not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a
result of an uncured default by Tenant, as permitted in subparagraph A(1)
hereof, Tenant shall remain liable to Landlord for damages in an amount equal
to the Rent and other sums which would have been owed by Tenant hereunder for
the balance of the term had this Lease not been terminated, less the net
proceeds, if any, of any reletting of the Premises by Landlord subsequent to
such termination, after deducting all Landlord's expenses in connection with
such reletting, including, but without limitation, the expenses enumerated
above. Landlord shall be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
hereunder if this Lease had not been terminated, and Landlord shall be entitled
to receive the same from Tenant on each such day. Landlord agrees to use good
faith efforts to mitigate its damages in the event of Tenant's default.
Alternatively, at the option of Landlord, Landlord shall be entitled to recover
forthwith against Tenant, as damages for the loss of the bargain and not as a
penalty, an aggregate sum which, at the time of such termination of this Lease,
represents the amount, if any, by which the aggregate of the Rent and all other
sums payable by Tenant hereunder which would have accrued for the balance of
the term exceeds the aggregate rental value of the Premises (such rental value
to be computed on the basis of a tenant paying not only Rent, but also such
other charges as are required to be paid by Tenant under the terms of this
Lease) for the balance of such term, both discounted to present worth at the
Federal Reserve discount rate plus one percent (1%).
D. Suit or suits for the recovery of the amounts and
damages set forth herein may be brought by Landlord, from time to time, at
Landlord's election; and nothing herein shall be deemed to require Landlord to
await the date that this Lease or the term hereof would have expired had there
been no such default by Tenant, or no such termination, as the case may be.
Each right and remedy provided for in this Lease shall be cumulative and shall
be in addition to every other right or remedy provided for in this Lease or now
or hereafter existing at law or in equity or by statute or otherwise,
including, but not limited to, suits for injunctive relief and specific
performance. The exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease as now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies
-10-
<PAGE> 11
provided for in this Lease as now or hereafter existing at law or in equity or
by statute or otherwise. All costs incurred by Landlord in connection with
collecting any amounts and damages owed by Tenant pursuant to the provisions of
this Lease, including reasonable attorneys' fees from the date any such matter
is turned over to an attorney, shall also be recoverable by Landlord from
Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach. Notwithstanding any termination
of this Lease, the same shall continue in full force and effect as to any
provisions hereof which require observance or performance by Landlord or Tenant
subsequent to termination.
(1) Nothing contained in this Paragraph 17 shall
limit or prejudice the right of Landlord to prove and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding an amount equal to the maximum allowed by any statute or
rule of law governing such proceeding and in effect at the time when such
damages are to be proved.
(2) Notwithstanding anything in this Paragraph 17
to the contrary, any such proceeding or action involving bankruptcy,
insolvency, reorganization, arrangement, assignment for the benefit of
creditors, or appointment of a receiver or trustee, as specified in
subparagraphs 16D and 16E above, shall be considered to be an event of default
only when such proceeding, action or remedy shall be taken or brought by or
against the then holder of the leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are
not paid within 30 days after they are due shall bear interest at the rate of
10% per annum from the 31st day after the due date of such payment until
received by Landlord. Similarly, any amounts paid by Landlord to cure any
defaults of Tenant hereunder, which Landlord shall have the right, but not the
obligation to do, shall, if not repaid by Tenant within 30 days after demand by
Landlord, thereafter bear interest at the above rate until received by
Landlord.
G. Landlord hereby waives any statutory or common law
rights it may have granting Landlord a lien or the right to foreclose on the
personal property of Tenant and/or the tenant improvements installed in the
Premises by Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any
-11-
<PAGE> 12
other person, but with an obligation by Landlord to account therefor. Tenant
shall pay Landlord for all expenses incurred in connection with the disposition
of such property.
19. HOLDING OVER. Should Tenant hold over after the termination
of this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to-month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
20. BROKER'S FEE. Tenant and Landlord each represent and warrant
to the other that it has had no dealings with any person, firm, broker or
finder in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and that no broker or other person,
firm or entity is entitled to any commission or finder's fee in connection with
said transaction. Tenant and Landlord do each hereby agree to indemnify,
protect, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party, including any costs, expenses, attorneys' fees reasonably incurred with
respect thereto.
21. SURRENDER AND NOTICE. Upon the expiration or other
termination of the term of this Lease, Tenant shall promptly quit the Premises
and surrender the Premises to Landlord broom clean, in good order and
condition, except for ordinary wear and tear and loss by fire or other
casualty. Tenant may remove Tenant's Property and all of its movable furniture
and other effects and such alterations, additions and improvements that Tenant
installed pursuant to Paragraph 26 hereof. In the event that Tenant fails to
vacate the Premises in a timely manner as required, Tenant shall be responsible
to Landlord for all reasonable costs incurred by Landlord as a result of such
failure, including, but not limited to, any amounts required to be paid to
third parties who were to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in
this Lease to the contrary, Landlord represents and warrants to Tenant that it
is the sole owner in fee simple of the Leased Premises, that no mortgages,
deeds of trusts or liens or encumbrances of any nature presently encumber
Landlord's title to the Premises except as set forth on Exhibit B, attached
hereto and incorporated herein by this reference; that none of said
encumbrances shall prohibit or impede the use of the Premises as contemplated
herein or create any financial obligation on the part of Tenant except as
expressly set forth herein; that Landlord has the full right, power and
authority to enter into this Lease and make the agreements contained herein on
its part to be performed; that the execution, delivery and performance of this
Lease has been duly authorized by Landlord; that the Lease constitutes the
valid and binding obligation of Landlord, enforceable in accordance with its
terms; that the making of this Lease and the performance thereof will not
violate any present zoning laws or ordinances or the terms or provisions of any
mortgage, lease or other agreement to which Landlord is a party or under which
Landlord is otherwise bound, or which restricts Landlord in any way with
respect to the use or disposition of the Premises; that Landlord has no
knowledge of any pending zoning changes affecting the Premises; that the
Premises and Building will be kept in compliance by Landlord, at its cost, with
all applicable laws and regulations enacted from and after the date of this
Lease; that the Premises are presently zoned so as to permit the operation of
the
-12-
<PAGE> 13
Premises as contemplated in this Lease; and that the Premises presently include
full legal access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's
option, shall be subordinate to any mortgage or deed of trust (now or hereafter
placed upon the Premises), and to any and all advances made under any mortgage
or deed of trust and to all renewals, modifications, consolidations,
replacements and extensions thereof. Tenant agrees to execute such documents
as may be further required to evidence such subordination or to make this Lease
prior to the lien of any mortgage or deed of trust, as the case may be, subject
to the following sentence. Notwithstanding the foregoing, Tenant shall only be
obligated to subordinate its leasehold interest to any mortgage, deed of trust,
or ground lease now or hereafter placed upon the Premises if the holder of such
mortgage or deed of trust or the landlord under such ground lease delivers to
Tenant a non-disturbance agreement, using the form of document then being
employed by such holder provided it is reasonably acceptable to Tenant, which
will provide that Tenant, notwithstanding any default of Landlord thereunder,
shall have the right to remain in possession of the Premises described herein
in accordance with the terms and provisions of this Lease for so long as Tenant
shall not be in default under this Lease. Upon the mutual execution of this
Lease, Landlord shall deliver such a non-disturbance agreement from any present
lender having a deed of trust or mortgage on the Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act
in any matter provided for herein by and through its building manager or any
other person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be
given to Landlord hereunder shall be in writing, and shall be deemed duly
served three days after deposited in the United States Mail, with proper
postage prepaid, certified or registered, return receipt requested, addressed
to Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of
-13-
<PAGE> 14
this Lease, except that the monthly rent for each respective Option Period will
be increased in the manner set forth in subparagraph B below. Tenant will
exercise its option by giving Landlord written notice at least 180 days prior
to the expiration of the Primary Lease Term, or the expiration of the then
current Option Period, as the case may be.
B. Landlord and Tenant agree that the monthly rent for
each Option Period will be determined set forth in this paragraph. For the
first month of the first year of the subject Option Period, the Rent due
hereunder will be adjusted in accordance with the increase, if any, which has
occurred in the Consumer Price Index, Denver-Boulder area for all Urban
Consumers, U.S. City Average - All Items Index (CPI-U, 1982-84 equals 100),
published by the United States Department of Labor, Bureau of Labor Statistics
(the "INDEX") from the Commencement Date or the last day of a prior Rent
adjustment, whichever is later, to the date of the present adjustment. Such
adjusted Rent rate will be the Rent for the then Option Period. If the Index
is discontinued, Landlord and Tenant shall agree upon comparable statistics on
the cost of living for the computations under this subparagraph B, and such
statistics shall be published by an agency of the United States Government or
by a responsible financial periodical or recognized authority. If Landlord and
Tenant fail to agree on a replacement index, they will submit the question of a
replacement index to an arbitrator in accordance with the rules and regulations
of the American Arbitration Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip
the Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply
for, diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits
-14-
<PAGE> 15
or approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense,
as part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental regulations. All sign construction shall be
in accordance with such local sign ordinances and applicable governmental
regulation. Tenant shall obtain, and Landlord shall cooperate with Tenant's
applications therefor, any and all permits as are required under such
governmental regulations.
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and
hold harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's
-15-
<PAGE> 16
rental and other payment obligations under this Lease shall be abated entirely
during the period beyond the 24 hours that Tenant is required to be closed for
business or abated in proportion to the amount of lost business suffered by
Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold harmless Landlord, its directors, officers,
employees, and agents and assignees or successors to Landlord's interest in the
Premises, their directors, officers, employees, and agents from and against any
and all losses, claims, damages, penalties and liability including all
out-of-pocket litigation costs and reasonable attorneys' fees (i) including all
damages, directly or indirectly arising out of the use, generation, storage,
release or disposal of Hazardous Materials by Tenant, its agents or
contractors, and (ii) including, without limitation, the cost of any required
or necessary repair, clean-up or detoxification and the preparation of any
closure or other required plans to the full extent that such is attributable,
directly or indirectly, to the use, generation, storage, release or disposal of
Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Premises at the
time in question. In the event of any transfer or transfers of the title to
the Premises, the Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released,
from and after the date of such transfer or conveyance, from all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that the
grantee assumes the duty to perform Landlord's covenants and obligations
hereunder, and provided that any funds in which Tenant has an interest in the
hands of Landlord or the then grantor at the time of such transfer shall be
turned over to the grantee. Any amount then due and payable to Tenant by
Landlord or the then grantor under any provisions of this Lease shall be paid
to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease
shall not work a merger, and such termination or mutual cancellation shall, at
the option of Landlord, either terminate all subleases and subtenancies or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30
-16-
<PAGE> 17
days after demand, and if the other party is Tenant, such expenditures may be
offset against Rent due under this Lease but only if Landlord does not pay such
amount within such 30-day period. Notwithstanding anything in this paragraph
to the contrary, no prior notice to the non-complying party shall be necessary
if the failure to comply involves emergency repairs under this Lease reasonably
necessary for the safety and preservation of the Premises or the furnishings
and equipment located therein or the health or safety of the occupants or
employees thereof.
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter
of convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day
permitted for the performance of any act required or permitted under this Lease
falls on a Saturday, Sunday or holiday, the time for such performance will be
extended to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any
obligation of Tenant, other than the payment of Rent, which is delayed or not
performed due to acts of God, strike, riot, war, weather, failure to obtain
labor and materials at a reasonable cost, or any other reason beyond the
control of the Landlord or Tenant shall not constitute a default hereunder and
shall be performed within a reasonable time after the end of such cause for
delay or non-performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all of Tenant's income, leasehold improvements,
equipment, furniture, fixtures and personal property owned by Tenant located in
the Premises. In the event that any or all of Tenant's leasehold
-17-
<PAGE> 18
improvements, equipment, furniture, fixtures and personal property shall be
assessed and taxed with the Building, Tenant shall pay such taxes applicable to
Tenant's property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or permit them to be brought in its name; however, Landlord will not be
subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
L. Any consent of Landlord or Tenant hereunder shall not
be unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
N. This Lease will be construed and enforced in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
"LANDLORD"
By: /s/ GEORGE A. EVANS
-------------------------------------------
George Evans
Date: May 15, 1996
-----------------------------------------
Address: 8157 E. Hunters Hill Dr.
-------------------------------------
Englewood, CO 80112
----------------------------------------------
By: /s/ LARRY DAVIDSON
-------------------------------------------
Larry Davidson
Date: May 15, 1997
-----------------------------------------
Address: 9504 Southern Hills Cr.
-------------------------------------
Littleton, CO 80124
----------------------------------------------
"TENANT"
RentX Industries, Inc., a Delaware corporation
By: /s/ RICHARD M. TYLER
------------------------------------------
Its: Richard M. Tyler, President
------------------------------------------
Date: May 15, 1996
----------------------------------------
Address: 1522 Blake Street,
Denver, Colorado 80202
-18-
<PAGE> 19
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
[LEGAL DESCRIPTION OMITTED]
A-1
<PAGE> 20
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
Mortgage held by 1st Denver Mortgage, Loan No. 42440
Colorado Deed of Trust dated October 25, 1984, for the benefit of Megapolitan
Mortgage Company recorded in Book 546 at Page 826, Douglas County, Colorado, as
subsequently assigned to First Federal Savings and Loan by Assignment recorded
in Book 546 at Page 835, Douglas County, Colorado
B-1
<PAGE> 1
EXHIBIT 10.41
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made as of the 15th day of May,
1996, between George Evans and Larry Davidson (collectively, "Landlord") and
RentX Industries, Inc., a Delaware corporation ("Tenant").
1. PREMISES. In consideration of the payment of rent and the
performance by Tenant of the covenants and agreements hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
property and all improvements located thereon more particularly described on
Exhibit A, attached hereto and by this reference incorporated herein,
consisting of an approximately 5,400 rentable square foot building located at
5862 E. Evans, Denver, Colorado and a warehouse located at 2131 So. Jasmine,
Denver, Colorado (the "Building"), together with a non-exclusive license,
subject to the provisions hereof, to use all appurtenances thereto, including,
but not limited to, any parking area and access roads, and other areas related
to the use of the Building (collectively, the "Premises").
2. TERM. The term of this Lease shall commence as of May 15,
1996 (the "Commencement Date"), and terminate on May 14, 1999, unless sooner
terminated pursuant to this Lease. (Said three-year term is hereinafter
referred to as the "Primary Lease Term".)
3. RENT. For the Primary Lease Term under this Lease, Tenant
shall pay to Landlord the annual sum of $38,907.48 (the "Rent") which sum shall
be payable in twelve equal monthly installments of $3,242.29 commencing on the
Commencement Date, and continuing thereafter on the first day of each
succeeding calendar month. The installments of Rent for any partial month of
the term hereof shall be prorated based upon the number of days during such
month. All Rent or other rentals or sums due hereunder shall be paid in
advance without notice at the office of Landlord or to such other person or at
such other place as Landlord may designate in writing.
4. PAYMENT OF OPERATING EXPENSES. Tenant understands that this
is a "triple net" lease to Landlord, and Tenant shall be responsible for timely
payment of all Operating Expenses, defined below. The parties agree that
Landlord shall have no obligation regarding payment of all or any portion of
the Operating Expenses, except as otherwise set forth below. For purposes of
this Lease, "Operating Expenses" shall mean all operating expenses of any kind
or nature which are necessary, ordinary, or customarily incurred in connection
with the operation and maintenance or repair of all or a portion of the
Building and Premises. Operating Expenses shall also include:
A. All real property taxes and assessments levied
against the Premises by any governmental or quasi-governmental authority. The
foregoing shall include any taxes, assessments, surcharges, or service or other
fees of a nature not presently in effect which shall hereafter be levied on the
Premises as a result of the use, ownership or operation of the Premises or for
any other reason, whether in lieu of or in addition to any current real estate
taxes and
<PAGE> 2
assessments. Expenses incurred by Tenant for tax consultants and in contesting
the amount or validity of any such taxes or assessments shall be included in
such computations. Assessments shall include any and all so-called special
assessments, license tax, business license fee, business license tax,
commercial rental tax, levy, charge or tax, imposed by any authority having the
direct power to tax, including any city, county, state or federal government,
or any school, agricultural, lighting, water, drainage or other improvement or
special district thereof, against the Premises, or the Building, or against any
legal or equitable interest of Landlord therein. Taxes and assessment shall
exclude Landlord's income taxes or similar taxes. Any special assessments will
be amortized over the maximum period allowed by law or applicable tax rules,
whichever is longer, and Operating Expenses will include only the prorated and
amortized amount.
B. Insurance premiums, including fire and all-risk
coverage; public liability insurance; and any other insurance carried by Tenant
or Landlord relating to this Lease. All such insurance shall be in such
amounts as set forth in this Lease.
C. Any capital improvements, repairs and replacements
made in or to the Premises. The cost of any capital improvement shall be
amortized over the useful life of such item and Tenant will pay its percentage
share (which shall be determined by dividing the square footage of the Building
by the square footage of all buildings benefitted by such improvement,
including the Building) of the annual amortized amount.
Notwithstanding the foregoing, Operating Expenses shall not
include, and Landlord shall be solely responsible for the payment of:
(i) Costs of capital improvements, repairs and
replacements made in or to the Premises in order to bring the Premises into
compliance with existing laws;
(ii) Costs of repairs or other work occasioned by
fire, windstorm or other insured casualty;
(iii) Costs of repairs or rebuilding necessitated
by condemnation;
(iv) Any interest on borrowed money or debt
amortization;
(v) Depreciation of the Building; and
(vi) Fines, penalties or other surcharges or
extraordinary expenses incurred by Landlord as a result of Landlord's failure
to pay taxes, assessments, insurance premiums or other items of Operating
Expenses on a timely basis, unless the failure is due to a default by Tenant
under this Lease.
Annual Operating Expenses shall be paid in equal monthly installments
due in the same manner as Rent. Prior to the determination of actual Operating
Expenses, Landlord may
-2-
<PAGE> 3
estimate the amount of Operating Expenses for the then current year based on
the most currently available information to Landlord. Upon the determination
of the actual Operating Expenses for such year, Landlord shall deliver to
Tenant a comparative statement which shall show a comparison of the estimated
Operating Expenses to the actual Operating Expenses for the applicable year.
If the estimated Operating Expenses exceed the actual Operating Expenses,
Landlord shall immediately remit such excess to Tenant. If the estimated
Operating Expenses are less than the actual Operating Expenses, Tenant shall
immediately pay such deficiency to Landlord.
Tenant and its agents shall have 90 days after receiving any statement
from Landlord of any Operating Expenses paid by Landlord to audit Landlord's
books and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses or the amount thereof applicable to Tenant, Landlord shall
promptly credit to Tenant the amount of any overpayment by Tenant and if such
overpayment is 3% or more of the actual amount attributable to Tenant, Landlord
shall also pay Tenant interest on such amounts equal to 6% per year for the
respective period of the overpayment. If Tenant does not proceed with an audit
within the 90-day period, then Tenant shall be deemed to have accepted as final
the amount shown owing on any such statement. If Tenant's audit of the books
and records shows that Landlord overstated the sum owed by Tenant by an amount
equal to 3% or more of the actual costs and taxes payable by Tenant, then
Landlord shall pay to Tenant, Tenant's reasonable costs of conducting the
audit. This provision shall survive the termination or expiration of this
Lease.
Tenant will have the right to contest the amount or validity, in whole
or in part, of any tax that Tenant is required to pay, in whole or in part, by
appropriate proceedings diligently conducted in good faith, only after paying
such tax or posting such security that Landlord reasonably requires in order to
protect the Leased Premises against loss or forfeiture. Upon the conclusion of
any such protest proceedings, Tenant will pay its share of the tax, as finally
determined, in accordance with this Lease the payment of which tax may have
been deferred during the prosecution of the proceedings, together with any
costs, fees, interest, penalties, or other related liabilities. Landlord will
not be required to join in any contest or proceedings unless the provisions of
any law or regulations then in effect require that the proceedings be brought
by or in the name of Landlord. In that event, Landlord will join in the
proceedings or permit them to be brought in its name; however, Landlord will
not be subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
-3-
<PAGE> 4
5. CHARACTER OF OCCUPANCY.
A. The Premises are to be used for machinery and
equipment rental, repairs, sales, refueling and storage; merchandise sale and
warehousing; any other rental type of business; or for any other purpose
allowed by law and reasonably approved by Landlord.
B. Tenant shall not commit waste or suffer or permit
waste to be committed, nor shall Tenant permit any nuisance in or about the
Premises.
C. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or
hereafter enacted or promulgated.
D. Landlord agrees to not initiate or participate in any
zoning change affecting the Premises without first obtaining the prior written
consent of Tenant, which may be withheld in Tenant's sole discretion.
6. SERVICES AND UTILITIES.
A. Tenant agrees that Landlord shall not be liable for
failure to supply any heating, air conditioning, electrical, janitorial,
lighting or other services. In the event of any interruption, reduction or
discontinuance of services (either temporarily or permanently), Landlord shall
not be liable for damages to persons or property as a result thereof, nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant. Notwithstanding the foregoing, if any such services are not supplied
for a period exceeding three consecutive business days, and as a result of such
lack of service, Tenant is unable to use the Premises for its intended use,
Tenant shall be entitled to an abatement of Rent and other charges due
hereunder, beginning with the fourth day, in such amount, not to exceed the per
diem amount of such charges, as will fairly compensate Tenant for the
inconvenience and loss of business resulting from the lack of such services.
If an interruption of services which materially affects Tenant's use and
enjoyment of the Premises continues for more than 30 consecutive calendar days,
Tenant shall have the right to terminate this Lease upon written notice to
Landlord, and shall surrender the Premises to Landlord.
B. Tenant shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon.
7. QUIET ENJOYMENT. Landlord agrees to warrant and defend Tenant
in the quiet enjoyment and possession of the Premises during the term of this
Lease so long as Tenant complies with the provisions hereof.
-4-
<PAGE> 5
8. MAINTENANCE, REPAIRS, ALTERATIONS AND ADDITIONS.
A. Maintenance and Repairs:
(1) Except for matters specified under Paragraph
4 above and Paragraph 8A(3) below as being Landlord's obligation, Tenant shall,
at Tenant's sole cost and expense, maintain the Premises in good order,
condition and repair, ordinary wear and tear and damage by fire and casualty
excepted, including: the interior surfaces of the ceilings, walls and floors;
all doors and interior windows; furnishings installed within the Premises; all
equipment installed by or at the expense of Tenant; and all plumbing, heating,
ventilating, electrical and lighting facilities and fixtures; all landscaping,
parking lots, fences and signs located within the Premises.
(2) In the event that Tenant fails to maintain
the Premises in good order, condition and repair as required under this Lease,
Landlord shall give Tenant prior written notice to do such acts as are required
to so maintain the Premises. In the event that Tenant fails to commence such
work within 30 days after written demand by Landlord, and diligently prosecute
it to completion, then Landlord shall have the right, but shall not be
obligated, to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Landlord shall have no liability
to Tenant for any reasonable damage, inconvenience or interference with
Tenant's use of the Premises as a result of performing any such work.
(3) Landlord will maintain, repair and replace
all structural components of the Premises and the roof of the Building, and if
a repair, replacement or alteration or other change would be considered a
capital improvement or replacement to the Premises under generally accepted
accounting principles, then it shall be Landlord's responsibility to promptly
make and pay for such repair, replacement, alteration or other change. The
cost of any such capital improvement shall be amortized over the useful life of
such item and Tenant agrees to pay its percentage share (which shall be
determined by dividing the square footage of the Building by the square footage
of all buildings benefitted by such improvement, including the Building) of the
annual amortized amount. Such payment will be made by Tenant as set forth in
Paragraph 4 above. Landlord shall do all acts required to comply with all
applicable laws, ordinances, regulations and rules of any public authority
relating to the Premises, except to the extent that the foregoing are solely a
result of Tenant's use of the Premises. Tenant shall do all acts required to
comply with all applicable laws, ordinances, regulations and rules of any
public authority relating solely to Tenant's use of the Premises. If a repair
is required as a result of Tenant's negligence and such repair cost is not
covered by insurance proceeds, Tenant will pay for the cost of such repair.
Notwithstanding anything in this Lease to the contrary, in the event
that the need for repairs or the making of repairs (or both) which Landlord is
obligated to effect at Landlord's expense renders a material portion of the
Premises unusable for more than three consecutive business days, then Tenant
shall be entitled to an abatement of rent commencing with the fourth
-5-
<PAGE> 6
business day that the same are unusable; provided, however, that Tenant shall
not be entitled to a pro rata abatement of rent under the foregoing due to
unusability (i) caused directly or indirectly by any act or omission of Tenant
or any of Tenant's servants, employees, agents, contractors, visitors or
licensees, (ii) where Tenant makes a decoration, alteration, improvement or
addition which directly causes such unusability, or (iii) where the repair in
question is one which Tenant is obligated to furnish under the provisions of
this Lease.
B. Alterations and Additions.
(1) Tenant shall make no alterations, additions
or improvements (other than any non-structural change or decorating alteration
to the Premises or any part thereof) in excess of $25,000.00, without obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Landlord may condition its consent to any alterations,
additions or improvements upon such reasonable requirements as Landlord may
deem necessary in its reasonable discretion, including without limitation the
manner in which the work is done and the right to approve the contractor by
whom the work is to be performed.
(2) All items installed in the Premises by Tenant
and all alterations and additions made to the Premises by Tenant and all
improvements and fixtures located on the Premises, other than the structural
components of the Building, are the property of Tenant (collectively, "Tenant's
Property") and may be removed by Tenant at the end of the term of this Lease.
Tenant agrees to restore any damage to the building as a result of the removal
of Tenant's Property.
(3) If Tenant performs any work requiring
Landlord's consent prior to the commencement of any such work, Tenant shall
upon request deliver to Landlord, certificates issued by insurance companies
qualified to do business in the state where the Premises are located,
evidencing that Workmen's Compensation, general liability insurance and
property damage insurance, all in amounts, with companies and on forms
reasonably satisfactory to Landlord, are in full force and effect and
maintained by all contractors and subcontractors engaged by Tenant to perform
such work. All such policies shall name Landlord as an additional insured.
Each such certificate shall provide that the insurance policy may not be
canceled or modified without 10 days' prior written notice to Landlord.
Further, Tenant shall permit Landlord to post notices in the Premises in
locations which will be visible by persons performing any work on the Premises
stating that Landlord is not responsible for the payment for such work and
setting forth such other information as Landlord may deem necessary.
9. ENTRY BY LANDLORD. Landlord and its agents shall have the
right to enter the Premises at all reasonable times after 24 hours' prior
written notice, except in emergencies, for the purpose of: (1) examining or
inspecting the same; (2) showing the same to prospective purchasers or tenants
of the Building during the last six months of the Primary Lease Term or during
the last six months of any option period, if this Lease is extended; provided,
however, if such prospective purchaser or tenant is viewed by Tenant as a
"competitor" in the industry, then
-6-
<PAGE> 7
Landlord will use best efforts to restrict such prospective purchaser's or
tenant's access to areas where Tenant has confidential information (such
restricted access may mean certain areas may not be available for view or
require that such party be accompanied by a representative of Tenant when
entering such areas); and (3) making such alterations, repairs, improvements or
additions to the Building which are the obligation of Landlord, in a manner
which will not unreasonably interfere with Tenant's use of the Premises. If
Tenant shall not be personally present to open and permit entry into the
Premises at any time when such entry by Landlord is necessary or permitted
hereunder, Landlord may enter by means of a master key without liability to
Tenant, except for any failure to exercise due care for Tenant's property, and
without affecting this Lease. Such entry shall not be construed as a
manifestation by the Landlord of an intent to terminate this Lease. Tenant
shall not, without the prior consent of Landlord, change the locks or install
additional locks on any entry door or doors to the Building.
10. MECHANICS' LIENS. Tenant shall pay or cause to be paid all
costs for work done by Tenant or caused to be done by Tenant on the Premises of
a character which may result in liens on Landlord's interest therein. Tenant
will keep the Premises free and clear of all mechanics' liens and other liens
on account of work done or claimed to have been done for Tenant or persons
claiming under it. Tenant hereby agrees to indemnify Landlord for, save
Landlord harmless from, and defend Landlord against all liability, loss,
damage, costs or expenses, including attorneys' fees and interest incurred on
account of any claims of any nature whatsoever, including lien claims of
laborers, materialmen, or others for work performed for, or for materials or
supplies furnished to Tenant or persons claiming under Tenant. Should any
liens be filed or recorded against the Premises for work or materials supplied
to Tenant, or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be removed of record within 30 days after
notice from Landlord. If Tenant desires to contest any claim of lien, Tenant
shall furnish to Landlord adequate security in the amount of 100% of the amount
of the claim, plus estimated costs and interest, and, if a final judgment
establishing the validity or existence of any lien for any amount is entered,
Tenant shall pay and satisfy the same at once. If Tenant shall be in default
in paying any charge for which a mechanic's lien or suit to foreclose the lien
has been recorded or filed, and shall not have caused the same to be released
of record or shall not have given Landlord security as aforesaid, Landlord may
(but without being required to do so) pay such lien or claim and any costs or
obtain a bond or title insurance protection against such lien, and the amount
so paid, together with reasonable attorneys' fees incurred in connection
therewith, shall be immediately due from Tenant to Landlord.
11. DAMAGE TO PREMISES, INJURY TO PERSONS.
A. Tenant hereby indemnifies and agrees to hold Landlord
harmless from and to defend Landlord against any and all claims of liability
for any injury (including death) or damage to any person or property whatsoever
occurring in, on or about the Premises or any part thereof, when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Tenant, its agents, contractors, or employees. Tenant
further indemnifies and agrees to hold Landlord harmless from and to defend
Landlord against any and
-7-
<PAGE> 8
all claims arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease, or
arising from any act or negligence of Tenant, or any of its agents,
contractors, or employees, and from and against all costs, reasonable
attorneys' and legal assistants' fees and liabilities incurred as a result of
any such claim or any action or proceeding brought thereon. Tenant shall not
be liable to Landlord for any damage by or from any act or negligence of any
owner or occupant of adjoining or contiguous property. Tenant agrees to pay
for all damage to the Premises caused by Tenant's misuse of the Premises.
Tenant shall not be required to indemnify Landlord for Landlord's own
negligence or misconduct or the negligence or misconduct of Landlord's agents,
contractors or employees. Landlord hereby indemnifies and agrees to hold
Tenant harmless from and to defend Tenant against, any and all claims of
liability for any injury (including death) or damage to any person or property
whatsoever occurring in or about the Building, or Premises when such injury or
damage is caused in whole or in part by the act, neglect, fault or omission to
act on the part of Landlord, its agents, contractors, or employees. Landlord
further indemnifies and agrees to hold Tenant harmless from, and to defend
Tenant against any and all claims arising from any breach or default in
performance of any obligation on Landlord's part to be performed under the
terms of this Lease, or arising from any act or negligence of Landlord, or any
of its agents, contractors or employees, and from and against all costs,
attorneys' and legal assistants' fees, expenses and liabilities incurred as a
result of any such claim or any action or proceeding brought thereon. Landlord
shall not be liable to Tenant for any damage by or from any act or negligence
of any other occupant of the Building, or by any owner or occupant of adjoining
or contiguous property. Landlord shall not be required to indemnify Tenant for
Tenant's own negligence or misconduct or the negligence or misconduct of
Tenant's agents, contractors or employees.
B. Neither Landlord nor its agents shall be liable for
any damage to property entrusted to Landlord, its agents or employees, or the
building manager, if any, nor for the loss or damage to any property by theft
or otherwise, by any means whatsoever, nor for any injury (including death) or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface, or from any other place, or resulting from dampness
or any other cause whatsoever; provided, however, that nothing contained herein
shall be construed to relieve Landlord from liability for any personal injury
resulting from its negligence or that of its agents, servants or employees or
to disclaim Landlord's responsibility for latent defects in the Premises or the
Building. Landlord or its agents shall not be liable for interference with the
light, view or other incorporeal hereditaments.
C. In case any action or proceeding is brought against
Landlord by reason of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act or negligence of Tenant, or of its
agents or employees, Tenant upon reasonable prior written notice from Landlord,
shall defend the same at Tenant's expense. In case any action or proceeding is
brought against Tenant by reason of any obligation on Landlord's part to be
performed under the terms of this Lease, or arising from any act or negligence
of Landlord, or
-8-
<PAGE> 9
of its agents, or employees, Landlord, upon reasonable prior written notice
from Tenant, shall defend the same at Landlord's expense.
D. Tenant agrees to carry and maintain general liability
insurance, including bodily injury and property damage insurance, such
insurance to afford protection to the limit of not less than $1,000,000.00 for
any occurrence. All such insurance shall be procured from a responsible
insurance company or companies authorized to do business in the state where the
Premises are located, and shall be otherwise reasonably satisfactory to
Landlord. All such policies shall provide that the same may not be canceled or
altered except upon 10 days' prior written notice to Landlord. Tenant shall
provide certificate(s) of such insurance to Landlord upon request from time to
time, and such certificate(s) shall disclose that such insurance names Landlord
as an additional insured, in addition to the other requirements set forth
herein.
12. INSURANCE, CASUALTY AND RESTORATION OF PREMISES.
A. Tenant shall maintain "all risk" property insurance
in the amount of the full replacement value of the Building with reasonable
adjustments for inflation from such companies and on such terms and conditions
as Landlord from time to time reasonably deems appropriate, and Tenant shall
maintain "all risk" property insurance, in the amount of the full replacement
value, on Tenant's trade fixtures, furniture, furnishings and other property of
Tenant within the Premises, including the property to be installed by Tenant
pursuant to Paragraph 26 below (collectively, "Tenant's Property").
B. In the event that the Premises is damaged by fire or
other insured casualty, Tenant shall deliver the insurance proceeds received
for the Building, excluding the amounts received for Tenant's Property and the
amount of any deductible paid by Tenant, to Landlord, and the damage shall be
repaired by and at the expense of Landlord, regardless of the extent of
available insurance proceeds, provided that such repairs and restoration can,
in Landlord's reasonable opinion, be made within 120 days after the occurrence
of such damage, and any excess proceeds shall be returned to Tenant within five
days after completion of such reconstruction or repair. Until such repairs and
restoration are completed the Rent shall be abated from the date of the
casualty in proportion to the part of the Premises which is unusable by Tenant
in the conduct of its business. Landlord agrees to notify Tenant within 30
days after such casualty if it estimates that it will be unable to repair and
restore the Premises within said 120-day period. Such notice will set forth
the approximate length of time Landlord estimates will be required to complete
such repairs and restoration. If Landlord estimates it cannot make such
repairs and restoration within said 120-day period, then either party, by
written notice to the other, may cancel this Lease as of the date of occurrence
of such damage, provided that such notice is given to the other party within 15
days after Landlord notifies Tenant of the estimated time for completion of
such repairs and restoration. If no notice is given by either party to
terminate this Lease, this Lease shall continue in effect and the Rent shall be
apportioned in the manner provided above. Landlord agrees that if Landlord
exercises the foregoing termination option, Tenant shall have the right to
reinstate the Lease by giving Landlord written notice of such reinstatement
within
-9-
<PAGE> 10
15 days after receipt of Landlord's termination notice, and upon such
reinstatement, Landlord shall deliver all insurance proceeds to Tenant, who
will commence and complete such repair and restoration work.
C. Landlord and Tenant hereby waive any and all rights
of recovery against one another and their officers, agents and employees for
damage to real or personal property occurring as a result of the use or
occupancy of the Premises to the extent of insurance coverage. Landlord and
Tenant each agree that all policies of insurance obtained by them pursuant to
the provisions of this Lease shall contain endorsements or provisions waiving
the insurer's rights of subrogation with respect to claims against the other,
and each shall notify its insurance companies of the existence of the waiver
and indemnity provisions set forth in this Lease.
13. CONDEMNATION. If any portion of the Premises which materially
affects Tenant's ability to continue to use the remainder thereof for the
purposes set forth herein, or which renders the Premises untenantable, is taken
by right of eminent domain or by condemnation, or is conveyed in lieu of any
such taking, then this Lease may be terminated at the option of Tenant. Such
option shall be exercised by Tenant giving notice to Landlord of such
termination within 30 days after such taking or conveyance; whereupon this
Lease shall forthwith terminate and the Rent shall be duly apportioned as of
the date of such taking or conveyance. Upon such termination, Tenant shall
surrender to Landlord the Premises and all of Tenant's interest therein under
this Lease, and Landlord may re-enter and take possession of the Premises or
remove Tenant therefrom. If any portion of the Premises is taken which does
not materially affect Tenant's right to use the remainder of the Premises for
the purposes set forth herein, this Lease shall continue in full force and
effect, and Landlord shall promptly perform any repair or restoration work
required to restore the Premises, insofar as possible, to former condition, and
the rental owing hereunder shall be adjusted, if necessary, in such just manner
and proportion as the part so taken (and its effect on Tenant's ability to use
the remainder of the Premises) bears to the whole. In the event of taking or
conveyance as described herein, Landlord shall receive the award or
consideration for the lands and improvements so taken; provided, however, that
Landlord shall have no interest in any award made for Tenant's loss of business
or value of its leasehold interest or for the taking of Tenant's fixtures or
property, or for Tenant's relocation expenses. Landlord and Tenant shall
cooperate with one another in making claims for condemnation awards.
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not permit any part of the Premises to
be used or occupied by any persons other than Tenant and the employees of
Tenant, nor shall Tenant permit any part of the Premises to be used or occupied
by any licensee or concessionaire, or permit any persons to be upon the
Premises other than Tenant, and employees, customers and others having lawful
business with Tenant without the prior written consent of Landlord, not to be
unreasonably withheld or delayed. Tenant shall have the right to assign or
part with the possession of the
-10-
<PAGE> 11
Premises without the prior written consent of Landlord, provided that such
assignment or sublease is to an entity (i) controlled by, controlling, or under
common control with Tenant or (ii) which acquires, by merger or otherwise,
substantially all of the assets or business of Tenant. Tenant may collaterally
assign this Lease to any lender of Tenant without obtaining Landlord's consent
thereto.
B. Tenant may sublet all or any part of the Premises to
any subtenant or subtenants whose use of the Premises is consistent with the
requirements of this Lease, upon the reasonable approval of Landlord. Tenant
shall provide Landlord with a copy of each executed sublease agreement. No
sublease shall relieve Tenant from its obligations under this Lease.
15. ESTOPPEL CERTIFICATE. Tenant and Landlord agree, at any time
and from time to time, upon not less than 10 days' prior written request by the
other party, to execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that it is in full force and
effect as modified, and stating the modifications), that there have been no
defaults thereunder by Landlord or Tenant (or if there have been defaults,
setting forth the nature thereof), the date to which the Rent and other charges
have been paid in advance, if any, and such other matters as are reasonably
requested by the requesting party, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser or lender on all or any portion of the requesting party's interest
herein, or a holder of any mortgage or deed of trust encumbering the Premises.
Notwithstanding the foregoing, the parties agree that Tenant's obligation to
deliver estoppel certificates under this Paragraph 15 shall be conditioned upon
receipt by Tenant of a nondisturbance agreement pursuant to the provisions of
Paragraph 23 below.
16. DEFAULT. The happening of any one or more of the following
events shall constitute an "event of default":
A. Tenant shall fail to pay when due any installment of
Rent, and such default shall continue for 10 days after receipt of written
notice from Landlord;
B. This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party
except in a manner permitted herein;
C. This Lease or the Premises or any part thereof shall
be taken upon execution or by other process of law directed against Tenant, or
shall be taken upon or subject to any attachment at the instance of any
creditor or claimant against Tenant, and said attachment shall not be
discharged or disposed of within 30 days after the levy thereof;
D. Tenant shall file a petition in bankruptcy or
insolvency or for reorganization or arrangement under the bankruptcy laws of
the United States or under any
-11-
<PAGE> 12
insolvency act of any state, or shall voluntarily take advantage of any such
law or act by answer or otherwise, or shall be dissolved, or shall make an
assignment for the benefit of creditors;
E. Involuntary proceedings under any such bankruptcy law
or insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee of all or substantially all of the property of
Tenant shall be appointed, and such proceeding shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment; or
F. Tenant shall fail to perform any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be
performed, and such non-performance shall continue for a period of 30 days
after written notice thereof by Landlord to Tenant; provided that if the
curative action to be taken by Tenant cannot, for reasons beyond Tenant's
reasonable control be completed within 30 days, then so long as Tenant promptly
initiates and diligently provides such cure, Tenant will not be deemed in
default.
17. REMEDIES FOR DEFAULT.
A. Upon the happening of any event of default as
hereinabove described, Landlord shall have the right, at its election, then or
at any time thereafter and while any such event of default shall continue,
either:
(1) To give Tenant written notice of intention to
terminate this Lease on the date of giving notice or on any later date
specified therein, whereupon Tenant's right to possession of the Premises shall
cease and this Lease shall be terminated, except as to Tenant's liability, as
if the expiration of the term fixed in such notice were the end of the term
herein originally demised; or
(2) To re-enter and take possession of the
Premises and repossess the same as of Landlord's former estate, and expel
Tenant and those claiming through or under Tenant, and remove the effects of
both, and without prejudice to any remedies for arrears of Rent. Should
Landlord elect to re-enter as provided in this subparagraph (2), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord shall without terminating this Lease, use
reasonable efforts to relet the Premises in Landlord's or Tenant's name, but
for the account of Tenant, for such term or terms (which may be greater or less
than the period which would otherwise have constituted the balance of the term
of this Lease) and on such conditions and upon such other terms as Landlord may
reasonably determine, and Landlord may collect and receive the rents therefor.
Landlord shall in no way be responsible or liable for any failure to relet the
Premises after exercising good faith efforts therefor, but shall make every
reasonable effort to mitigate its damages. No such re-entry or taking
possession of the Premises by Landlord shall be construed as an election on
Landlord's part to terminate this Lease unless a written notice of such
intention is given to Tenant. No notice from Landlord hereunder or under a
forcible entry and detainer statute or similar law shall constitute an election
-12-
<PAGE> 13
by Landlord to terminate this Lease unless such notice specifically so states.
Landlord reserves the right following any such re-entry or reletting to
exercise its right to terminate this Lease by giving Tenant written notice to
that effect, in which event the Lease will terminate as specified in said
notice.
B. In the event that Landlord does not elect to
terminate this Lease and elects to take possession as provided in subparagraph
A(2) hereof, Tenant shall pay to Landlord (i) the Rent and other sums as herein
provided, which would be payable hereunder if such repossession had not
occurred, less (ii) the net proceeds, if any, of any reletting of the Premises
after deducting Landlord's reasonable expenses in connection with such
reletting, including, but without limitation, all repossession costs, brokerage
commissions, reasonable attorneys' fees, alteration and repair costs and
expenses of preparation for such reletting. If, in connection with any
reletting, the new lease term extends beyond the existing term, or the Premises
covered thereby include other premises not part of the Premises, a fair
apportionment of the Rent received from such reletting and the expenses
incurred in connection therewith will be made in determining the net proceeds
from such reletting. Any Rent concessions will be apportioned over the term of
the new lease. Tenant shall pay such Rent and other sums to Landlord monthly
on the days on which the Rent would have been payable hereunder if possession
had not been retaken, and Landlord shall be entitled to receive the same from
Tenant on each such day.
C. In the event that this Lease is terminated as a
result of an uncured default by Tenant, as permitted in subparagraph A(1)
hereof, Tenant shall remain liable to Landlord for damages in an amount equal
to the Rent and other sums which would have been owed by Tenant hereunder for
the balance of the term had this Lease not been terminated, less the net
proceeds, if any, of any reletting of the Premises by Landlord subsequent to
such termination, after deducting all Landlord's expenses in connection with
such reletting, including, but without limitation, the expenses enumerated
above. Landlord shall be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
hereunder if this Lease had not been terminated, and Landlord shall be entitled
to receive the same from Tenant on each such day. Landlord agrees to use good
faith efforts to mitigate its damages in the event of Tenant's default.
Alternatively, at the option of Landlord, Landlord shall be entitled to recover
forthwith against Tenant, as damages for the loss of the bargain and not as a
penalty, an aggregate sum which, at the time of such termination of this Lease,
represents the amount, if any, by which the aggregate of the Rent and all other
sums payable by Tenant hereunder which would have accrued for the balance of
the term exceeds the aggregate rental value of the Premises (such rental value
to be computed on the basis of a tenant paying not only Rent, but also such
other charges as are required to be paid by Tenant under the terms of this
Lease) for the balance of such term, both discounted to present worth at the
Federal Reserve discount rate plus one percent (1%).
D. Suit or suits for the recovery of the amounts and
damages set forth herein may be brought by Landlord, from time to time, at
Landlord's election; and nothing herein shall be deemed to require Landlord to
await the date that this Lease or the term hereof would
-13-
<PAGE> 14
have expired had there been no such default by Tenant, or no such termination,
as the case may be. Each right and remedy provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise, including, but not limited to, suits for injunctive relief and
specific performance. The exercise or beginning of the exercise by Landlord of
any one or more of the rights or remedies provided for in this Lease as now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease as now or hereafter existing at
law or in equity or by statute or otherwise. All costs incurred by Landlord in
connection with collecting any amounts and damages owed by Tenant pursuant to
the provisions of this Lease, including reasonable attorneys' fees from the
date any such matter is turned over to an attorney, shall also be recoverable
by Landlord from Tenant.
E. No failure by Landlord to insist upon the strict
performance of any agreement, term, covenant or condition hereof or to exercise
any right or remedy consequent upon a breach thereof, and no acceptance of full
or partial Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or any such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease; but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach. Notwithstanding any termination
of this Lease, the same shall continue in full force and effect as to any
provisions hereof which require observance or performance by Landlord or Tenant
subsequent to termination.
(1) Nothing contained in this Paragraph 17 shall
limit or prejudice the right of Landlord to prove and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding an amount equal to the maximum allowed by any statute or
rule of law governing such proceeding and in effect at the time when such
damages are to be proved.
(2) Notwithstanding anything in this Paragraph 17
to the contrary, any such proceeding or action involving bankruptcy,
insolvency, reorganization, arrangement, assignment for the benefit of
creditors, or appointment of a receiver or trustee, as specified in
subparagraphs 16D and 16E above, shall be considered to be an event of default
only when such proceeding, action or remedy shall be taken or brought by or
against the then holder of the leasehold estate under this Lease.
F. Any rents or other amounts owing hereunder which are
not paid within 30 days after they are due shall bear interest at the rate of
10% per annum from the 31st day after the due date of such payment until
received by Landlord. Similarly, any amounts paid by Landlord to cure any
defaults of Tenant hereunder, which Landlord shall have the right, but
-14-
<PAGE> 15
not the obligation to do, shall, if not repaid by Tenant within 30 days after
demand by Landlord, thereafter bear interest at the above rate until received
by Landlord.
G. Landlord hereby waives any statutory or common law
rights it may have granting Landlord a lien or the right to foreclose on the
personal property of Tenant and/or the tenant improvements installed in the
Premises by Tenant.
H. If Landlord is in default in the performance of its
obligations under this Lease and such default is not cured within 30 days after
written notice thereof, Tenant may at its option upon 10 days' prior written
notice to Landlord terminate this Lease, or may incur any expense and deduct
the monies owed from Rent and any other amounts due under this Lease.
Landlord's performance of each and every one of its conditions, covenants and
agreements in this Lease is a condition precedent to Landlord's right to
enforce this Lease.
18. REMOVAL OF TENANT'S PROPERTY. All trade fixtures, equipment,
movable furniture, Tenant's Property and personal effects of Tenant not removed
from the Premises upon the vacation or abandonment thereof or upon the
termination of this Lease for any cause whatsoever or after the expiration of
the term hereof will be stored by Landlord at Tenant's expense, and if after 30
days' written notice from Landlord to Tenant, Tenant does not claim such
property, it shall be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant or any other person, but with an obligation by
Landlord to account therefor. Tenant shall pay Landlord for all expenses
incurred in connection with the disposition of such property.
19. HOLDING OVER. Should Tenant hold over after the termination
of this Lease and continue to pay Rent, and should Landlord accept such Rent,
without any express written agreement as to such holding over, Tenant shall
become a Tenant from month-to-month only upon each and all of the terms herein
provided as may be applicable to such month-to-month tenancy, but any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rentals equal to 125% of the amount of
Rent provided in Paragraph 3 above.
20. BROKER'S FEE. Tenant and Landlord each represent and warrant
to the other that it has had no dealings with any person, firm, broker or
finder in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and that no broker or other person,
firm or entity is entitled to any commission or finder's fee in connection with
said transaction. Tenant and Landlord do each hereby agree to indemnify,
protect, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party, including any costs, expenses, attorneys' fees reasonably incurred with
respect thereto.
-15-
<PAGE> 16
21. SURRENDER AND NOTICE. Upon the expiration or other
termination of the term of this Lease, Tenant shall promptly quit the Premises
and surrender the Premises to Landlord broom clean, in good order and
condition, except for ordinary wear and tear and loss by fire or other
casualty. Tenant may remove Tenant's Property and all of its movable furniture
and other effects and such alterations, additions and improvements that Tenant
installed pursuant to Paragraph 26 hereof. In the event that Tenant fails to
vacate the Premises in a timely manner as required, Tenant shall be responsible
to Landlord for all reasonable costs incurred by Landlord as a result of such
failure, including, but not limited to, any amounts required to be paid to
third parties who were to have occupied the Premises.
22. REPRESENTATIONS AND WARRANTIES. Notwithstanding anything in
this Lease to the contrary, Landlord represents and warrants to Tenant that it
is the sole owner in fee simple of the Leased Premises, that no mortgages,
deeds of trusts or liens or encumbrances of any nature presently encumber
Landlord's title to the Premises except as set forth on Exhibit B, attached
hereto and incorporated herein by this reference; that none of said
encumbrances shall prohibit or impede the use of the Premises as contemplated
herein or create any financial obligation on the part of Tenant except as
expressly set forth herein; that Landlord has the full right, power and
authority to enter into this Lease and make the agreements contained herein on
its part to be performed; that the execution, delivery and performance of this
Lease has been duly authorized by Landlord; that the Lease constitutes the
valid and binding obligation of Landlord, enforceable in accordance with its
terms; that the making of this Lease and the performance thereof will not
violate any present zoning laws or ordinances or the terms or provisions of any
mortgage, lease or other agreement to which Landlord is a party or under which
Landlord is otherwise bound, or which restricts Landlord in any way with
respect to the use or disposition of the Premises; that Landlord has no
knowledge of any pending zoning changes affecting the Premises; that the
Premises and Building will be kept in compliance by Landlord, at its cost, with
all applicable laws and regulations enacted from and after the date of this
Lease; that the Premises are presently zoned so as to permit the operation of
the Premises as contemplated in this Lease; and that the Premises presently
include full legal access to one or more dedicated public rights-of-way.
23. SUBORDINATION AND ATTORNMENT. This Lease, at Landlord's
option, shall be subordinate to any mortgage or deed of trust (now or hereafter
placed upon the Premises), and to any and all advances made under any mortgage
or deed of trust and to all renewals, modifications, consolidations,
replacements and extensions thereof. Tenant agrees to execute such documents
as may be further required to evidence such subordination or to make this Lease
prior to the lien of any mortgage or deed of trust, as the case may be, subject
to the following sentence. Notwithstanding the foregoing, Tenant shall only be
obligated to subordinate its leasehold interest to any mortgage, deed of trust,
or ground lease now or hereafter placed upon the Premises if the holder of such
mortgage or deed of trust or the landlord under such ground lease delivers to
Tenant a non-disturbance agreement, using the form of document then being
employed by such holder provided it is reasonably acceptable to Tenant, which
will provide that Tenant, notwithstanding any default of Landlord thereunder,
shall have the right to remain in possession of the Premises described herein
in accordance with the terms and provisions of this Lease for so
-16-
<PAGE> 17
long as Tenant shall not be in default under this Lease. Upon the mutual
execution of this Lease, Landlord shall deliver such a non-disturbance
agreement from any present lender having a deed of trust or mortgage on the
Premises.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act
in any matter provided for herein by and through its building manager or any
other person who shall from time to time be designated by Landlord in writing.
B. All notices or demands required or permitted to be
given to Landlord hereunder shall be in writing, and shall be deemed duly
served three days after deposited in the United States Mail, with proper
postage prepaid, certified or registered, return receipt requested, addressed
to Landlord at its address specified below its signature, or at the most recent
address of which Landlord has notified Tenant in writing. All notices or
demands required to be given to Tenant hereunder shall be in writing, and shall
be deemed duly served three days after deposited in the United States Mail,
with proper postage prepaid, certified or registered, return receipt requested,
addressed to Tenant at its address specified below its signature. If Tenant
fails to so designate an address, such notice may be mailed to Tenant's
Premises. Either party shall have the right to designate in writing, served as
above provided, a different address to which notice is to be mailed.
25. RENEWAL.
A. On the condition that Tenant is not then in default,
Tenant shall have the option to extend the term of this Lease for four
additional, consecutive periods of three years each (in each case, the "Option
Period") on the same terms, covenants, and conditions of this Lease, except
that the monthly rent for each respective Option Period will be increased in
the manner set forth in subparagraph B below. Tenant will exercise its option
by giving Landlord written notice at least 180 days prior to the expiration of
the Primary Lease Term, or the expiration of the then current Option Period, as
the case may be.
B. Landlord and Tenant agree that the monthly rent for
each Option Period will be determined set forth in this paragraph. For the
first month of the first year of the subject Option Period, the Rent due
hereunder will be adjusted in accordance with the increase, if any, which has
occurred in the Consumer Price Index, Denver-Boulder area for all Urban
Consumers, U.S. City Average - All Items Index (CPI-U, 1982-84 equals 100),
published by the United States Department of Labor, Bureau of Labor Statistics
(the "INDEX") from the Commencement Date or the last day of a prior Rent
adjustment, whichever is later, to the date of the present adjustment. Such
adjusted Rent rate will be the Rent for the then Option Period. If the Index
is discontinued, Landlord and Tenant shall agree upon comparable statistics on
the cost of living for the computations under this subparagraph B, and such
statistics shall be published by an agency of the United States Government or
by a responsible financial periodical or
-17-
<PAGE> 18
recognized authority. If Landlord and Tenant fail to agree on a replacement
index, they will submit the question of a replacement index to an arbitrator in
accordance with the rules and regulations of the American Arbitration
Association.
26. TENANT IMPROVEMENTS.
A. At any time during the lease term, Tenant may equip
the Building with fixtures and personal property necessary or appropriate, as
determined in Tenant's reasonable discretion, for the operation of the Building
for the uses allowed under this Lease, all to be selected by Tenant in its
reasonable discretion and all as specified in the plans and specifications to
be delivered to Landlord from time to time ("Tenant's Work"). Tenant's Work
shall be performed in a good and workmanlike manner and in compliance with all
applicable laws.
B. Upon completion of Tenant's Work, Tenant shall apply
for, diligently pursue, obtain and deliver to Landlord a conditional or
unconditional certificate of occupancy, or any other permits or approvals as
may be required by applicable laws for occupancy of the Premises for the
purposes contemplated in this Lease. Tenant shall take any corrective action,
as required by inspection reports by the applicable governmental authority,
reasonably necessary to obtain such certificates, permits or approvals, to the
extent the failure to obtain such certificates, permits or approvals is
attributable to any failure by Tenant to meet its construction obligations
under this Lease. If Tenant is unable to obtain such certificates, permits or
approvals due to any existing noncompliance of the Building or its
appurtenances with any present laws, rules or regulations, which noncompliance
does not relate to installations made by Tenant, then Tenant's obligation to
pay rent hereunder shall be postponed, notwithstanding any other provision of
this Lease to the contrary, until 10 days after such certificates, permits or
approvals have been obtained, and Landlord shall take such action as is
appropriate to promptly correct any such noncompliance.
C. Tenant, in its discretion, may, at its sole expense,
as part of Tenant's Work, erect interior and exterior signs. Tenant shall be
entitled to construct the maximum signage permitted under local sign ordinances
and other applicable governmental regulations. All sign construction shall be
in accordance with such local sign ordinances and applicable governmental
regulation. Tenant shall obtain, and Landlord shall cooperate with Tenant's
applications therefor, any and all permits as are required under such
governmental regulations.
27. HAZARDOUS MATERIALS. Landlord shall indemnify, defend and
hold harmless Tenant, its directors, officers, employees, and agents, and any
assignees, subtenants or successors to Tenant's interest in the Premises, their
directors, officers, employees, and agents, from and against any and all
losses, claims, suits, damages, judgments, penalties, and liability including
all out-of-pocket litigation costs and reasonable attorneys' fees including
without limitation (i) all foreseeable and all unforeseeable consequential
damages, directly or indirectly arising out of the presence, use, generation,
storage, release or disposal of Hazardous Materials (as hereinafter defined)
on, under or in the Premises and the underlying property before or after the
-18-
<PAGE> 19
Commencement Date by or due to the actions or omissions of any person other
than Tenant and (ii) the cost of any required or necessary repair, clean-up or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
commencement of the Primary Lease Term, to the full extent that such is
attributable, directly or indirectly, to the presence, use, generation,
storage, release, threatened release, or disposal of Hazardous Materials due
to the actions or omissions of any person other than Tenant on, under or in the
property underlying the Premises or to any person other than the Tenant
violating any Environmental Law. Tenant agrees to use reasonable efforts to
mitigate any damages to Tenant. For the purpose of this paragraph, Hazardous
Materials shall include but not be limited to substances defined as "hazardous
substances," "hazardous materials," or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; and other state, local or federal environmental
laws; and in the regulations adopted and publications promulgated pursuant to
said laws (collectively, the "Environmental Laws"). The provisions of this
paragraph shall survive the expiration or sooner termination of this Lease.
In the event any clean-up, repair, detoxification or other similar
action with respect to the Premises or the underlying or surrounding property
is required by any governmental or quasi-governmental agency as a result of the
actions or omissions of any party other than Tenant before or after the
Commencement Date and such action requires that Tenant be closed for business
for greater than a 24-hour period, or if access to the Premises as a result of
such action is materially adversely affected for a period in excess of 24
hours, then Tenant's rental and other payment obligations under this Lease
shall be abated entirely during the period beyond the 24 hours that Tenant is
required to be closed for business or abated in proportion to the amount of
lost business suffered by Tenant if access to the Premises is impaired.
Tenant shall not do anything throughout the term of this Lease and any
extension thereof that will violate any Environmental Laws. Tenant shall
indemnify, defend and hold harmless Landlord, its directors, officers,
employees, and agents and assignees or successors to Landlord's interest in the
Premises, their directors, officers, employees, and agents from and against any
and all losses, claims, damages, penalties and liability including all
out-of-pocket litigation costs and reasonable attorneys' fees (i) including all
damages, directly or indirectly arising out of the use, generation, storage,
release or disposal of Hazardous Materials by Tenant, its agents or
contractors, and (ii) including, without limitation, the cost of any required
or necessary repair, clean-up or detoxification and the preparation of any
closure or other required plans to the full extent that such is attributable,
directly or indirectly, to the use, generation, storage, release or disposal of
Hazardous Materials by Tenant.
28. MISCELLANEOUS.
A. The term "Landlord," as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the
-19-
<PAGE> 20
owner or owners of the Premises at the time in question. In the event of any
transfer or transfers of the title to the Premises, the Landlord herein named
(and in the case of any subsequent transfers or conveyances, the then grantor)
shall be automatically released, from and after the date of such transfer or
conveyance, from all liability with respect to the performance of any covenants
or obligations on the part of Landlord contained in this Lease thereafter to be
performed; provided that the grantee assumes the duty to perform Landlord's
covenants and obligations hereunder, and provided that any funds in which
Tenant has an interest in the hands of Landlord or the then grantor at the time
of such transfer shall be turned over to the grantee. Any amount then due and
payable to Tenant by Landlord or the then grantor under any provisions of this
Lease shall be paid to Tenant at the time of any transfer or conveyance.
B. The termination or mutual cancellation of this Lease
shall not work a merger, and such termination or mutual cancellation shall, at
the option of Landlord, either terminate all subleases and subtenancies or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
C. In the event either party to this Lease shall fail to
comply with its obligations hereunder, and such failure continues for 30 days
after notice (or such longer period not to exceed 45 days if performance has
commenced but compliance cannot reasonably be obtained within 30 days) stating
that the party giving such notice will use self help if there is no compliance
within the time period, the other party may (but shall not be obligated to)
fulfill such obligation on behalf of the non-complying party, making any
reasonable expenditure in connection therewith. All such expenditures shall be
reimbursed to the other party within 30 days after demand, and if the other
party is Tenant, such expenditures may be offset against Rent due under this
Lease but only if Landlord does not pay such amount within such 30-day period.
Notwithstanding anything in this paragraph to the contrary, no prior notice to
the non-complying party shall be necessary if the failure to comply involves
emergency repairs under this Lease reasonably necessary for the safety and
preservation of the Premises or the furnishings and equipment located therein
or the health or safety of the occupants or employees thereof.
D. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby; and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a legal, valid and enforceable clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible.
E. The captions of each paragraph are added as a matter
of convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
-20-
<PAGE> 21
F. Except as herein specifically set forth, all terms,
conditions and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, successors and assigns.
G. Time is of the essence hereof. If the last day
permitted for the performance of any act required or permitted under this Lease
falls on a Saturday, Sunday or holiday, the time for such performance will be
extended to the next succeeding business day.
H. Any obligation of the Landlord hereunder or any
obligation of Tenant, other than the payment of Rent, which is delayed or not
performed due to acts of God, strike, riot, war, weather, failure to obtain
labor and materials at a reasonable cost, or any other reason beyond the
control of the Landlord or Tenant shall not constitute a default hereunder and
shall be performed within a reasonable time after the end of such cause for
delay or non-performance.
I. This Lease may be executed in two or more duplicate
originals. Each duplicate original shall be deemed to be an original hereof,
and it shall not be necessary for a party hereto to produce more than one such
original as evidence hereof.
J. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all of Tenant's income, leasehold improvements,
equipment, furniture, fixtures and personal property owned by Tenant located in
the Premises. In the event that any or all of Tenant's leasehold improvements,
equipment, furniture, fixtures and personal property shall be assessed and
taxed with the Building, Tenant shall pay such taxes applicable to Tenant's
property.
K. Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax that Tenant is required to pay, by
appropriate proceedings diligently conducted in good faith. Landlord will not
be required to join in any contest or proceeding unless the provisions of any
law or regulation then in effect requires that the proceeding be brought by or
in the name of Landlord. In that event, Landlord will join in the proceedings
or permit them to be brought in its name; however, Landlord will not be
subjected to any liability for the payment of any costs or expenses in
connection with any contest or proceedings, and Tenant will indemnify Landlord
against and save Landlord harmless from any costs and expenses in this regard.
L. Any consent of Landlord or Tenant hereunder shall not
be unreasonably withheld or delayed.
M. In the event of any litigation between Landlord and
Tenant, the prevailing party in such litigation shall be entitled to an award
of its reasonable attorneys' and legal assistants' fees and costs.
-21-
<PAGE> 22
N. This Lease will be construed and enforced in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
"LANDLORD"
By: /s/ GEORGE EVANS
-------------------------------------
George Evans
-------------------------------------
Date: May 15, 1996
-----------------------------------
Address: 8157 E. Hunters Hill Dr.
--------------------------------
Englewood, CO 80117
--------------------------------
By: /s/ LARRY DAVIDSON
-------------------------------------
Larry Davidson
-------------------------------------
Date: May 15, 1996
-----------------------------------
Address: 9504 Southern Hills
--------------------------------
Littleton, CO 80124
--------------------------------
"TENANT"
RentX Industries, Inc., a Delaware
corporation
By: /s/ RICHARD M. TYLER
-------------------------------------
Its: Richard M. Tyler, President
------------------------------------
Date: May 15, 1996
-----------------------------------
Address: 1522 Blake Street
--------------------------------
Denver, Colorado 80202
--------------------------------
-22-
<PAGE> 23
EXHIBIT A
LEGAL DESCRIPTION
OF THE PREMISES
EXHIBIT "A"
PARCEL A:
PART OF BLOCK 1, EASTGATE-FILING NO. FOUR, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHEAST
CORNER OF SAID BLOCK 1, THENCE SOUTHERLY ALONG THE EAST LINE OF SAID BLOCK 1, A
DISTANCE OF 124.42 FEET, THENCE AT AN ANGLE TO THE RIGHT OF 90 DEGREES 07
MINUTES 43 SECONDS WESTERLY 178.42 FEET TO A POINT ON THE WEST LINE OF SAID
BLOCK 1, THENCE AT AN ANGLE TO THE RIGHT OF 89 DEGREES 5 MINUTES 03 SECONDS
NORTHERLY ALONG THE WEST LINE OF SAID BLOCK 1, A DISTANCE OF 124.42 FEET, TO A
POINT ON THE NORTH LINE OF SAID BLOCK 1, THENCE AT AN ANGLE TO THE RIGHT OF 90
DEGREES 08 MINUTES 57 SECONDS EASTERLY ALONG THE NORTH LINE OF SAID BLOCK 1, A
DISTANCE OF 178.47 FEET TO THE POINT OF BEGINNING.
PARCEL B:
PART OF BLOCK 1, EASTGATE-FILING NO. FOUR, CITY AND COUNTY OF DENVER, STATE OF
COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHEAST
CORNER OF SAID BLOCK 1 THENCE SOUTHERLY ALONG THE EAST LINE OF SAID BLOCK 1, A
DISTANCE OF 124.42 FEET TO THE POINT OF BEGINNING, THENCE CONTINUING SOUTHERLY
ALONG THE EAST LINE OF SAID BLOCK 1, A DISTANCE OF 70.75 FEET THENCE AT AN
ANGLE TO THE RIGHT OF 90 DEGREES 07 MINUTES 43 SECONDS WESTERLY 178.40 FEET,
THENCE AT AN ANGLE TO THE RIGHT OF 89 DEGREES 51 MINUTES 03 SECONDS NORTHERLY
ALONG THE WEST LINE OF SAID BLOCK 1, A DISTANCE OF 70.75 FEET, THENCE AT AN
ANGLE TO THE RIGHT OF 90 DEGREES 08 MINUTES 57 SECONDS EASTERLY 178.42 FEET TO
THE POINT OF BEGINNING, CITY AND COUNTY OF DENVER, STATE OF COLORADO.
EXCEPT FOR THE BUILDINGS AND RELATED PARKING SPACE USED BY BOSCH AND PRO AUTO
CARE.
A-1
<PAGE> 24
EXHIBIT B
MORTGAGES OR DEEDS OF TRUST
5862 E. Evans, Denver, Colorado:
First Deed of Trust dated May 20, 1991 held by Colorado National Bank, Loan No.
1735012629
Second and Third Deed of Trusts held by Bank One, Loan No. 2167173686 and Loan
No. 2700799369
Warehouse at 2131 S. Jasmine, Denver, Colorado:
Mortgages held by Bank One, Loan No. 2164451101 and Colsen Services, which is
serviced by Community Economic Development at 1111 Osage Street, Suite 110,
Denver, Colorado 80204
Deed of Trust dated January 15, 1992 for the benefit of Affiliated National
Bank-University Hills recorded at Reception No. 92-0007042, Denver County,
Colorado
Deed of Trust dated August 31, 1992 for the benefit of Community Economic
Development Company of Colorado recorded at Reception 92-0100485, Denver
County, Colorado
B-1
<PAGE> 1
EXHIBIT 10.42
LEASE
Plaza 6000 Partners
a California Limited Partnership
(as Landlord)
and
RentX Industries, Inc.,
a Delaware Corporation
(as Tenant)
<PAGE> 2
LEASE
Plaza 6000 Partners
a California Limited Partnership
(as Landlord)
and
RentX Industries, Inc.,
a Delaware Corporation
(as Tenant)
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<S> <C> <C>
1. PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. INITIAL IMPROVEMENTS TO AND FINISH WORK FOR THE PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. ACCEPTANCE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8. SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. CHARACTER OF OCCUPANCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. ALTERATIONS AND REENTRY BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11. ALTERATIONS AND REPAIRS BY TENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12. MECHANICS' LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13. SUBLETTING AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
14. DAMAGE TO PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
15. INSURANCE AND WAIVER OF SUBROGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
16. CASUALTY AND RESTORATION OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
17. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
18. DEFAULT BY TENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
19. SUBORDINATION AND ATTORNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
20. SURRENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
21. STATEMENT OF PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
22. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
23. PERSONAL PROPERTY TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
24. AUTHORITIES FOR ACTION AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
25. RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
26. LIMITATION OF LANDLORD'S LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
27. BROKER INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
28. OPTION TO EXTEND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
29. ADDITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
30. RIGHT OF EXPANSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
<PAGE> 3
LEASE
THIS Lease is made this 1st day of September, 1996, by and between
Plaza 6000 Partners, a California Limited Partnership, ("Landlord") and RentX
Industries, Inc., a Delaware Corporation, ("Tenant").
W I T N E S S E T H:
1. PREMISES.
That as consideration of the payment of rent and the keeping and performance of
the covenants and agreements by Tenant, as hereinafter set forth, Landlord
hereby leases and demises unto Tenant the premises known and described as
approximately 5,539 Rentable Square Feet (hereinafter referred to as the
"Premises"), as depicted on the floor plan hereto attached as Exhibit A, and
being a part of that certain building (the "Building") shown on Exhibit B
attached hereto, located on the real property (the "Real Property") situated at
6000 East Evans Avenue, Suite 2-300 in the City and County of Denver, Colorado
as more particularly described on Exhibit C attached hereto and made a part
hereof, together with a non-exclusive right, subject to the provisions hereof,
to use all appurtenances thereto, including, but not limited to, the surface
parking area, except covered parking areas and any areas specifically
designated or leased for the exclusive use of others, walkways and other common
areas on the Real Property designated by Landlord for use by tenants of the
Building. (The Real Property, including the common corridors, lobby area,
parking area, landscaped areas, walkways and other areas from time to time
designated by Landlord for use by all tenants of the Building are hereinafter
collectively referred to as the "Common Areas").
2. TERM.
The term of the Lease shall commence at 12:00 a.m. on the 1st day of November,
1996, and shall terminate at 11:59 p.m. on the 31st day of October, 2001 (said
five (5) year term is referred to herein as the "Term").
3. RENT.
Tenant shall pay to Landlord as base rent for the Premises the following
monthly installments during the Primary Lease Term (the "Base Rent"):
<TABLE>
<CAPTION>
Lease Year Monthly Payment Sub Total
---------- --------------- ----------
<S> <C> <C>
11/1/96 - 2/28/97 $2,873.36 $11,493.44
3/l/97 - 10/31/97 $5,746.71 $45,973.68
11/1/97 - 10/31/98 $5,977.50 $71,730.00
11/1/98 - 10/31/99 $6,208.30 $74,499.60
11/1/99 - 10/31/00 $6,439.09 $77,269.08
11/1/00 - 10/31/01 $6,669.88 $80,038.56
</TABLE>
"Lease Year" as used herein shall mean the period beginning with the first day
of the first full calendar month following the date the Term commences and
ending twelve (12) months thereafter or on any anniversary thereof. Tenant
shall pay Base Rent in the sum of three hundred sixty one thousand, four
dollars and thirty six cents ($361,004.36) attributable to the period from
November 1, 1996, through October 31, 2001. All Base Rent shall be paid in
advance on the first day of each calendar month of the term hereof. Rent for
any period during the term hereof which is for less than one month shall be
prorated based upon the actual number of days in the month during which the
Lease is in effect. Rent shall be payable without notice or demand and without
any deduction, offset or abatement in lawful money of the United States of
America to Landlord at 6000 East Evans Avenue, Suite 1-100, Denver, Colorado
80222 or to such other persons or at such other places as Landlord may, from
time to time, designate in writing.
<PAGE> 4
4. INITIAL IMPROVEMENTS TO AND FINISH WORK FOR THE PREMISES.
A. Landlord and Tenant agree that the Premises shall be
initially improved and/or finished substantially in accordance with Exhibit D
attached hereto and the work to be completed shall be referred to herein as the
"Tenant Finish Work." The work and materials specifically identified on
Exhibit D (the "Standard Tenant Finish") shall be at Landlord's cost and
expense. All work and materials required to complete the tenant finish work
not specifically identified on said Exhibit D shall be at Tenant's sole cost
and expense, and shall be referred to herein as "above Standard Tenant Finish."
The approved space plan for the Premises is set forth on said Exhibit D.
Landlord shall be responsible for performance of all tenant finish work, and
shall promptly cause the contractor to commence and proceed with due diligence
to complete the shell and core of the Building (if applicable) and the tenant
finish work substantially in accordance with Exhibit D, subject to delays
arising as a result of circumstances beyond the control of Landlord or
Landlord's contractor, and to deliver possession of the Premises to Tenant
"ready for occupancy." If Tenant modifies, alters or makes any modifications
or changes to such space plan and/or construction documents, all costs and
expenses arising as a result thereof shall be Tenant's responsibility and shall
be amortized over the lease term at 12% interest and included in the Base Rent.
Additionally each day of delay resulting from Tenant modifications shall extend
the delivery date pursuant to Paragraph 4.C. of this Lease by one day.
Landlord and Tenant acknowledge that the approved space plan and approved
tenant finish schedule for the Premises has been reviewed and approved by
Tenant. Landlord shall be responsible and liable for the design, sufficiency,
or compliance of the Premises with laws, rules or regulations of governmental
agencies or authorities.
B. All costs for Standard Tenant Finish work shall be
amortized over the lease term and included in the Base Rent. All construction
work shall be performed in a good and workmanlike manner and, subject to
paragraph 5 below, in compliance with all applicable laws, rules and
regulations.
C. The term "ready for occupancy," as used herein, is
defined to mean substantial completion of the tenant finish work to be
completed by Landlord pursuant to the final plans and specifications therefor.
The determination of when the Premises are "ready for occupancy" shall be
evidenced by a certificate of the architect (or other representative of
Landlord) in charge of supervising completion of the Premises and issuance of a
temporary or permanent certificate of occupancy by appropriate governmental
officials for the Premises. The Primary Lease Term shall commence on the
actual date on which the Premises are ready for occupancy, as determined in
accordance with the provisions above, and such date shall be referred to as the
"Lease Commencement Date." It is anticipated that the Lease Commencement Date
will occur on or about November 1, 1996, (the "Estimated Completion Date").
Landlord shall have no responsibility or liability if the Lease Commencement
Date is later than the Estimated Completion Date and the postponement of the
Lease Commencement Date and the commencement of Tenant's obligation to pay rent
hereunder shall be in full settlement of all claims which Tenant may otherwise
have by reason of said Premises not being "ready for occupancy." If the
Premises are not "ready for occupancy" on or before 90 days after the mutual
execution of this Lease, then Tenant may elect to terminate this lease by
delivering written notice thereof to Landlord. If as a result of such delay
the Lease Commencement Date would otherwise occur on a day other than on the
first day of the month, the Lease Commencement Date, and the beginning of the
Primary Lease Term shall be further delayed until the first day of the
following month, but Tenant shall pay proportionate rent at the same monthly
rate set forth herein (also in advance) for such partial month. In this event
the expiration of the term hereof shall also be extended so that the Term will
continue for the full period set forth in Paragraph 2 hereof. If the premises
are not "ready for occupancy" on the Estimated Completion Date (or such later
date as contemplated herein) as a result of delays which are the fault of
Tenant, including but not limited to delays in Tenant's submittal of the
preliminary space plan for the Premises, Tenant's approval of the final plans
and specifications and cost estimates for the tenant finish work, Tenant's
failure to make any required payment to Landlord or Tenant's selection of
tenant finish items with long-lead delivery times (Landlord
-2-
<PAGE> 5
agrees to notify Tenant of any such long-lead items of which Landlord has
actual knowledge) (herein "Tenant delays"), then, the Lease Commencement Date
shall be the date the Premises would have been "ready for occupancy" but for
the Tenant delays as reasonably determined by Landlord's architect, and the
term of the Lease and all of Tenant's obligations hereunder will be measured
from said date.
5. ACCEPTANCE OF PREMISES.
As of the date of taking possession the Premises shall be in good order and
repair and completed substantially in accordance with the final approved plans
and specifications therefore and in compliance with all applicable laws, rules
and regulations except for those items set forth on a punch list furnished to
Landlord within fifteen (15) days following such taking of possession by Tenant
and latent defects, if any, which are identified by Tenant in writing not later
than ninety (90) days following the Lease Commencement Date. No items shall be
included on such punch list which are the result of the acts of Tenant,
including any damage which occurs during Tenant's move into the Premises.
Landlord shall proceed to complete the items so listed on the punch list within
a reasonable time.
6. OPERATING EXPENSES.
A. "Definitions." In addition to terms hereinabove
defined, the following terms shall have the following meanings with respect to
the provisions of this Lease:
(1) "Base Operating Expenses" shall mean an
annual amount equal to the base year of 1996 divided by the total number of
square feet of Rentable Area as hereinafter defined. Tenant acknowledges that
Landlord has not made any representation or given Tenant any assurances that
the Base Operating Expense will equal or approximate the actual Operating
Expenses for any Lease Year during the Term, or any extension thereof,
including the first Lease Year. The Operating Expenses that vary with
occupancy and that are attributable to any part of the term in which less than
95% of the rentable area of the Building is occupied by tenants will be
adjusted by Landlord to the amount that Landlord reasonably believes they would
have been if 95% of the rentable area of the Building had been occupied.
Tenant's proportionate share of the Operating Expenses shall not increase from
one year to the next by more than five percent (5%) of the preceding year's
cost, excluding real estate taxes, utilities and insurance.
(2) "Rentable Area" shall mean 104,356 rentable
square feet, which is all rentable space available for lease in the Building.
If there is a significant change in the aggregate Rentable Area as the result
of an addition to the Building, partial destruction thereof, modification to
Building design or similar cause which causes a reduction or increase thereto
on a permanent basis, Landlord's accountants shall make such adjustments in the
computations as shall be necessary to provide for any such change.
(3) "Tenant's Pro Rata Share" shall mean (5.31%).
In the event Tenant at any time during the Term or any extensions thereof,
either leases additional space in the Building, or relinquishes, with
Landlord's consent, any portion of the Premises, Tenant's Pro Rata Share shall
be recomputed by dividing the total Rentable Square Footage of space then being
leased by Tenant (including such additional space) by the Rentable Area and the
resulting percentage figure shall become Tenant's Pro Rata Share.
(4) "Lease Year" shall mean that twelve (12)
month period defined in Paragraph 3 hereof.
(5) "Landlord's Accountants" shall mean that
individual or firm employed by Landlord from time to time to keep the books and
records for the Building and Common Area and/or to prepare the federal and
state income tax returns for Landlord with respect to the Building and Common
Area, all of which books and records shall be certified to by an appropriate
representative of Landlord.
-3-
<PAGE> 6
(6) "Operating Expenses" shall mean all operating
expenses of any kind or nature which are in accordance with accepted principles
of sound accounting practice as applied to the operation and maintenance of
office buildings in the metropolitan Denver, Colorado area. Operating Expense
shall include but not be limited to:
(a) All real property taxes and
assessments levied against the Building and/or Common Areas by any governmental
or quasi-governmental authority. The foregoing shall include any taxes or
assessments of a nature not presently in effect which shall hereafter be levied
on the Building and/or Common Areas as a result of the use, ownership or
operation of the Building and/or Common Areas, or for any other reason, whether
in lieu of, or in addition to, any current real estate taxes and assessments;
provided, however, any taxes which shall be levied on the rentals of the
Building shall be determined as if the Building were Landlord's only property
and, provided further, that in no event shall the term "taxes or assessments,"
as used herein, include any net federal or state income taxes levied or
assessed on Landlord, unless such taxes are a specific substitute for real
property taxes. Such term shall, however, include gross taxes on rentals.
Expenses incurred by Landlord for tax consultants and in contesting the amount
or validity of any such taxes or assessments shall be included in such
computations (all of the foregoing are collectively referred to herein as the
"Taxes");
(b) Costs of supplies, including , but
not limited to, the cost of relamping all standard building tenant lighting as
the same may be required from time to time;
(c) Costs incurred in connection with
obtaining and providing energy for the Building, including, but not limited to,
costs of propane, butane, natural gas, steam, electricity, solar energy and
fuel oils, coal or any other energy sources;
(d) Costs of water and sanitary and
storm drainage services;
(e) Costs of janitorial and security
services, including the cost of managing and operating a computer which
controls building energy consumption, life safety equipment, fire alarms, and
security access/response, when applicable;
(f) Costs of general maintenance,
repairs and painting of the Building and/or the Common Areas, or any portion
thereof, including costs under HVAC and other mechanical maintenance contracts
and repairs and replacements of equipment used in connection with such
maintenance and repair work;
(g) Costs of maintenance and replacement
of landscaping;
(h) Insurance premiums, including fire
and all-risk coverage, together with loss of rent endorsement, the part of any
claim required to be paid under the deductible portion of any insurance policy
carried by Landlord in connection with the Building or Common Areas or any
component parts thereof (where Landlord is unable to obtain insurance without
such deductible from a major insurance carrier at reasonable rates, as
determined by Landlord), public liability insurance; and any other insurance
carried by Landlord on the Building or Common Area or any component parts
thereof (all such insurance shall be in such amounts as Landlord may reasonably
determine);
(i) Labor costs, including wages and
other payments, costs to Landlord of workmen's compensation and disability
insurance, payroll taxes, welfare fringe benefits, and all legal fees and other
costs or expenses incurred in resolving any labor dispute;
(j) Professional building management
fees;
-4-
<PAGE> 7
(k) Legal, accounting, inspection and
other consultation fees incurred in the ordinary course of operating the
Building and in making the computations required hereunder;
(l) The costs of capital improvements
and structural repairs and replacements made in or to the Building and/or
Common Areas in order to conform to changes, arising subsequent to the date
Landlord obtained its building permit to construct the Building, in any
applicable laws, ordinances, rules, regulations or orders of any governmental
or quasi-governmental authority having jurisdiction over the Building and/or
Common Areas (herein "Required Capital Improvements"), except Landlord shall
indemnify Tenant from any and all costs or expense relating to compliance with
the Americans with Disabilities Act of 1990; the costs of any capital
improvements and structural repairs and replacements designed primarily to
reduce Operating Expense (herein "Cost Savings Improvements"); and a reasonable
annual reserve for all other capital improvement and structural repairs and
replacements reasonably to permit Landlord to maintain the Building. The
expenditures for Required Capital Improvements and Cost Savings Improvements
shall be amortized at a market rate of return over the useful life of such
capital improvement or structural repair or replacement (as determined by
Landlord's Accountants); provided that the amortized amount of any Cost Savings
Improvements shall be limited in any year to the reduction in Operating
Expenses as a result thereof; "Operating Expenses" shall not include: (i)
Costs of work, including tenant change work, which Landlord performs for any
tenant or in any tenant's space in the Building other than work of a kind and
scope which Landlord would be obligated to furnish to all tenants whose leases
contain a rental adjustment provision and services provision similar to
Paragraphs 6 and 7 hereof; (ii) costs of repairs or other work occasioned by
fire, windstorm or other insured casualty to the extent of insurance proceeds
received; (iii) leasing commissions, advertising expenses and other costs
incurred in leasing space in the Building; (iv) costs of repairs or rebuilding
necessitated by condemnation; (v) any interest on borrowed money or debt
amortization, except as specifically set forth above; (vi) depreciation on the
Building.
B. Tenant hereby agrees for each calendar year of the
term hereof (including the calendar year in which the Term commences) to pay to
Landlord as hereafter provided, Tenant's Pro Rata Share of the amount of the
increase in the Operating Expenses for the calendar year just completed over
the Base Operating Expenses. Tenant also agrees to pay to Landlord monthly
during each calendar year following the year in which the Term commences, an
estimate of Tenant's Pro Rata Share of the amount by which actual Operating
Expenses attributable to the calendar year during which such amounts are paid
will exceed the Base Operating Expenses. As soon as practicable following the
end of each calendar year during the Term, beginning with the end of the
calendar year in which the Term commences, Landlord shall submit to Tenant a
statement setting forth: (i) The exact amount of the increase, if any, in
Tenant's Pro Rata Share of the increases in Operating Expenses for the calendar
year just completed over the Base Operating Expenses; and (ii) for each
calendar year following the year during which the Term commences, the
difference, if any, between Tenant's actual Pro Rata Share of the Operating
Expenses for the calendar year just completed and the estimated amount of
Tenant's Pro Rata Share of the increases in Operating Expenses which was paid
for such year. Such statement shall also set forth the amount of the estimated
increases in Operating Expenses over Base Operating Expenses for the new
calendar year computed in accordance with the foregoing provisions. To the
extent that Tenant's Pro Rata Share of the actual increases in Operating
Expenses for the period covered by such statement are higher than Tenant's Pro
Rata Share of the estimated increases which Tenant previously paid during the
calendar year just completed Tenant shall pay to Landlord the difference in
cash within thirty (30) days following receipt of said statement from Landlord.
If, however, Tenant's Pro Rata Share of the actual increases in Operating
Expenses for the period covered by the Statement are less than Tenant's Pro
Rata Share of the estimated increases which Tenant previously paid during the
calendar year just completed, Landlord shall credit the difference against the
Tenant's estimated payment for such Operating Expenses for the current year.
Until Tenant receives such statement, Tenant shall continue to pay the amount
required for the prior year, but Tenant shall commence payment to Landlord of
the monthly installments of such estimates
-5-
<PAGE> 8
on the basis of the statement beginning on the first day of the month following
the month in which Tenant receives such statement.
C. Tenant's obligation with respect to payment of its
Pro Rata Share of the increases in Operating Expenses shall survive the
expiration or early termination of this Lease and Landlord shall have the right
to retain the Security Deposit, or so much thereof as it deems necessary, to
secure such payment attributable to the year in which this Lease terminates.
If the Lease is in effect for less than a full calendar year during the first
or last calendar years of the Term, Tenant's Pro Rata Share for such partial
year shall be calculated by proportionately reducing the Base Operating
Expenses to reflect the number of months in such year during which the Lease
was in effect (the "Adjusted Base Operating Expenses"). The Adjusted Base
Operating Expenses shall then be compared with the actual Operating Expenses
for said partial year to determine the amount, if any, of any increases in the
actual Operating Expenses for such partial year over the Adjusted Base
Operating Expenses.
D. For the purposes of this Lease, any special
assessments shall be deemed payable in such number of installments as is
permitted by law, whether or not actually so paid. Notwithstanding anything
contained herein to the contrary, if any lease entered into by Landlord with
any tenant in the Building is on a so-called "net" basis, or provides for a
separate basis of computation for any Operating Expenses with respect to its
leased premises, then, to the extent that Landlord's Accountants determine that
an adjustment should be made in making the computations herein provided for,
Landlord's Accountants shall be permitted to modify the computation of Base
Operating Expenses, Rentable Area, and Operating Expenses for a particular
Lease Year in order to eliminate or otherwise modify any such expenses which
are paid for in whole or in part by such tenant. Furthermore, in making any
computations contemplated hereby, Landlord's Accountants shall also be
permitted to make such adjustments and modifications to the provisions of this
Paragraph 6 as shall be reasonably necessary to achieve the intention of the
parties hereto, which intention is to allocate the Operating Expenses
proportionately among the tenants who are required to pay same. In the event
the Rentable Area is not fully occupied during any particular Lease Year,
Landlord's Accountants or Landlord shall adjust those Operating Expenses which
are affected by the occupancy rates for the particular Lease Year, or portion
thereof, as the case may be, to reflect a 95% occupancy.
7. SERVICES.
A. Subject to the provisions of subparagraph D below,
Landlord, without charge, except as provided herein, and in accordance with
standards from time to time prevailing for the Building agrees: (1) To furnish
running water at those points of supply for general use of tenants of the
Building, heated and cooled air, electrical current, janitorial services and
such maintenance as Landlord deems necessary for all Common Areas; (2) to
furnish, during Ordinary Business Hours, as hereinafter defined, such heated or
cooled air to the Premises as may, in the judgment of Landlord, be reasonably
required for the comfortable use and occupancy of the Premises, provided that
the recommendations of Landlord's engineer regarding occupancy and use of the
Premises are complied with by Tenant, and with respect to cooled air, provided
the same is used only for standard office use; (3) if the Building is equipped
with elevators, to provide, during such Ordinary Business Hours, the general
use of the passenger elevator for access and egress to and from the Premises
(with at least one such elevator being available at all times except in the
case of emergencies or repair); (4) to provide janitorial services for the
Premises to the extent of the Building Standard Tenant Finish items contained
therein (including such window washing of the outside of exterior windows as
may, in the judgement of Landlord, be reasonably required), but unless and
until the Building standard changes, such janitorial services will be provided
after business hours only, five days a week, except for Legal Holidays; and (5)
to cause electric current to be supplied to the Premises not to exceed five (5)
watts per Rentable Square Foot (herein the "Permitted Wattage"). "Ordinary
Business Hours" as used herein shall mean and refer to 7:00 a.m. to 7:30 p.m.
Monday through Friday and 9:00 a.m. to 1:00 p.m. on Saturdays, Legal Holidays
excepted. "Legal Holidays," as used herein, shall mean New Year's Day,
President's Day,
-6-
<PAGE> 9
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and
such other national holidays as may be hereafter established by the United
States government.
B. To the extent that: (a) electric current in excess
of Permitted Wattage is used for (i) any machinery or equipment, or (ii) for
operation of the Premises; and/or (b) equipment and machinery located in the
Premises is used during hours in excess of Landlord's established Ordinary
Business Hours; and/or (c) any use of machinery or equipment would overload
Building facilities (or would result in an imbalance being created in the HVAC
systems designed for the Building), then and in each such case Tenant's rent
may be increased from time to time by Landlord in such amounts as Landlord
reasonably determines are necessary to cover the costs of such increase uses,
including all additional air conditioning costs, and any other costs incurred
by Landlord attributable to any such uses (and all costs required to make such
service available to the Premises). Such increases shall be paid monthly,
Tenant shall also reimburse Landlord all costs of modifying the Building HVAC
system and/or extending or modifying any electrical service as Landlord may
determine is necessary as a result of Tenant's excess usage. Prior to
installation or use by Tenant of any equipment other than that which is within
the Permitted Wattage, or operation of the Premises for extended hours on an
ongoing basis, Tenant shall notify Landlord of such intended installation or
use and obtain Landlord's consent therefor. In addition to the foregoing,
Landlord may, at Landlord's option then or at any time thereafter, require
Tenant, at Tenant's sole cost and expense, to install a check meter to assist
in determining the fair amount by which Tenant's rent should be increased. If
Tenant desires electric current, heated or cooled air to the Premises during
periods other than during Ordinary Business Hours, Landlord will use reasonable
efforts to supply the same, but at the expense of Tenant, at Landlord's
standard rate as established by it, from time to time, for such services. Not
less than forty-eight (48) hours' prior notice shall be given by Tenant to
Landlord of Tenant's desire for such services. It is also understood that
Tenant shall pay the cost of replacing light bulbs or tubes used in all
non-standard Building lighting in the Premises.
C. If Tenant requires janitorial services other than
those required to be provided to other tenants of the Building generally,
Tenant shall separately pay for such services monthly upon billings by
Landlord, or Tenant shall, at Landlord's option, separately contract for such
services with the same company furnishing janitorial services to Landlord.
Notwithstanding the foregoing, Tenant shall have the right, subject to
Landlord's prior written consent and such rules, regulations and requirements
as Landlord may impose (including, but not limited to, the requirements that
such janitors belong to a trade union), to employ janitors, other than those
employed by Landlord, to perform such additional services.
D. Tenant agrees that Landlord shall not be liable for
failure to supply any such heating, air conditioning, elevator, electrical,
janitorial, lighting or other services during any period when Landlord uses
reasonable diligence to supply such services, or during any period Landlord is
required to reduce or curtail such services pursuant to any applicable laws,
rules or regulations, including regulations of any utility now or hereafter in
force or effect, it being understood the Landlord may discontinue, reduce or
curtail such services, or any of them (either temporarily or permanently), at
such times as it may be necessary by reason of accident, repairs, alterations,
improvements, strikes, lockouts, riots, acts of God, application of applicable
laws, statutes, or rules and regulations or due to any other happening beyond
the control of Landlord. In the event of any such interruption, reduction, or
discontinuance of Landlord's services (either temporary or permanent), Landlord
shall not be liable for damages to person or property as a result thereof nor
shall the occurrence of any such event in any way be construed as an eviction
of Tenant; or cause or permit an abatement, reduction, or setoff of rent; or
operate to release Tenant from any of Tenant's obligations hereunder.
E. Tenant agrees to notify promptly the Landlord or its
representative of any accidents or defects in the Building of which Tenant
becomes aware, including defects in pipes, electric wiring, and HVAC equipment.
In addition, Tenant shall provide Landlord with prompt notification of any
matter or condition which may cause injury or damage to the building or any
person or property therein.
-7-
<PAGE> 10
8. SECURITY DEPOSIT.
It is agreed that Tenant concurrently with the execution of this Lease shall
deposit with Landlord, and will keep on deposit at all times during the term of
this Lease, the sum of six thousand, six hundred sixty nine dollars and eighty-
eight cents ($6,669.88), as security for the payment by Tenant of all rent and
other amounts herein agreed to be paid and for the faithful performance of all
the terms, conditions and covenants of this Lease. If, at any time during the
term of this Lease, Tenant shall be in default in the performance of any
provision of this Lease, Landlord shall have the right to use said deposit, or
so much thereof as necessary, in payment of any rent or other amounts in
default as aforesaid, reimbursement of any expense incurred by Landlord, and in
payment of any damages incurred by Landlord by reason of Tenant's default. In
such event, Tenant shall, on written demand of Landlord, forthwith remit to
Landlord a sufficient amount in cash to restore said deposit to its original
amount. In the event said deposit has not been utilized as aforesaid, said
deposit, or as much thereof as has not been utilized for such purposes, shall
be refunded to Tenant, or to whomever is then the holder of Tenant's interest
in this Lease, without interest, upon full performance of this Lease by Tenant.
Landlord shall have the right to commingle said deposit with other funds of
Landlord. Landlord may deliver the funds deposited herein by Tenant to the
purchaser of Landlord's interest in the Premises in the event such interest be
sold, and thereupon, Landlord shall be discharged from further liability with
respect to such deposit. If claims of Landlord exceed said deposit, Tenant
shall remain liable for the balance of such claims. Landlord will return the
security deposit to Tenant, less any justified deductions, within sixty (60)
days after the expiration of this Lease.
9. CHARACTER OF OCCUPANCY.
Tenant covenants and agrees to occupy the Premises as general business offices
and for no other purpose, and to use them in a careful, safe and proper manner;
to pay on demand for any damage to the Premises or any other portion of the
Real Property, caused by misuse or abuse thereof by Tenant, Tenant's agents or
employees, or of any other person entering upon the Premises under express or
implied invitation of Tenant; not to use or permit the Premises to be used for
any purposes prohibited by the laws, codes, rules and regulations of the United
States, the State of Colorado, or the county and/or municipality in which the
Real Property is located; or the provisions of the restrictive covenants
affecting the Building. Tenant shall not commit waste, or suffer or permit
waste to be committed, or permit any nuisance on or in the Premises. Tenant,
at Tenant's expense, shall comply with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county, and
municipal authorities now in force or which may hereafter be in force, which
shall impose any duty upon Tenant with respect to Tenant's specific use,
occupancy or alteration of the Premises or any portion thereof, as compared to
a general retail or office use which will be the responsibility of Landlord.
10. ALTERATIONS AND REENTRY BY LANDLORD.
A. Unless otherwise expressly provided herein Landlord
shall not be required to make any improvements or repairs of any kind or
character to the Premises during the Term, or any extension thereof, except
such repairs to the base, shell and core of the Building, the roof, building
standard HVAC, electrical and plumbing facilities and Common Areas as may be
deemed necessary by Landlord for normal maintenance operations of the Building
and Common Areas so long as the need for such repairs is not the result of
Tenant's gross negligence, willful and intentional acts and misconduct.
B. Tenant covenants and agrees to permit Landlord at any
time after not less than 24 hours' advance notice, except in case of emergency
to examine and inspect the same or, if Landlord so elects, to perform any
obligations of Tenant hereunder which Tenant shall fail to perform or to
perform such cleaning, maintenance, janitorial services (no notice required),
repairs, additions or alterations as Landlord may deem necessary or proper for
the safety, improvement or preservation of the Premises or of other portions of
the Building and Common Areas or as may be required by governmental authorities
through any code, rule,
-8-
<PAGE> 11
regulations, ordinance and/or law. Any such entry shall not constitute an
eviction or entitle Tenant to abatement of rent. Furthermore, Landlord shall
at all times have the right at Landlord's election to make such alterations or
changes in other portions of the Building and Common Areas as Landlord may from
time to time deem necessary and desirable as long as such alterations and
changes do not unreasonably interfere with Tenant's use and occupancy of the
Premises. Landlord may use one or more of the street entrances to the Building
and Common Areas and such public areas thereof as may be necessary, in
Landlord's determination to complete such alterations or changes.
11. ALTERATIONS AND REPAIRS BY TENANT.
A. Tenant covenants and agrees not to make any
alterations in or additions to the Premises (subsequent to the work in the
Premises performed by Landlord in accordance with Paragraph 4.A above),
including installation of any equipment or machinery therein which requires
modification of or additions to any existing electrical outlet or which would
increase Tenant's usage of electricity beyond the Permitted Wattage (all such
alterations are referred to herein collectively as "Alterations") without in
each such instance first obtaining the written consent of Landlord. Landlord's
consent to or approval of any such Alterations shall create no responsibility
or liability on the part of Landlord for their design, sufficiency or
compliance with any laws, rules or regulations of governmental agencies or
authorities. Tenant, at its expense, shall pay all engineering and design
costs incurred by Landlord attributable to the Alterations and obtain all
necessary governmental permits and certificates required for any Alterations to
which Landlord has consented, and shall cause such Alterations to be completed
in compliance therewith and with all applicable laws and requirements of public
authorities and all applicable requirements of Landlord's insurance carriers.
All Alterations which Tenant is permitted to make shall be performed in a good
and workmanlike manner, using new materials and equipment at least equal in
quality to the original installations in the Premises. All repair and
maintenance work required to be performed by Tenant pursuant to the provisions
of subparagraph B below and any Alterations permitted by Landlord pursuant to
the provisions hereof, including, but not limited to, any installations desired
by Tenant for Tenant's telegraphic, telephonic or electrical connections, shall
be done at Tenant's expense by Landlord's employees or, with landlord's
consent, by persons requested by Tenant and authorized in writing by Landlord;
provided, however, if such work is performed by persons who are not employees
of Landlord, Tenant shall pay to Landlord, upon receipt of billing therefor,
the costs for supervision and control of such persons as Landlord may determine
to be necessary. If Landlord authorizes persons requested by Tenant to perform
such work, prior to the commencement of any such work, on request, Tenant shall
deliver to Landlord certificates issued by insurance companies qualified to do
business in the State of Colorado, evidencing that workmen's compensation,
public liability insurance and property damage insurance, all in the amounts,
with companies and on forms satisfactory to Landlord, are in force and effect
and maintained by all contractors and subcontractors engaged by Tenant to
perform such work. All such policies shall name Landlord and any Mortgagee (as
defined in Paragraph 22.H hereof) as an additional insured. Each such
certificate shall provide that the same may not be cancelled or modified
without ten (10) days' prior written notice to Landlord and such Mortgagee.
Further, Landlord or such Mortgagee shall have the right to post notices in the
Premises in locations which will be visible by parties performing any work on
the Premises stating that Landlord is not responsible for the payment for such
work and setting further such other information as Landlord may deem necessary.
Alterations, repair and maintenance work shall be performed in a manner which
will not unreasonably interfere with, delay, or impose any additional expense
upon Landlord in the maintenance or operation of the Building or upon other
tenants' use of their premises.
B. Tenant shall keep the Premises in as good order,
condition and repair and in an orderly state, as when they were entered upon,
ordinary wear and tear and damage by fire or other casualty excepted. Subject
to Landlord's obligation to make repairs in the event of certain casualties as
set forth in Paragraph 16 below, Landlord shall have no obligation for the
repair or replacement of any portion of the interior of the Premises which is
damaged or wears out during the term hereof regardless of the cause therefor,
including, but not limited to,
-9-
<PAGE> 12
carpeting, draperies, window coverings, wallcoverings, painting, or any of
Tenant's property or betterments in the Premises.
C. All Alterations and permanent fixtures installed in
the Premises, including, by way of illustration and not by limitations, all
partitions, paneling, carpeting, drapes or other window covering, and light
fixtures.(but not including trade fixtures and movable office furniture not
attached to the Building), shall be deemed a part of the real estate and the
property of Landlord and shall remain upon and be surrendered with the Premises
as a part thereof without molestation, disturbance or injury upon termination
or expiration of the Term, or any extension thereof, whether by lapse of time
or otherwise, unless Landlord by notice given to Tenant no later than fifteen
(15) days prior to the end of the Term shall elect to have Tenant remove all or
any of the Alterations, and in such event, Tenant shall promptly remove at
Tenant's expense the Alterations specified by Landlord and restore the Premises
to their condition prior to the making of the same, reasonable wear and tear
excepted.
12. MECHANICS' LIENS.
Tenant shall pay or cause to be paid all costs for work done by Tenant or
caused to be done by Tenant on the Premises (including work performed by
Landlord or its contractor at Tenant's request following the commencement of
the Term) of a character which will or may result in liens on Landlord's
interest therein and Tenant will keep the Premises free and clear of all
mechanics' liens, and other liens on account of work done for Tenant or persons
claiming under it, excluding any tenant finish work which is to be paid for by
Landlord (without reimbursement by Tenant) pursuant to the provisions hereof.
Tenant hereby agrees to indemnify, defend and save Landlord harmless of and
from all liability, loss, damage, costs or expenses, including attorneys' fees,
on account of any claims of any nature whatsoever including claims or liens of
laborers or materialmen or others for work performed for or materials or
supplies furnished to Tenant or persons claiming under Tenant. Additionally,
as a condition to commencement of construction, Tenant agrees to procure
executed lien waivers from all contractors, subcontractors, laborers and
materialmen, in form and content acceptable to Landlord, waiving and releasing
all claims of Mechanics Liens against the property described in Exhibit C.
Should any liens be filed or recorded against the Premises or any action
affecting the title thereto be commenced as a result of such work (which term
includes the supplying of materials), Tenant shall cause such liens to be
removed of record within five (5) days after notice from Landlord. If Tenant
desires to contest any claim or lien, Tenant shall furnish to Landlord adequate
security of at least one hundred fifty percent (150%) of the amount of the
claim, plus estimated costs and interest, or, at Tenant's option, file a bond
with the appropriate court and obtain a release of the lien pursuant to Section
38-22-131, C.R.S. 1973. If a final judgement establishing the validity or
existence of any lien for any amount is entered, Tenant shall pay and satisfy
the same at once. If Tenant shall be in default in paying any charge for which
a mechanic's lien or suit to foreclose the lien has been recorded or filed and
shall not have given Landlord security as aforesaid, Landlord may (but without
being required to do so) pay such lien or claim and any costs, and the amount
so paid, together with reasonable attorneys' fees incurred in connection
therewith, shall be immediately due from Tenant to Landlord.
13. SUBLETTING AND ASSIGNMENT.
A. Without the prior written consent of Landlord,
neither Tenant nor Tenant's legal representatives or successors in interest, by
operation of law or otherwise, shall assign this Lease or sublet the whole or
any part of the Premises or permit the Premises or any part thereof to be used
or occupied by others. Landlord's consent to any such transaction shall be in
Landlord's discretion, not to be unreasonably withheld. Notwithstanding the
foregoing, Tenant shall have the right to assign or part with the possession of
the Premises without the prior written consent of Landlord, provided that such
assignment or sublease is to an entity (i) controlled by, controlling, or under
common control with Tenant or (ii) which acquires by merger or otherwise,
substantially all of the assets or business of Tenant. Tenant may collaterally
assign this Lease to any lender of Tenant without obtaining Landlord's consent,
-10-
<PAGE> 13
provided that no such collateral assignment effects or encumbers in any way
Landlords record, title or interest in the Building.
B. If this Lease be assigned, or if the Premises or any
part thereof be sublet or occupied by anybody other than Tenant, Landlord may,
at any time thereafter, collect the rent from the assignee, subtenant, or
occupant, and apply the net amount collected to the rent herein reserved, but
no such assignment, subletting, occupancy, or collection shall be deemed an
acceptance of the assignee, subtenant, or occupant as the Tenant hereof, or a
release of Tenant from further performance by Tenant of covenants on the part
of Tenant herein contained. Consent by Landlord to any one assignment or
subletting shall not in anyway be construed as relieving Tenant from obtaining
the Landlord's express written consent to any further assignment or subletting
(including subletting by any subtenant). Notwithstanding the consent of
Landlord, to any subletting or assignment, or any provision hereunder allowing
Tenant to sublet or assign without Landlords consent, Tenant shall not be
relieved from its primary obligations hereunder to Landlord including but not
limited to the payment of all Base Rent and Tenant's Pro Rata Share of
increases in Operating Expenses. Landlord's consent to any requested
subletting or assignment shall not waive Landlord's right to refuse to consent
to any other such request. Tenant shall pay to Landlord within thirty (30)
days of receipt of an invoice therefor all reasonable costs incurred by
landlord in reviewing and preparing documents with respect to any proposed
subletting or assignment of the Premises, not to exceed $500.
C. In the event Tenant receives rental or other sums as
rent from any subtenant or assignee in excess of the Base Rent and increases in
Operating Expenses required to be paid by Tenant hereunder Landlord shall be
entitled to 100% of such excess. Tenant shall promptly pay to Landlord 100% of
such excess rental as when the same is received by Tenant from any such
subtenant or assignee.
14. DAMAGE TO PROPERTY.
A. Tenant shall neither hold nor attempt to hold
Landlord liable for any injury or damage, either proximate or remote, occurring
through or caused by fire, water, steam, or any repairs, alterations, injury,
accident, or any other cause to the Premises, to any furniture, fixtures,
Tenant improvement, or other personal property of Tenant kept or stored in the
Premises, or in other parts of the Building and/or Common Areas not herein
demised, whether by reason of the negligence or default of the owners or
occupants thereof or any other person or otherwise, and the keeping or storing
of all property of Tenant in the Building, Common Areas and/or Premises shall
be at the sole risk of Tenant.
B. Subject to provisions of Paragraph 15.E below, Tenant
hereby agrees to indemnify, defend, and save Landlord harmless of and from all
liability, loss, damages, costs, or expenses, including attorneys' fees, on
account of injuries to the person or property of Landlord or of any other
tenant in the Building and Common Areas, or to any other person rightfully in
said Building and Common Areas for any purpose whatsoever, where the injuries
are caused by the negligence or misconduct of the Tenant, Tenant's agents,
servants or employees, or of any other person entering upon the Premises under
express or implied invitation of Tenant, or where such injuries are the result
of the violation of the provisions of this Lease, by any such persons.
15. INSURANCE AND WAIVER OF SUBROGATION.
A. Landlord shall maintain all risk property insurance
on the shell and core of the building, on the Premises to the extent of the
Standard Tenant Finish therein, and on the Building and Common Areas, in such
amounts, from such companies, and on such terms and conditions, including loss
of rental insurance, as Landlord deems appropriate, from time to time. Tenant
understands that Landlord will not carry insurance of any kind on Tenant's
furniture and furnishings or on any fixture or equipment removable by Tenant
under the provisions of this Lease or any other improvements installed in the
Premises by or for Tenant
-11-
<PAGE> 14
other than Standard Tenant Finish, and that Landlord shall not be obligated to
repair any damage thereto or replace the same.
B. Tenant shall obtain and maintain throughout the term
of this Lease "all risk" insurance on all of Tenant's property and betterments
in the Premises including, without limitation, all furniture, fixtures,
personal property, and all tenant finish in excess of that included within the
Standard Tenant Finish.
C. In addition to the above, Tenant shall obtain and
maintain throughout the term of this Lease a comprehensive general liability
policy, including protection against death, personal injury and property
damage, issued by an insurance company qualified to do business in the State of
Colorado, with a single limit of not less than $1,000,000 with a minimum
$2,000,000 aggregate.
D. All policies of insurance required to be carried by
Tenant hereunder shall name Landlord as an additional insured. Each such
policy shall provide that the same may not be cancelled or modified without at
least twenty (20 days' proper written notice to Landlord and any Mortgagee (as
defined in Paragraph 22.H hereof). Tenant shall deliver from time to time
certificates evidencing that such insurance is in force and effect. The limits
of said insurance shall not, under any circumstances, limit the liability of
Tenant hereunder.
E. Notwithstanding anything to the contrary contained
herein Landlord and Tenant hereby mutually waive and release their respective
rights of recovery against each other for (a) any loss on its property actually
insured against by "all risk" insurance coverage, said waiver and release shall
not apply to any deductible amount relating to such a claim; and (b) all loss,
cost, damage or expense arising out of or due to any interruption of business
(regardless of the cause therefor), increased or additional costs of operation
of business or other costs or expenses whether similar or dissimilar which are
actually insured against under business interruption insurance, said waiver and
release shall not apply to any deductible amount relating to such claim. Each
party shall apply to their insurers to obtain said waivers and obtain any
special endorsements, if required by their insurer to evidence compliance with
the aforementioned waiver, and shall bear the cost therefor.
16. CASUALTY AND RESTORATION OF PREMISES.
A. If the Premises of the Building shall be so damaged
by fire or other casualty as to render the Premises wholly untenantable, and if
such damage shall be so great that a competent architect, in good standing,
selected by Landlord shall certify in writing to Landlord and Tenant within
sixty (60) days of said casualty that the Premises, with the exercise of
reasonable diligence, cannot be made fit for occupancy within one hundred
twenty (120) days from the happening thereof, then this Lease shall cease and
terminate from the date of the occurrence of such damage; and Tenant shall
thereupon surrender to Landlord the Premises and all interest therein, and
Landlord may reenter and take possession of the Premises and remove Tenant
therefrom. Tenant shall pay rent, duly apportioned, up to the time of such
termination of this Lease. If, however, the damage shall be such that said
architect shall certify within said sixty (60) day period that the Premises can
be made tenantable within said one hundred twenty (120) day period, then,
except as hereinafter provided, Landlord shall repair the damage so done to the
extent of the Standard Tenant Finish with all reasonable speed.
B. If the Premises, without the fault of Tenant, shall
be damaged by fire or other casualty, but not so as to render the same wholly
untenantable or to require a repair period in excess of one hundred twenty
(120) days, then, Landlord, after receiving notice in writing of the occurrence
of the injury, shall, except as hereinafter provided, cause the same to be
repaired to the extent of the Standard Tenant Finish with reasonable
promptness. If the Premises have not been restored as provided above within
one hundred twenty (120) days after the date of the casualty, then Tenant may
elect to terminate this Lease by delivering written notice thereof to Landlord.
-12-
<PAGE> 15
C. In case the Building shall be so injured or damaged,
whether by fire or otherwise (though said Premises may not be affected, or if
affected), can be repaired within said one hundred twenty (120) days, that
within sixty (60) days after the happening of such injury, Landlord, in its
sole and absolute discretion, shall decide not to reconstruct or rebuild said
Building, then, notwithstanding anything contained herein to the contrary, upon
notice in writing to that effect given by Landlord to Tenant within said sixty
(60) days, Tenant shall pay the rent, properly apportioned up to such date,
this Lease shall terminate from the date of delivery of said written notice,
and both parties hereto shall be freed and discharged of all further
obligations hereunder.
D. Provided that the casualty is not the fault of
Tenant, Tenant's agents, servants or employees, Tenant's rent shall abate
during any such period of repair and restoration. If the Premises are wholly
untenantable, rent shall abate. If the Premises are partially untenantable,
rent shall abate in proportion to the portion of the Premises that is
untenantable.
17. CONDEMNATION.
If the entire Premises or substantially all of the Premises, or any portion of
the Building and Common Areas which shall render the Premises untenantable
shall be taken by right of eminent domain or by condemnation, or shall be
conveyed in lieu of any such taking, then this Lease, at the option of either
Landlord or Tenant exercised by either party giving notice to the other of such
termination within thirty (30) days after such taking or conveyance, shall
forthwith cease and terminate and the rent shall be duly apportioned as of the
date of such taking or conveyance. Tenant thereupon shall surrender to
Landlord the Premises and all interest therein under this Lease, and Landlord
may reenter and take possession of the Premises or remove Tenant therefrom. In
the event less than all of the Premises shall be taken by such proceeding,
Landlord shall promptly repair the Premises as nearly as possible to its
condition immediately prior to said taking unless Landlord elects not to
reconstruct or rebuild as described in subparagraph C of Paragraph 16 above.
In the event of any such taking or conveyance, Landlord shall receive the
entire award or consideration for the portion of the Building so taken.
18. DEFAULT BY TENANT.
A. Each one of the following events is herein referred
to as an "Event of Default":
(1) Tenant shall fail to pay rent or any other
amounts due hereunder within three (3) days of the date when due;
(2) Tenant shall vacate or abandon the Premises
or otherwise fail to continuously operate its business upon the Premises, for a
period of more than forty-five (45) days;
(3) This Lease or the estate of Tenant hereunder
shall be transferred to or shall pass to or devolve upon any other person or
party except as permitted in Paragraph 13;
(4) This Lease or the Premises or any part
thereof shall be taken upon execution or by other process of law directed
against Tenant, or shall be taken upon or subject to any attachment at the
instance of any creditor of or claimant against Tenant and said attachment
shall not be discharged or disposed of within sixty (60) days after the levy
thereof;
(5) The filing of any petition or the
commencement of any case or proceeding by the Tenant under any provision or
chapter of the Federal Bankruptcy Act, the Federal Bankruptcy Code or any other
federal or state law relating to insolvency, bankruptcy or reorganization; or
the adjudication or Tenant's admission that the Tenant is insolvent or
-13-
<PAGE> 16
bankrupt or unable to pay its debts as they come due; or the entry of an order
for relief under the Federal Bankruptcy Code with respect to Tenant;
(6) The filing of any petition or the
commencement of any case or proceeding described in subparagraph (5) above
against the Tenant, unless such petition and all proceedings initiated thereby
are dismissed within sixty (60) days from the date of such filing; the filing
of an answer by Tenant admitting the allegations of any such petition; or the
appointment of or taking possession by a custodian, trustee or receiver for all
or any assets of the Tenant, unless such appointment is vacated or dismissed
within sixty (60) days from the date of such appointment;
(7) The insolvency of the Tenant or the execution
by the Tenant of an assignment for the benefit of creditors; the convening by
Tenant of a meeting of its creditors, or any class thereof, for purposes of
effecting a moratorium upon or extension or composition of its debts; or the
failure of the Tenant generally to pay its debts as they mature;
(8) The admission in writing by Tenant or any
partner of Tenant if Tenant is a partnership that it is unable to pay its debts
as they mature or it is generally not paying its debts as they mature;
(9) Tenant shall fail to take possession of the
Premises on the date the Primary Lease Term commences;
(10) Tenant shall fail to perform any of the other
agreements, terms, covenants, or conditions hereof on Tenant's part to be
performed, and such non-performance shall continue for a period of thirty (30)
days after written notice thereof by Landlord to Tenant, or if such performance
cannot be reasonably had within such thirty (30) day period, Tenant shall not
in good faith have commenced such performance within such thirty (30) day
period and shall not diligently proceed therewith to completion and effect such
cure within a period of not more than (90) days after said written notice.
B. Remedies of Landlord. If any one or more Events of
Default shall happen, then Landlord shall have the right at Landlord's
election, then or at any time thereafter either:
(1) (a) With demand and notice, to reenter and
take possession of the Premises or any part thereof, and repossess the same as
of Landlord's former estate and expel Tenant and those claiming through or
under Tenant and remove the effects of both or either, without being deemed
guilty of any manner of trespass and without prejudice to any remedies for
arrears of rent or preceding breach of covenants or conditions. Should
Landlord elect to reenter as provided in this subparagraph (1), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Landlord may, from time to time, without
terminating this Lease, relet the Premises or any part thereof, either alone or
in conjunction with other portions of the Building of which the Premises are a
part, in Landlord's or Tenant's name but for the account of Tenant, for such
term or terms (which may be greater or less than the period which would
otherwise have constituted the balance of the term of this Lease) and on such
conditions and upon such other terms, (which may include such concessions, free
rent, alterations and repair of the Premises) as Landlord, in its sole
discretion, may determine, and Landlord may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any failure to
relet the Premises, or any part thereof, or for any failure to collect any rent
due upon such reletting. No such reentry or taking possession of the Premises
by Landlord shall be construed as an election on Landlord's part to terminate
this Lease unless a written notice of such intention be given to Tenant. No
notice from Landlord hereunder or under a forcible entry and detainer statute
or similar law shall constitute an election by Landlord to terminate this
Lease, nor shall such notice authorize Tenant to terminate or, revoke this
Lease, unless such notice specifically so states. Landlord reserves the right
following any such reentry and/or reletting to exercise its right to terminate
this Lease by
-14-
<PAGE> 17
giving Tenant such written notice, in which event the Lease will terminate as
specified in said notice.
(b) If Landlord elects to take
possession of the Premises as provided in this subparagraph (1) without
termination the Lease, Tenant shall pay to Landlord (i) the rent and other sums
as herein provided, which would be payable hereunder if such repossession had
not occurred, less (ii) the net proceeds, if any, of any reletting of the
Premises after deducting all of the Landlord 's expenses incurred in connection
with such reletting, including, but without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, expenses of employees,
alteration, remodeling and repair costs and expenses of preparation for such
reletting. If, in connection with any reletting, the new lease term extends
beyond the existing term, or the premises covered thereby include other
premises not part of the Premises, a fair apportionment of the rent received
from such reletting and the expenses incurred in connection therewith, as
provided aforesaid, will be made in determining the net proceeds received from
such reletting. In addition, in determining the net proceeds from such
reletting, any rent concessions will be apportioned over the term of the new
lease. Tenant shall pay such amounts to Landlord monthly on the days on which
the rent and all other amounts owing hereunder would have been payable if
possession had not been retaken and Landlord shall be entitled to receive the
same from Tenant on each such day; or
(2) To give Tenant written notice of intention to
terminate this Lease on the date of such give notice or on any later date
specified therein, and on the date specified in such notice, Tenant's right to
possession of the Premises shall cease and the Lease shall thereupon be
terminated, except as to Tenant's liability hereunder as hereinafter provided,
as if the expiration of term fixed in such notice were the end of the term
herein originally demised. In the event this Lease is terminated pursuant to
the provisions of this subparagraph (2), Tenant shall remain liable to Landlord
for damages in an amount equal to the rent and other sums which would have been
owing by Tenant hereunder for the balance of the term had this Lease not been
terminated, less the net proceeds, if any, of any reletting of the Premises by
Landlord subsequent to such termination, after deducting all Landlord's
expenses in connection with such reletting, including, but without limitation,
the expenses enumerated above. Landlord shall be entitled to collect such
damages from Tenant monthly on the days on which the rent and other amounts
would have been payable hereunder if this Lease had not been terminated, and
Landlord shall be entitled to receive the same from Tenant on each such day.
Alternatively, at the option of the Landlord, in the event this Lease is
terminated, Landlord shall be entitled to recover forthwith against Tenant as
damages for loss of the bargain and not as a penalty an amount equal to the
worth at the time of termination of the excess, if any, of the amount of rent
reserved in this Lease for the balance of the term hereof over the then
Reasonable Rental Value of the Premises for the same period plus all amounts
incurred by Landlord in order to obtain possession of the Premises and relet
the same, including attorneys' fees, reletting expenses, alterations and repair
costs, brokerage commissions, and all other like amounts. It is agreed that
the "Reasonable Rental Value" shall be the amount of rental which Landlord can
obtain as rent for the remaining balance of the term.
(3) In addition to Landlord's rights set forth in
subparagraphs (1) and (2) above, if Tenant fails to timely pay its rent and all
other amounts owing hereunder more than two (2) times during any twelve (12)
month period during the Term, or any extension thereof, then, upon the
occurrence of the third or any subsequent default in the payment of monies
during said twelve (12) month period, Landlord, at its sole option, shall have
the right to require that Tenant, as a condition precedent to curing such
default, pay to Landlord, in cash or its equivalent, in advance, the entire
rent and Landlord's estimate of all other amounts which will become due and
owing hereunder by Tenant for the balance of the Term (or if such default
occurs during any extension term, the amounts which will be required to be paid
will be those attributable to the balance of the extension term). All such
amounts shall be paid by Tenant within thirty (30) days after notice from
Landlord demanding the same. All monies so paid shall be retained by Landlord,
without interest, for the balance of the Term, and any extension thereof, and
shall be applied by Landlord to all amounts owing hereunder by Tenant.
-15-
<PAGE> 18
If however Landlord's estimate of the amounts for which Tenant is responsible
hereunder are inaccurate, when such error is discovered Landlord shall pay to
Tenant, or Tenant shall pay to Landlord, within thirty (30) days after written
notice thereof the excess or deficiency, as the case may be, which is required
to reconcile the amount on deposit with Landlord with the actual amounts for
which Tenant is responsible.
C. Cumulative Remedies. Suit or suits for the recovery
of the rents and other amounts and damages set forth hereinabove may be brought
by Landlord, from time to time, at Landlord's election, and nothing herein
shall be deemed to require Landlord to await the date whereon this Lease or the
term hereof would have expired by limitation had there been no such default by
Tenant, or no such termination, as the case may be. Each right and remedy
provided for in this Lease shall be cumulative and shall be in addition to
every other right or remedy provided for in this Lease or now or hereafter
existing at law or in equity or by statute or otherwise including but not
limited to suits for inductive relief and specific performance. The exercise
or beginning of the exercise by Landlord of any one or more of the rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise shall not preclude the simultaneous or later
exercise by Landlord of any or all other rights or remedies provided for in
this Lease or now or hereafter existing at law or in equity or by statute or
otherwise. All such rights and remedies shall be considered cumulative and
non-exclusive. In the event any action is commenced arising out of the terms
and provisions of this Lease, the prevailing party herein shall be entitled to
recover from the other party all costs and expense, including without
limitation all reasonable attorneys' fees incurred in connection with said
action. Notwithstanding anything in this Lease to the contrary, Landlord
agrees to use reasonable efforts to mitigate damages.
D. No Waiver. No failure by Landlord to insist upon the
strict performance of any agreement, term, covenant or condition hereof or to
exercise any right or remedy consequent upon a breach thereof, and no
acceptance of full or partial rent during the continuance of any such breach,
shall constitute a waiver of any such breach or of such agreement, term,
covenant, or condition. No agreement, term, covenant, or condition hereof to
be performed or complied with by Tenant and no breach thereof shall be waived,
altered, or modified except by written instrument executed by Landlord. No
waiver of any breach shall affect or alter this Lease, but each and every
agreement, term, covenant, and condition hereof shall continue in full force
and effect with respect to any other then existing or subsequent breach
thereof. Notwithstanding any termination of this Lease, the same shall
continue in force and effect as to any provisions which require observance or
performance by Landlord or Tenant subsequent to such termination.
E. Bankruptcy. Nothing contained in this Paragraph 18
shall limit or prejudice the right of Landlord to prove and obtain as
liquidated damages in any bankruptcy, insolvency, receivership, reorganization,
or dissolution proceeding an amount equal to the maximum allowed by any statute
or rule of law governing such a proceeding and in effect at the time when such
damages are to be proved, whether or not such amount be greater, equal to or
less than the amounts recoverable, either as damages or rent, referred to in
any of the preceding provisions of this section. Notwithstanding anything
contained hereinabove in this Paragraph to the contrary, any such proceeding or
action involving bankruptcy, insolvency, reorganization, arrangement,
assignment for the benefit of creditors, or appointment of a receiver or
trustee, as set forth above, shall be considered to be an Event of Default only
when such proceeding, action, or remedy shall be taken or brought by or against
the then holder of the leasehold estate under the Lease. Landlord and Tenant
understand that notwithstanding certain provisions to the contrary contained
herein, a trustee or debtor in possession to the contrary contained herein, a
trustee or debtor in possession under the Bankruptcy Code of the United States
may have certain rights to assume or assign this Lease. Landlord and Tenant
further understand that in any event Landlord is entitled under the Bankruptcy
Code to Adequate Assurance of future performance of the terms and provisions of
this Lease. For purposes of any such assumption or assignment, the parties
hereto agree that the term "Adequate Assurance" shall include at least the
following:
-16-
<PAGE> 19
(1) In order to assure Landlord that the proposed
assignee will have the resources with which to pay the rent called for herein,
any proposed assignee must have as demonstrated to Landlord's satisfaction a
net worth (as defined in accordance with generally accepted accounting
principles consistently applied) at least as great as the net worth of Tenant
on the date this Lease became effective increased by seven percent (7%),
compounded annually, for each year from the Lease Commencement Date through the
date of the proposed assignment. The financial condition and resources of
Tenant were a material inducement to Landlord in entering into this Lease.
(2) Any proposed assignee of this Lease must
assume and agree to be bound by the terms, provisions, and covenants of this
Lease.
F. Late Payment Charge. Any rents or other amounts
owing hereunder which are not paid within five (5) days after the date they are
due shall thereafter bear interest at the annual rate of ten percentage points
over the prime rate then being charged by First Interstate Bank of Denver, N.A.
to its most credit-worthy customers on an unsecured basis for short term loans
(the "Prime Rate"), or the highest rate permitted by applicable usury law,
whichever is higher, until paid. Further, in the event any rents or other
amounts owing hereunder are not paid within said three (3) day period after
written notice, Landlord and Tenant agree that Landlord will incur additional
administrative expenses, the amount of which will be difficult if not
impossible to determine. Accordingly, Tenant shall pay to Landlord an
additional one-time late charge for any such late payment in the amount of five
percent (5%) of such payment. Any amounts paid by Landlord to cure any
defaults of Tenant hereunder, which Landlord shall have the right, but not the
obligation, to do, shall, if not repaid by Tenant within three (3) days of
demand by Landlord, thereafter bear interest at the rate of ten (10) percentage
points over the Prime Rate, until paid.
19. SUBORDINATION AND ATTORNMENT.
A. This Lease, at Landlord's option, automatically shall
be subordinate to any mortgage or deed of trust (now or hereafter placed upon
the Building and Common Areas, or any portion thereof), including any
amendment, modification, or restatement of any of such documents and to any and
all advances made under any mortgage or deed of trust and to all renewals,
modifications, consolidations, replacements, and extensions thereof. Tenant
agrees that with respect to any of the foregoing documents, no documentation,
other than this Lease, shall be required to evidence such subordination.
B. If any holder of a mortgage or deed of trust shall
elect to have this Lease superior to the lien of the holder's mortgage or deed
of trust and shall give written notice thereof to Tenant, this Lease shall be
deemed prior to such mortgage or deed of trust, whether this Lease is dated
prior or subsequent to the date of said mortgage or deed of trust, or the date
of recording thereof.
C. In confirmation of such subordination or superior
position, as the case may be, Tenant agrees to execute such documents as may be
required by Landlord or its Mortgagee to evidence the subordination of its
interest herein to any of the events described above, or to make this Lease
prior to the lien of any mortgage or deed of trust, as the case may be, and
failing to do so within ten (10) days after written demand, Tenant does hereby
make, constitute and irrevocably appoint Landlord as Tenant's attorney-in-fact
and in Tenant's name, place and stead, to do so.
D. Tenant hereby agrees to attorn to all successor
owners of the Building and Common Areas whether or not such ownership is
acquired as a result of a sale, through foreclosure of a deed of trust or
mortgage, or otherwise.
-17-
<PAGE> 20
20. SURRENDER.
A. Upon the expiration or other termination of the Term
of this Lease, Tenant shall promptly quit and surrender to Landlord the
Premises broom clean, in good order and condition, ordinary wear and tear and
damage by fire or other casualty excepted, and Tenant shall remove all of its
movable furniture and other effects and such Alterations, as Landlord shall
require Tenant to remove pursuant to Paragraph 11 hereof. In the event Tenant
fails to vacate the Premises on a timely basis as required, Tenant shall be
responsible to Landlord for all costs incurred by Landlord as a result of such
failure, including, but not limited to, any amounts required to be paid to
third parties who were to have occupied the Premises.
B. All movable furniture and personal effects of Tenant
not removed from the Premises upon the vacation or abandonment thereof or upon
the termination of this Lease for any cause whatsoever shall conclusively be
deemed to have been abandoned and may be appropriated, sold, stored, destroyed,
or otherwise disposed of by Landlord without notice to Tenant or any other
person and without obligation to account therefor, and Tenant shall pay
landlord all expenses incurred in connection with the disposition of such
property.
C. If, after the expiration of this Lease, Tenant shall
remain in possession of the Premises and continue to pay rent, without any
express written agreement as to such holding over, then such holding over shall
be deemed and taken to be a holding upon a tenancy from month to month, subject
to all the terms and conditions hereof on the part of Tenant to be observed and
performed and at a monthly rent equivalent to one hundred fifty percent (150%)
of the monthly installments paid by Tenant immediately prior to such expiration
or the then current market rental rate, whichever is greater. All such rent
shall be payable in advance on the same day of each calendar month. Such
month-to- month tenancy may be terminated by either party upon thirty (30)
days' notice prior to the end of any such monthly period. Nothing contained
herein shall be construed as obligating Landlord to accept any rental tendered
by Tenant after the expiration of the term hereof or as relieving Tenant of its
liability and obligations pursuant to this Paragraph.
D. No payments of money by Tenant to Landlord after the
termination of this Lease, in any manner, or after giving of any notice (other
than a demand for payment of money) by Landlord to Tenant, shall reinstate,
continue or extend the term of this Lease or affect any notice given to Tenant
prior to the payment of such money, it being agreed that after the service of
notice or the commencement of a suit or other final judgement granting Landlord
possession of the Premises, Landlord may receive and collect any sums of rent
due, or any other sums of money due under the terms of this Lease, or otherwise
exercise Landlord's rights and remedies hereunder, and the payment of such sums
of money, whether as rent or otherwise, shall not waive said notice, or in any
manner affect any pending suit or judgement theretofore obtained.
21. STATEMENT OF PERFORMANCE.
Both parties agree at any time and from time to time, upon not less than ten
(10) days' prior written request by the other party, to execute, acknowledge
and deliver to the other party a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified, and
stating the modifications), that there have been no defaults thereunder by
Landlord or Tenant (or if there have been defaults, setting forth the nature
thereof), the date to which the rent and other charges have been paid in
advance, if any, and such other information as the other party may request. It
is intended that any such statement delivered pursuant to this Paragraph may be
relied upon by any prospective purchaser of all or any portion of either
party's interest herein or a holder or prospective holder of any mortgage or
deed of trust encumbering the Building. Either party's failure to deliver such
statement within such time shall be conclusive upon such party that: (i) this
Lease is in full force and effect, without modification except as may be
represented by such party; (ii) there are no uncured defaults in either party's
performance; and
-18-
<PAGE> 21
(iii) not more than one (1) month's rent has been paid in advance. In
addition, such party agrees to provide such other information as the other
party may require from time to time. Further, upon request, such party will
supply to the other party a corporate or partnership resolution, as the case
may be, certifying that the party signing said statement of such party is
property authorized to do so.
22. MISCELLANEOUS.
A. The term "Landlord" as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Building and Common
Areas at the time in question, and in the event of any transfer or transfers of
the title thereto, Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically released
from and after the date of such transfer or conveyance of all liability as
respects the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed; provided that any
funds in the hands of Landlord or the then grantor at the time of such transfer
in which Tenant has an interest shall be turned over to the grantee, and any
amount then due and payable to Tenant by Landlord or the then grantor under any
provision of this Lease shall be paid to Tenant.
B. The termination or mutual cancellation of this Lease
shall not work a merger, and such termination or mutual cancellation shall, at
the option of Landlord, either terminate all subleases and subtenancies or
operate as an assignment to Landlord of any or all such subleases or
subtenancies.
C. Tenant agrees that for the purposes of completing or
making repairs or alterations in any portion of the Building, Landlord may use
one or more of, the street entrances, the halls, passageways and elevators of
the Building.
D. This Lease shall be construed as though the covenants
herein between Landlord and Tenant are independent and not dependent, and
Tenant shall not be entitled to any setoff of the rent or other amounts owing
hereunder against Landlord if Landlord fails to perform its obligations set
forth herein; provided, however, the foregoing shall in no way impair the right
of Tenant to commence a separate action against Landlord for any violation by
Landlord of the provisions hereof so long as notice is first given to Landlord
and an opportunity granted to Landlord to correct such violation as provided in
subparagraph H, below, of this Paragraph.
E. If any clause or provision of this Lease is illegal,
invalid, or unenforceable under present or future laws effective during the
term of this Lease, then and in that event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby, and it
is also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid, or unenforceable, there be
added as a part of this lease a clause or provision as similar in terms to such
illegal, invalid, or unenforceable clause or provision as may be possible and
be legal, valid, and enforceable.
F. The caption of each paragraph is added as a matter of
convenience only and shall be considered of no effect in the construction of
any provision or provisions of this Lease.
G. Except as herein specifically set forth, all terms,
conditions, and covenants to be observed and performed by the parties hereto
shall be applicable to and binding upon their respective heirs, administrators,
executors, and assigns. The terms, conditions and covenants hereof shall also
be considered to be covenants running with the land to the fullest extent
permitted by law.
-19-
<PAGE> 22
H. In the event of any alleged default on the part of
Landlord hereunder, Tenant shall give written notice to Landlord in the manner
herein set forth and shall afford Landlord a reasonable opportunity to cure any
such default, not to exceed ninety (90) days.
I. Tenant and the party executing this Lease on behalf
of Tenant represent to Landlord that such party is authorized to do so by
requisite action of the board of directors, partners, or managers or members,
as the case may be, and agree upon request to deliver to Landlord a resolution
or similar document or opinion of counsel to that effect.
J. If there are more than one entity or person which or
who is the Tenant under this Lease, the obligations imposed upon Tenant under
this Lease shall be joint and several.
K. No act or thing done by Landlord or Landlord's agents
during the term hereof, including, but not limited to, any agreement to accept
surrender of the Premises or to amend or modify this Lease, shall be deemed to
be binding on Landlord unless such act or thing shall be by a partner or
officer of Landlord, as the case may be, or a party designated in writing by
Landlord as so authorized to act. The delivery of keys to Landlord or
Landlord's agents, employees, or officers shall not operate as a termination of
this Lease or a surrender of the Premises. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly rent and all other amounts owing
as herein stipulated, shall be deemed to be other than on account of the
earliest stipulated rent, or other amounts nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy available to Landlord.
L. Landlord shall have the right at any time to change
the name of the Building, to increase the size of the Building and/or Common
Areas by adding additional real property thereto, to construct other buildings
or improvements on any portion of the Building and/or Common Areas or to change
the Building and/or Common Areas. In the event any such additional buildings
are constructed or Landlord increases the size of the Building and/or Common
Areas, Landlord and Tenant shall execute an amendment to the Lease which
incorporates such modifications, additions and adjustments to Tenant's Pro Rata
Share, if necessary. Tenant shall not use the name and/or mark, PLAZA 6000 or
other mark, name or logo belonging to Landlord or Plaza 6000 Partners, alone or
in conjunction with any words or symbols as a trade name, corporate name, trade
mark, service mark or otherwise, without a prior written agreement from Plaza
6000 Partners, or its successor-in-interest. Any use of such name in the
designation of Tenant's business shall constitute a default under this Lease.
M. Tenant covenants and agree that no diminution of
light, air or view by any structure that may hereafter be erected (whether or
not by Landlord) shall entitle Tenant to any reduction of rent or other charges
under this Lease, result in any liability of Landlord to Tenant, or in any
other way affect this Lease or Tenant's obligations hereunder.
N. Landlord agrees to warrant and defend Tenant in the
quiet enjoyment and possession of the Premises during the term of this Lease so
long as Tenant complies with the provisions hereof.
O. Whenever the Lease provides for Landlord to consent
or approve any action or documents, it is understood and agreed that such
consent or approval shall be in Landlord's sole and absolute discretion, except
where specifically provided that such consent or approval shall not be
unreasonably withheld and shall be effective only if provided in writing signed
by an authorized agent of Landlord.
P. Time is of the essence hereof.
-20-
<PAGE> 23
Q. Tenant acknowledges and agrees that it has not relied
upon any statements, representations, agreements, or warranties by Landlord,
its agents or employees, except such as are expressed herein, and that no
amendment or modification of this Lease shall be valid or binding unless
expressed in writing and executed by the parties hereto in the same manner as
the execution of this Lease.
R. Tenant agrees that the Rentable Area, the Base Rent,
and Tenant's Pro Rata Share may be recalculated in the event that the Building
and/or Premises are measured upon completion and it is determined that the
square footage of the Building and/or Premises differs from those set forth in
Paragraphs 3 and 6 hereof. The Base Rent shall be recalculated pursuant to
paragraph 3.
S. Tenant shall not record this Lease or any memorandum
of this Lease. Any attempt to record this Lease or any memorandum of this
Lease shall be an event of default (subject to no grace period or notice) and
shall entitle Landlord to pursue any and all remedies available to it as a
result thereof.
T. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or an option for
lease, and it is not effective as a lease or otherwise until execution and
delivery by both Landlord and Tenant.
U. Tenant and Landlord hereby waive (to the extent
allowed by law) any and all rights to a trial by jury in suit or suits brought
to enforce any provision of this Lease or arising out of or concerning the
provisions of this Lease.
V. Tenant covenants with Landlord to generate and store
Hazardous Substances (as defined below) at the Premises only in amounts as are
incident to and necessary for the normal office operation of Tenant and
permitted by this Lease, to comply with all obligations imposed by applicable
law upon such generation and storage of Hazardous Substances, to prohibit any
generation, storage, or disposal of Hazardous Substances at the Premises except
as permitted above, to deliver promptly to Landlord true and complete copies of
all notices received by Tenant from any governmental authority with respect to
the generation, storage or disposal by Tenant of Hazardous Substances, to
notify Landlord of any spills or accidents involving a Hazardous Substance, and
to permit reasonable entry onto the Premises by Landlord for verification of
Tenant's compliance with this covenant. Tenant also agrees to indemnify and
defend Landlord (with legal counsel reasonably acceptable to Landlord) from and
against any costs, fees or expenses (including, without limitation, clean-up
expenses, third party claims and environmental impairment expenses, and
reasonably attorneys' fees and expenses) incurred by Landlord in connection
with Tenant's generation, storage or disposal of Hazardous Substances. This
indemnification by Tenant shall survive the termination or expiration of this
Lease. "Hazardous Substances" shall mean (i) "hazardous substances" as defined
in the Comprehensive Environmental Response, Compensation and Liability Act, as
from time to time amended, (ii) "PCBs" as defined in 40 C.F.R. 761, et seq. and
"TCDD" as defined in 40 C.F.R. 775, et seq., or, in either case, analogous
regulations promulgated under the Toxic Substances Control Act, as from time to
time amended, (iii) "asbestos" as defined in 29 C.F.R. 1910.1001, et seq., or
analogous regulations promulgated under the Occupational Safety and Health Act
of 1970, as from time to time amended, (iv) oil and petroleum based products,
(v) "hazardous wastes" as defined in Resource Conservation and Recovery Act, as
from time to time amended; and (vi) any other substances identified as
hazardous or toxic or otherwise regulated under any of said statutes or
regulations or under any other federal, state or local laws or regulations.
W. Except as otherwise provided below, if the parties
mutually agree at the time of the dispute, the parties may agree to submit a
dispute to arbitration in the City and County of Denver, and judgment upon the
award rendered may be entered in any court having jurisdiction thereof. Except
as provided herein, the arbitration shall proceed in accordance with the laws
of the State of Colorado. Either party may request arbitration of any dispute
by serving a written demand for arbitration on the other party by registered or
certified mail. The
-21-
<PAGE> 24
demand shall set forth a statement of the nature of the dispute, an estimate of
the amount involved, if such estimate is then feasible, and a brief description
of the remedies sought. No later than twenty (20) calendar days after a demand
for arbitration is served, the parties shall jointly select and appoint a
retired judge of the District Court of the City and County of Denver, or
another person acceptable to both parties, to act as the arbitrator. If the
parties do not agree on the selection of an arbitrator, the party seeking
arbitration shall apply to the District Court for the City and County of Denver
for the appointment of an arbitrator. No later than ten (10) calendar days
after appointment of an arbitrator, the parties shall jointly prepare and
submit to the arbitrator a set of rules for the arbitration. If the parties
cannot agree on the rules for the arbitration, the arbitrator shall establish
the applicable rules. No later than ten (10) calendar days after the
arbitrator is appointed, the arbitrator shall schedule the arbitration for a
hearing to commence on a mutually convenient date. The hearing shall commence
no later than one hundred twenty (120) calendar days after the arbitrator is
appointed and shall continue from day to day until completed. The arbitrator
shall issue his award in writing no later than twenty (20) calendar days after
the conclusion of the hearing. The arbitration award shall be final and
binding regardless whether one of the parties fails or refuses to participate
in the arbitration. The arbitrator is empowered to hear and determine all
disputes between Landlord and Tenant, as well as any guarantor under this
Lease, if applicable, concerning the subject matter of this Lease. Without
limiting the generality of the foregoing, the arbitrator may award monetary
damages, punitive damages, injunctive relief, rescission, restitution and
costs. Further, the arbitrator shall, as part of the arbitration decree, award
to the prevailing party all reasonable costs and expenses, including reasonable
attorneys' fees, expended or incurred by the prevailing party in connection
with the dispute giving rise to the arbitration proceeding. For purposes of
the foregoing, the prevailing party shall be deemed to be the party recovering
a net money judgement against the other, without regard to non-monetary
remedies. If either party serves a proper demand for arbitration under this
Agreement, both parties may pursue discovery in accordance with the Colorado
Rules of Civil Procedure, the provisions of which are incorporated herein by
reference, with the following exceptions: (a) any party may conduct all
discovery, including depositions for discovery purposes, without leave of the
arbitrator; and (b) all discovery shall be completed no later than the
commencement of the arbitration hearing or one hundred twenty (120) calendar
days after the date that a proper demand for arbitration is served, whichever
occurs earlier, unless upon a showing of good cause, the arbitrator extends or
shortens that period. The arbitrator shall not have the power to amend this
Lease in any respect. Notwithstanding any provision to the contrary contained
herein, the foregoing arbitration procedures shall not apply to any forcible or
unlawful entry and detainer action or any other actions or proceedings to
determine the party entitled to possession and occupancy of the Premises or any
other portion of the Real Property, all of which actions shall be brought by
appropriate action before a court with jurisdiction over same, nor shall same
apply to any right of Landlord to recover possession of the Premises by means
of self-help or other non-judicial remedy authorized by law upon the occurrence
of an event of default under this Lease.
23. PERSONAL PROPERTY TAXES.
Tenant shall pay all sales and use taxes imposed as the result of Tenant's
business conducted on the Premises and all personal property taxes assessed
against personal property of the Tenant situated thereon during the term
hereof.
24. AUTHORITIES FOR ACTION AND NOTICE.
A. Except as herein otherwise provided, Landlord may act
in any manner provided for herein by Landlord's Building manager or any other
person who shall from time to time be designated in writing.
B. All notices, demand, statements or communications
required or permitted to be given to Landlord hereunder shall be in writing,
and shall be deemed duly served when deposited in the United States mail,
postage prepaid, certified or registered, return receipt requested, addressed
to Landlord, 6000 East Evans Avenue, Suite 1-100, Denver, Colorado
-22-
<PAGE> 25
80222 or at the most recent address of which Landlord has notified Tenant in
writing. All notices or demand required to be given to Tenant hereunder shall
be in writing, and shall be deemed duly served when delivery personally to any
officer (or a partner of Tenant if Tenant is partnership, a member or manager
if Tenant is a limited liability company, or to Tenant individually if Tenant
is a sole proprietor) or manager of Tenant whose office is in the Building, or
when deposited in the United States mail, postage prepaid, certified or
registered, return receipt requested, addressed to Tenant at the Premises, or,
prior to Tenant's taking possession of the Premises, to the address known to
Landlord as Tenant's principal office address. Either party shall have the
right to designate in writing served as above provided a different address to
which notice is to be mailed. The foregoing shall in no event prohibit notice
from being given as provided in Rule 4 of Colorado Rules of Civil Procedure, as
the same may be amended from time to time.
25. RULES AND REGULATIONS.
It is further agreed that the following rules and regulations shall be and are
hereby made a part of this Lease, and Tenant agrees that Tenant's employees and
agents, or any others permitted by Tenant to occupy or enter the Premises, will
at all times abide by said rules and regulations, to wit:
A. The sidewalks, entries, passages, corridors,
stairways, and elevators of the Building and/or Common Areas shall not be
obstructed by Tenant, or Tenant's agents or employees, or used for any purpose
other than ingress and egress to and from the Premises, it being understood and
agreed that such access may be obtained only via the elevators in the lobby of
the Building.
B. Furniture, equipment, or supplies will be moved in or
out of the Building only upon the elevator designated by Landlord and then only
during such hours and in such manner as may be prescribed by Landlord. The
Landlord shall have the right to approve or disapprove the movers or moving
company employed by Tenant, and Tenant shall cause said movers to use only the
loading facilities and elevator designated by Landlord. In the event Tenant's
movers damage the elevator or any part of the Building, Tenant shall forthwith
pay to Landlord the amount required to repair said damage. Landlord
understands and approves that Tenant may move its property by using its
employees and principals.
C. No safe or article, the weight of which may, in the
opinion of Landlord, constitute a hazard or damage to the Building or the
Building's equipment, shall be moved into the Premises. Safes or other
equipment, the weight of which is not excessive, shall be moved into, from, or
about the Building only during such hours and in such manner as shall be
prescribed by Landlord, and Landlord shall have the right to designate the
location of such articles in the Premises.
D. No sign, advertisement, or notice shall be inscribed,
painted or affixed on any part of the inside or outside of the Building unless
of such color, size and style and in such place upon or in the Building as
shall be first designated by Landlord in writing, but there shall be no
obligation or duty on Landlord to allow any sign, advertisement or notice to be
inscribed, painted or affixed on any part of the inside or outside of the
Building. A directory in a conspicuous place, with names of tenants, not to
exceed one (1) name per one thousand (1,000) Rentable Square Feet of space
contained in the respective premises, will be provided by Landlord. Any
necessary revision in the directory will be made by Landlord at Tenant's
expense within a reasonable time after notice from Tenant of the change making
the revision necessary. No furniture shall be placed in front of the Building
or in any lobby or corridor of the Building (whether included wholly within the
Premises or otherwise), without the Prior written consent of Landlord.
Landlord shall have the right to remove all non-permitted signs and furniture,
without notice to Tenant, at the expense of Tenant.
E. Tenant shall not do or permit anything to be done in
the Premises or bring or keep anything therein which would in any way increase
the rate of fire insurance on
-23-
<PAGE> 26
the Building or on personal property kept therein, constitute a nuisance or
waste, obstruct or interfere with the rights of other tenants or in any way
injure or annoy them, or conflict with the laws relating to fire or with any
regulations of the fire department, fire insurance underwriters or with any
insurance policy upon the Building or any part thereof, or conflict with any of
the rules or ordinances of the Department of Health of the City and County
where the Building is located.
F. Tenant shall not employ any person or persons other
than the janitor of Landlord for the purpose of cleaning or taking care of the
Premises without the prior written consent of Landlord. Landlord shall be in
no way responsible to Tenant for any loss of property from the Premises,
however occurring, or for any damage done to Tenant's furniture or equipment by
the janitor or any of the janitor's staff, or by any other person or persons
whomsoever. The janitor of the Building may at all times keep a passkey and
other agents of Landlord shall at all time be allowed admittance to the
Premises.
G. Water closets and other water fixtures shall not be
used for any purpose other than that for which they are intended, and any
damage resulting to them from misuse on the part of Tenant or Tenant's agents
or employees shall be paid for by Tenant. No person shall waste water by tying
back or wedging the faucets or in any other manner.
H. No animals shall be allowed in the offices, halls,
corridors and elevators in the Building. No person shall disturb the tenants
of the Building or adjoining buildings or premises by the use of any radio,
sound equipment, or musical instrument or by the making of loud or improper
noises.
I. Bicycles or other vehicles shall not be permitted in
the offices, halls, corridors, and elevators in the Building nor shall any
obstruction of sidewalks or entrances of the Building be permitted.
J. Tenant shall not allow anything to be placed on the
outside of the Building nor shall anything be thrown by Tenant, Tenant's agents
or employees out of the windows or doors, or down the corridors, elevator
shafts, or ventilating ducts or shafts of the Building. Tenant, except in case
of fire or other emergency, shall not open any outside window.
K. No locksmith services may be performed and no
additional lock or locks shall be placed by Tenant on any door in the Building
unless written consent of Landlord shall first have been obtained. Two keys to
the Premises, exterior doors and the toilet rooms, if locked by Landlord, will
be furnished by Landlord, and neither Tenant nor Tenant's agents or employees
shall have any duplicate keys made. Landlord shall supply Tenant with such
additional keys as Tenant may require at Tenant's sole cost and expense. At
the termination of this tenancy, Tenant shall promptly return to Landlord all
keys to offices, toilet rooms or exterior doors.
L. No window shades, blinds, screens, draperies, or
other window coverings will be attached or detached by Tenant without
Landlord's prior written consent. Tenant agrees to abide by Landlord's rules
with respect to maintaining uniform curtains, draperies, and linings or blinds
at all windows and hallways.
M. If any Tenant desires telegraphic, telephonic, or
other electric connections, Landlord or Landlord's agents will direct the
electricians as to where and how the wires may be introduced. Without such
directions, no boring or cutting of wires will be permitted. Any such
installation and connection shall be made at Tenant's expense.
N. Tenant shall not install or operate any steam or gas
engine or boiler, or carry on any mechanical business in the Premises. The use
of oil, gas, or inflammable liquids for heating, lighting, or any other purpose
is expressly prohibited. Explosives or other articles deemed extra hazardous
shall not be brought into the Building.
-24-
<PAGE> 27
O. Any painting or decorating as may be agreed to be
done by and at the expense of Landlord shall be done during regular weekday
working hours; should Tenant desire such work on Saturdays, Sundays, Legal
Holidays, or outside of regular working hours, Tenant shall pay for the extra
cost thereof.
P. Except as permitted by Landlord, Tenant shall not
mark upon, paint signs upon, cut, drill into, drive nails or screws into, or in
any way deface the walls, ceilings, partitions, or floors of the Premises or of
the Building, and any defacement, damage, or injury caused by Tenant, Tenant's
agents or employees, shall be paid for by Tenant.
Q. During the entire term of this Lease, Tenant shall,
at Tenant's expense, install and maintain under each and every caster chair, a
chair pad to protect the carpeting.
R. Smoking is not permitted in Common Areas, including
but not limited to hallways, elevators, restrooms, locker rooms and exercise
facilities.
Smoking is permitted, subject to and except as regulated by
federal, state, and local, governmental or quasi-governmental agencies, laws or
regulations, within the confines of Tenants offices and in areas designated,
from time to time, subject to change, by Landlord. Provided however; (a) If
smoking odors become an issue for neighboring tenants within their offices or
in common areas, it will be the responsibility of the offending Tenant, as
determined in the sole discretion of the Landlord, to correct the odor problem;
(b) Said areas do not contradict terms of, increase costs of or disrupt
Landlords hazard and liability insurance policies; and (c) Provided Tenant,
Tenant's agents, servants or employees, or any other person entering upon the
Premises, Building and Common Areas under the express or implied invitation of
Tenant, use reasonable care not to damage deface or litter the Building and
Common Areas with fire, smoke, ash, cigarette and/or cigar butts and matches
and that care is taken that all litter, debris, used smoking materials and
by-products are placed in receptacles provided in said designated smoking
areas.
S. No cooking shall be done or permitted by Tenant on
Premises, nor shall Premises be used for lodging or for any improper,
objectionable or immoral purpose. Landlord agrees that Tenant may use a
microwave oven in the Premises.
T. The toilet rooms, urinals, wash bowls and other
apparatus shall not be used for any purpose other than that for which they were
constructed or intended. No inappropriate or damaging substances or materials
of any kind whatsoever shall be disposed of therein. All expenses of any
damages, breakage or stoppage resulting from the violation of this rule shall
be born entirely by the tenant who, or whose agents, servants, employees and/or
any other persons entering the Building under the express or implied invitation
of Tenant are found to be negligent under this rule.
U. Canvassing, soliciting and peddling in or about the
Building and Common Areas is prohibited.
V. Tenant shall at all times comply with all Building
security and life safety procedures as may from time to time be implemented by
Landlord.
X. For the purpose of providing utilities and services,
the Building hours of operation are from 7:00 a.m. to 7:30 p.m., Monday through
Friday and from 9:00 a.m. to 1:00 p.m. Saturday, except legal holidays.
Y. Tenant shall insure that all entry doors of the
Premises are closed and locked and observe strict care and caution that all
water faucets and apparatus are entirely shut off before Tenant or Tenant's
agents, servants or employees leave the Building. All electricity shall
likewise be shut off. All expenses, damages or injuries resulting from the
violation of this rule shall be born by the tenant who, or whose agents,
servants or employees are found to be negligent under this rule.
-25-
<PAGE> 28
Z. Parking is provided for the non-exclusive use of
tenants, tenant's agents, servants, employees and any other persons entering
the Building under the express or implied invitation of Tenant. Parking is not
allowed in covered parking areas or any areas specifically designated or leased
for the exclusive use of others. Only passenger vehicles are allowed in
Building parking areas. No trucks or equipment are allowed to park. No
overnight or extended parking is allowed without the written permission of the
Landlord.
Tenant agrees that Landlord may amend, modify, delete, or add
new and additional rules and regulations of the use and care of the Premises
and the Building and Common Areas. Tenant agrees to comply with all such rules
and regulations upon notice to Tenant from Landlord thereof. In the event of
any breach of any rules and regulations herein set forth or any amendments,
modifications, or additions thereto, Landlord shall have all remedies in this
Lease provided for in the event of default by Tenant.
26. LIMITATION OF LANDLORD'S LIABILITY.
Notwithstanding anything to the contrary contained herein, none of the partners
(including any trustees or beneficiaries of trusts of partners) of Landlord
shall have any individual or personal liability for the performance or
observance of Landlord's responsibilities and covenants hereunder; Landlord's
liability under the Lease shall be limited to Landlord's interest in the
Building and Common Areas.
27. BROKER INDEMNIFICATION.
A. Daniel Bruce Strong, Colorado Real Estate Broker
#IB00275141, Fuller and Company and McBroom and Company shall hereinafter be
referred to as ("Broker of Record").
B. As part of the consideration for the granting of this
Lease, Tenant represents and warrants to Landlord that no broker or agent
negotiated or was instrumental in the negotiation or consummation of this Lease
except the Broker of Record, and Tenant agrees to indemnify Landlord against
any loss, expense, cost or liability incurred by Landlord as a result of a
claim by any broker or finder claiming through Tenant.
28. OPTION TO EXTEND.
As additional consideration for the covenants of Tenant hereunder, Landlord
hereby grants unto Tenant an option (the "Option") to extend the term of the
Lease for one (1) additional term of three (3) years (the "Option Term"). The
Option shall apply to all space then under the Lease at the time the Option
Term would commence, and shall be on the following terms and conditions:
A. Written notice of tenant's interest in exercising the
Option shall be given to Landlord no earlier than twelve (12) months and not
later than six (6) months prior to the expiration of the primary lease term
("Tenant's Notice"). Not later than thirty (30) days after receiving Tenant's
Notice, Landlord shall give to Tenant notice of the terms, conditions and
rental rate applicable during the Option Term, in accordance with subparagraph
E. below ("Landlord's Notice").
B. Tenant shall have thirty (30) days following Tenant's
receipt of Landlord's Notice within which to exercise the Option by delivering
written notice of such exercise to Landlord under the terms, conditions and
rental rate set forth in Landlord's Notice. If Tenant timely exercises the
Option, the Lease shall be deemed extended and thereafter the parties shall
execute an amendment to the Lease setting forth the terms of the extension.
C. Unless Landlord is timely notified by Tenant in
accordance with subparagraphs A and B above, it shall be conclusively deemed
that Tenant does not desire to
-26-
<PAGE> 29
exercise the Option, and the Lease shall expire in accordance with its terms,
at the end of the Primary Lease Term.
D. Tenant shall not be in uncured default under the
Lease at the time of exercise of the Option or at the time of the commencement
of the Option Term, or at any time in between. If Tenant is in default at any
such time, this Lease shall expire in accordance with its terms at the end of
the Term, and Tenant shall have no right to renew or extend the Term of this
Lease.
E. Base rent for the Option Term shall be scheduled as
illustrated below:
Year 1 - $14.45 per rentable square foot.
Year 2 - $14.95 per rentable square foot.
Year 3 - $15.45 per rentable square foot.
F. After exercise of the Option above described, there
shall be no further rights on the part of Tenant to extend the term of the
Lease.
29. ADDITIONAL PROVISIONS.
A. Provided Tenant is not in default of the terms and
conditions of this Lease:
1. Tenant shall have the option to terminate
this Lease on October 31, 1999, by providing Landlord with notice of intent, in
writing, no later than June 30, 1999. At the same time written notice of said
intention is delivered, a check in the amount of twenty six thousand, three
hundred forty four dollars and nineteen cents ($26,344.19), as liquidated
damages, shall accompany the notice. Said liquidated damages being based on
unamortized tenant finish costs plus commissions paid at 12% interest.
2. In the event that Tenant elects to holdover
tenancy after providing Landlord with notice of intent to vacate, Rent
described in paragraph 3. and pursuant to Surrender, paragraph 20.A. shall be
increased to 150% of the amount stated in paragraph 3. and 6.
30. RIGHT OF EXPANSION.
A. Provided Tenant is not in default under the terms and
conditions of this Lease, it is understood and agreed that Landlord will
provide Tenant with a Right of Expansion to secure the contiguous rentable
square footage located on the third floor of Building 2 and suite 2-210
consisting of approximately 1,876 rentable square feet and suite 2-221
consisting of approximately 951 rentable square feet, upon written notice by
Tenant. In the event Tenant exercises this right, the lease of such space
shall be on and subject to all terms, covenant and conditions provided in this
Lease except for the following:
1. NOTICE BY TENANT. Tenant shall notify
Landlord of its desire to lease any portion of the third floor of Building 2
and suite 2-210 consisting of approximately 1,876 rentable square feet and
suite 2-221 consisting of approximately 951 rentable square feet, in writing.
Landlord shall notify Tenant within three business days when space will be
available. In such event, Landlord will amend the Lease to reflect the terms
and conditions as outlined in paragraph 29.B.
2. RENT COMMENCEMENT. Tenant's obligation to
pay rent for said space shall commence upon occupancy.
3. LEASE TERM. The term of the expansion space
shall be coterminous with the term of the Lease.
-27-
<PAGE> 30
4. PRORATA SHARE. Tenant's prorata share of the
shared expenses shall be modified to include the additional space.
5. BASE RENT. The base rent for the expansion
space shall be as follows:
a. If rental commencement of the
expansion space occurs during the first year of the Lease Term, the base rental
rate shall be $12.45 per rentable square foot, full service.
b. If rental commencement of the
expansion space occurs during the second year of the Lease Term, the base
rental rate shall be $12.95 per rentable square foot, full service.
c. If rental commencement of the
expansion space occurs during the third year of the Lease Term, the base rental
rate shall be $13.45 per rentable square foot, full service.
d. If rental commencement of the
expansion space occurs during the fourth year of the Lease Term, the base
rental rate shall be $13.95 per rentable square foot, full service.
e. If rental commencement of the
expansion space occurs during the fifth year of the Lease Term, the base rental
rate shall Be $14.45 per rentable square foot, full service.
6. TENANT FINISH. Landlord shall provide an
initial tenant improvement allowance of $8.80 per rentable square foot at the
beginning of the Lease Term. Thereafter, the allowance shall be reduced
prorata per square foot per year, i.e. at the rate of fifteen cents ($.15) per
month.
B. Landlord agrees to lease to third parties the
expansion space on the third floor of building 2 on a month to month basis or
for a term, with either tenancy cancellable by Landlord upon thirty (30) days'
notice.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed the day and year first above written.
RentX Industries, Inc., Plaza 6000 Partners
a Delaware Corporation a California Limited Partnership
By: /s/ GARY J. KULESZA By: /s/ DANIEL BRUCE STRONG
------------------------------- ---------------------------------
Gary Kulesza Daniel Bruce Strong
Title: Vice President and Title: Director of Marketing/Management
Chief Operating Officer Landlord's Agent
Attest:
------------------------------
-28-
<PAGE> 31
EXHIBIT CHECKLIST
Exhibit A Floor Plan
Exhibit B Building Plan
Exhibit C Legal Description
Exhibit D Plans and Specifications
Exhibit E Rider to Lease Agreement
EXHIBITS A-D
[OMITTED]
<PAGE> 32
EXHIBIT E
RIDER TO LEASE AGREEMENT
DATED SEPTEMBER 1, 1996
BETWEEN
PLAZA 6000 PARTNERS, AS LANDLORD
AND
RENTX INDUSTRIES, INC., AS TENANT
This Rider is executed by Plaza 6000 Partners ("Landlord") and
RentX Industries, Inc., ("Tenant"), to supplement the foregoing Lease between
Landlord and Tenant relating to that certain space located in the City and
County of Denver, Colorado, as more particularly described in the Lease.
Landlord and Tenant agree that the provisions of this Rider will control and
supersede any provisions of the Lease which may be inconsistent with this
Rider. Any capitalized undefined terms used in this Rider shall have the same
meanings as set forth in the Lease.
The Lease is supplemented as follows:
30. COMPLETION OF THE PREMISES.
Landlord, at its sole cost agrees to perform the work set
forth on the plans and specifications dated September 1, 1996, prepared by
Reed-Cole Architects, which represent "turn key" construction. Landlord shall
use its best efforts to deliver the Premises to Tenant in a "ready for
occupancy" condition by November 1, 1996.
The definition of "ready for occupancy" set forth in the Lease
is supplemented as follows: (a) Landlord has completed any improvement work to
the Premises required to be performed by Landlord so that (1) Tenant can use
the Premises for its intended purpose without material interference to Tenant
conducting its ordinary business activities and (2) the only incomplete items
are minor or insubstantial details of construction, mechanical adjustments, or
finishing touches like touch-up plastering or painting; (b) Landlord has
received a temporary or permanent certificate of occupancy from the local
municipality; (c) Tenant, its employees, agents, and invitees, have ready
access to the Building and Premises through any lobby, entranceways, elevators,
and hallways; (d) any decorations, fixtures, and equipment to be installed by
Landlord are installed and in good operating order; (e) the Premises are ready
for the installation of any equipment, furniture, fixtures, or decorations that
Tenant will install; (f) the following items are installed and in good
operating order: (1) Building lobby; (2) any hallways to the Premises
(including walls, flooring, ceiling, lighting, etc.); (3) any elevators, HVAC,
utilities, and plumbing serving the Premises; and (4) the doors and hardware;
and (g) the Premises are broom clean.
Within 10 days after the Premises are "ready for occupancy",
the parties shall inspect the Premises, have all systems demonstrated, and
prepare a punchlist. The punchlist shall list incomplete, minor, or
insubstantial details of construction; necessary mechanical adjustments; and
needed finishing touches. Landlord will complete the punchlist items within 30
days after the Premises are "ready for occupancy". Landlord will promptly
correct any latent defects as they become known, if Tenant notifies Landlord of
the defect within 60 days after Tenant first learns of the defect. All such
work shall be performed in a good and workmanlike manner and in compliance with
all applicable laws.
31. OPERATING EXPENSES.
Notwithstanding the provisions of Paragraph 6 of this Lease,
Operating Expenses shall not include:
a. Costs of decorating, redecorating, or special
cleaning or other services not provided on a regular basis to tenants of the
Building;
b. Any charge for depreciation of the Building
or equipment and any interest or other financing charge;
-1-
<PAGE> 33
c. Any charge for Landlord's income taxes,
excess profit taxes, franchise taxes, or similar taxes on Landlord's business;
d. All costs relating to activities for the
solicitation and execution of leases of space in the Building;
e. All costs for which Tenant or any other
tenant in the Building is being charged other than pursuant to Paragraph 6 or
comparable sections in other tenant's leases;
f. The cost of correcting defects in the
construction of the Building or in the Building equipment, except that
conditions (not occasioned by construction defects) resulting from ordinary
wear and tear will not be deemed defects for the purpose of this category;
g. The cost of any repair made by Landlord
because of the total or partial destruction of the Building or the condemnation
of a portion of the Building;
h. The cost of any items for which Landlord is
reimbursed by insurance or otherwise compensated by parties other than tenants
of the Building;
i. The cost of any repairs, alterations,
additions, changes, replacements, and other items which under generally
accepted accounting principles are properly classified as capital expenditures
to the extent they upgrade or improve the Building as opposed to replace
existing items which have worn out;
j. The cost of overtime or other expense to
Landlord in curing its defaults or performing work expressly provided in this
Lease to be borne at Landlord's expense.
For purposes of calculating Operating Expense in accordance
with Paragraph 6 of this Lease, increases in Controlled Expenses, as defined
below, in operation of the Building shall be not greater than 5% annually.
"Controlled Expenses" shall mean all Operating Expenses as defined and
calculated in accordance with Paragraph 6 above, except for real estate taxes,
insurance premiums, and utility charges (including, without limitation, steam,
fuel, water, sewer, storm drainage, and electricity). The aforementioned limit
on Controlled Expenses shall be for the purposes of calculations under
Paragraph 6 only and shall not act as a limit on the amount that Landlord shall
actually expend for such purposes.
32. BOOKS AND RECORDS; AUDIT.
Supplementing Paragraph 6 of this Lease, Landlord covenants
and agrees that Tenant and its agents shall have 30 days after receiving
Landlord's statement of the actual Operating Expenses to audit Landlord's books
and records concerning the statement at a mutually convenient time at
Landlord's offices. The books and records shall be kept in accordance with
generally accepted accounting principles consistently applied. If Tenant
disputes the accuracy of Landlord's statement, Tenant shall still pay the
amount shown owing, while proceeding with Tenant's audit. If such audit shows
that as to such operating period Landlord has overstated the amount of
Operating Expenses and/or taxes or the amount thereof applicable to Tenant,
Landlord shall forthwith credit to Tenant the amount of any overpayment by
Tenant. If Tenant does not proceed with an audit within the 30 day period,
then Tenant shall be deemed to have accepted as final the amount shown owing on
the statement. If Tenant's audit of the books and records shows that Landlord
overstated the sum owed by Tenant by an amount in excess of professional fees
for the audit, then Landlord shall pay to Tenant, Tenant's reasonable costs of
conducting the audit. This provision shall survive the termination or
expiration of this Lease.
33. LANDLORD'S WARRANTIES AND COVENANTS.
Notwithstanding anything in this Lease to the contrary,
Landlord represents and warrants to Tenant that Landlord has the full right,
power and authority to enter into this Lease and make the agreements contained
herein on its part to be performed; that the execution, delivery and
performance of this Lease has been duly authorized by Landlord; that the Lease
constitutes the valid and binding obligation of Landlord, enforceable in
accordance with its
-2-
<PAGE> 34
terms; that the making of this Lease and the performance thereof will not
violate any present zoning laws or ordinances or the terms or provisions of any
mortgage, lease or other agreement to which Landlord is a party or under which
Landlord is otherwise bound.
34. HAZARDOUS MATERIALS.
Landlord covenants with Tenant to generate and store Hazardous
Substances at the Building only in amounts as are incident to and necessary for
the normal operation of the Building, to comply with all obligations imposed by
applicable law upon such generation and storage of Hazardous Substances, to
prohibit any generation, storage, or disposal of Hazardous Substances at the
Building except as permitted above.
35. INDEMNITY AND INSURANCE.
Supplementing Paragraph 14 above and subject to Paragraph 15.E
above, Landlord hereby agrees to indemnify, defend, and save Tenant harmless of
and from all liability, loss, damages, costs, or expenses, including attorneys'
fees, on account of injuries to the person in the Building and Common Areas, or
to any other person rightfully in said Building and Common Areas for any
purpose whatsoever, where the injuries are caused by the negligence or
misconduct of the Landlord, Landlord's agents, servants or employees, or of any
other person entering upon the Building under express or implied invitation of
Landlord, or where such injuries are the result of the violation of the
provisions of this Lease, by any such persons.
During the term hereof Landlord shall maintain comprehensive
general liability insurance, including public liability and property damage,
with a combined single limit of liability of not less than $1,000,000 for
personal injuries or deaths of persons occurring in or about the Building and
Premises.
36. REPAIRS.
Notwithstanding anything in this Lease to the contrary, in the
event that the need for repairs or the making of repairs (or both) which
Landlord is obligated to effect at Landlord's expense renders a material
portion of the Premises unusable for more than five consecutive business days,
then Tenant shall be entitled to an abatement of rent commencing with the sixth
business day that the same are usable; provided, however, that Tenant shall not
be entitled to a pro rata abatement of rent under the foregoing due to
unusability (i) caused directly or indirectly by any act or omission of Tenant
or any of Tenant's servants, employees, agents, contractors, visitors or
licensees, (ii) where Tenant makes a decoration, alteration, improvement or
addition which directly causes such unusability, or (iii) where the repair in
question is one which Tenant is obligated to furnish or pay for under the
provisions of this Lease.
37. UTILITIES.
Subject to the provisions of paragraph 7. and notwithstanding
paragraph 7.D Landlord warrants to Tenant that electricity, water, sanitary and
drainage sewers, telephone and natural gas will be available to the Premises
throughout the term of this Lease. Notwithstanding anything in this Lease to
the contrary, if any such utility service becomes unavailable or interrupted
for more than five consecutive business days without fault by Tenant or its
agents, servants, employees or invitees, then Tenant shall be entitled to an
abatement of rent commencing with the sixth business day that the same are
unavailable; provided, however, that Tenant shall not be entitled to any
abatement of rent under the foregoing due to unavailability (i) caused directly
or indirectly by any act or omission of Tenant or any of Tenant's servants,
employees, agents, contractors, visitors or licensees, (ii) where Tenant makes
a decoration, alteration, improvement or addition which requires interruption
of services, or (iii) where the service in question is one which Tenant is
obligated to furnish or pay for under the provisions of this Lease.
TENANT: LANDLORD:
RENTX INDUSTRIES, INC., PLAZA 6000 PARTNERS, a California
a Delaware Corporation Limited Partnership
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
---------------------------------- -----------------------------------
Its: EVP Its: Director Marketing/Management
--------------------------------- ----------------------------------
-3-
<PAGE> 35
FIRST AMENDMENT
TO
PLAZA 6000 OFFICE PARK LEASE
BETWEEN
PLAZA 6000 PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
"LANDLORD"
AND
RENTX INDUSTRIES, INC.
A DELAWARE CORPORATION
"TENANT"
DATED SEPTEMBER 1, 1996
For valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Landlord and the Tenant, hereto do modify and
amend the aforementioned Lease for the demised premises, located at 6000 East
Evans Avenue, Building 2, Suite 300, Denver, Colorado 80222 in the following
respects:
1. PREMISES: Pursuant to Paragraph 1. of the Lease,
Suites 2-317 and 2-331, approximately 514 rentable square feet will be added to
Tenants existing Lease hold, effective February 1, 1997. Suite 2-315,
approximately 170 rentable square feet, will be added to Tenants Lease hold on
March 15, 1997. Tenant's total rentable square footage will be approximately
6,223. All office space will be known as Suite 2-300.
2. TERM: Pursuant to Paragraph 2 of the Lease, the
commencement date of the Lease shall be adjusted to December 1, 1996 and shall
terminate at 11:59 p.m. on November 30, 2001.
3. RENT: Pursuant to Paragraph 3. of the Lease, Tenant
shall pay to Landlord as base rent for the premises, Suite 2-300 the following
monthly installments during the Lease Term (the "Base Rent"):
<TABLE>
<CAPTION>
LEASE YEAR MONTHLY PAYMENT SUB TOTAL
---------- --------------- ----------
<S> <C> <C>
2/1/97 - 2/28/97 $3,142.52 $ 3,142.52
3/1/97 - 3/31/97 $3,190.92 $ 3,190.92
4/1/97 - 11/30/97 $6,456.36 $51,650.88
12/1/97 - 11/30/98 $6,715.65 $80,587.80
12/1/98 - 11/30/99 $6,974.95 $83,699.40
12/1/99 - 11/30/00 $7,234.24 $86,810.88
12/1/00 - 11/30/01 $7,493.53 $89,922.36
</TABLE>
4. Pursuant to paragraph 6.A. (3) "Tenant's Pro Rata
Share" shall be increased to (5.96%).
5. SECURITY DEPOSIT: Pursuant to paragraph 8. of the
Lease, Tenant's security deposit will be increased by $823.65 to be added to
the $6,669.88 security deposit already on account for a total of $7,493.53.
6. TENANT IMPROVEMENTS: Landlord agrees to the
following improvements:
1. Paint suite and install new carpet to match
existing carpet in the expansion areas.
2. Install two (2) dedicated outlets.
3. Install two (2) power poles.
4. Remove one half of the wall between offices
2-315 and 2-317.
<PAGE> 36
Except as amended herein, all terms and conditions of the Lease shall remain in
full force and effect except as hereby ratified by Landlord and Tenant.
Dated this 16th day of January, 1997.
TENANT: LANDLORD:
RentX Industries, Inc. Plaza 6000 Partners
a Delaware Corporation a California Limited
Partnership
By:/s/ GARY KULESZA By:/s/ DANIEL BRUCE STRONG
------------------------------- -------------------------
Gary Kulesza Daniel Bruce Strong
Title: Vice President Director of Marketing
Chief Operating Officer and Management
Landlords Agent
Attest: /s/
---------------------------
<PAGE> 37
SECOND AMENDMENT
TO
PLAZA 6000 OFFICE PARK LEASE
BETWEEN
PLAZA 6000 PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
"LANDLORD"
AND
RENTX INDUSTRIES, INC.
A DELAWARE CORPORATION
"TENANT"
DATED SEPTEMBER 1, 1996
For valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Landlord and the Tenant, hereto do modify and
amend the aforementioned Lease for the demised premises, located at 6000 East
Evans Avenue, Building 2, Suite 300, Denver, Colorado 80222 in the following
respects:
1. PREMISES: Pursuant to Paragraph 1. of the Lease,
effective April 1, 1997 Tenant will add to their existing Lease hold suites
2-329 and 2-374, approximately 510 rentable square feet. The total approximate
Rentable Square footage is 6,733. All office space will be known as Suite
2-300.
2. RENT: Pursuant to Paragraph 3. of the Lease, Tenant
shall pay to Landlord as base rent for the premises, Suite 2-300 the following
monthly installments during the Lease Term (the "Base Rent"):
<TABLE>
<CAPTION>
LEASE YEAR MONTHLY PAYMENT SUB TOTAL
---------- --------------- ---------
<S> <C> <C>
4/l/97 - 11/30/97 $6,985.49 $55,883.92
12/1/97 - 11/30/98 $7,266.03 $87,192.36
12/1/98 - 11/30/99 $7,546.58 $90,558.96
12/1/99 - 11/30/00 $7,827.12 $93,925.44
12/1/00 - 11/30/01 $8,107.66 $97,291.92
</TABLE>
<PAGE> 38
3. OPERATING EXPENSES: Pursuant to paragraph 6.A. (3)
"Tenant's Pro Rata Share" shall be increased to (6.45%).
4. SECURITY DEPOSIT: Pursuant to paragraph 8. of the
Lease, Tenant's security deposit will be increased by $614.13 to be added to
the $7,493.53 security deposit already on account for a total of $8,107.66.
5. TENANT IMPROVEMENTS: Landlord agrees to paint the
suites and install new carpet to match existing carpet in suite 2-300.
Except as amended herein, all terms and conditions of the Lease shall remain in
full force and effect except as hereby ratified by Landlord and Tenant.
Dated this 24th day of March, 1997.
TENANT: LANDLORD:
RentX Industries, Inc. Plaza 6000 Partners
a Delaware Corporation a California Limited Partnership
By: /s/ G.J. KULESZA By: /s/ DANIEL BRUCE STRONG
------------------------------- --------------------------------
Gary Kulesza Daniel Bruce Strong
Title: Vice President Director of Marketing
Chief Operating Officer and Management
Landlords Agent
Attest: /s/ J.R. WAITE
---------------------------
<PAGE> 39
THIRD AMENDMENT
TO
PLAZA 6000 OFFICE PARK LEASE
BETWEEN
PLAZA 6000 PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
"LANDLORD"
AND
RENTX INDUSTRIES, INC.
A DELAWARE CORPORATION
"TENANT"
DATED SEPTEMBER 1, 1996
For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Landlord and the Tenant, hereto do modify and amend
the aforementioned Lease for the demised premises, located at 6000 East Evans
Avenue, Building 2, Suite 300, Denver, Colorado 80222 in the following
respects:
1. PREMISES: Pursuant to Paragraph 1. of the Lease,
effective June 15, 1997 Tenant will occupy the entire floor of Building 2. The
approximate Rentable Square footage is 8,470. All office space will be known
as Suite 2-300.
2. RENT: Pursuant to Paragraph 3. of the Lease, Tenant
shall pay to Landlord as base rent for the premises, Suite 2-300 the following
monthly installments during the Lease Term (the "Base Rent"):
<TABLE>
<CAPTION>
LEASE YEAR MONTHLY PAYMENT SUB TOTAL
---------- --------------- ---------
<S> <C> <C>
6/1/97 - 7/31/97 $ 6,985.49 $ 13,970.98
8/1/97 - 8/31/97 $ 7,886.56 $ 7,886.56
9/l/97 - 11/30/97 $ 8,787.63 $ 26,362.89
12/1/97 - 11/30/98 $ 9,140.54 $109,686.48
12/1/98 - 11/30/99 $ 9,493.46 $113,921.52
12/1/99 - 11/30/00 $ 9,846.38 $118,156.56
12/1/00 - 11/30/01 $ 10,199.29 $122,391.48
</TABLE>
4. Pursuant to paragraph 6.A. (3) "Tenant's Pro Rata
Share" shall be increased to (8.12%).
5. SECURITY DEPOSIT: Pursuant to paragraph 8. of the
Lease, Tenant's security deposit will be increased by $2,705.76 to be added to
the $7,493.53 security deposit already on account for a total of $10,199.29.
6. TENANT IMPROVEMENTS: Landlord agrees to remove the
following tenant improvements;
A. Remove hall walls as needed.
<PAGE> 40
B. Build walls around elevator lobby and create
entrance into suite 300.
C. Install carpet in all expansion areas to
match existing carpet in suite 300.
D. Paint as needed.
Except as amended herein, all terms and conditions of the Lease shall remain in
full force and effect except as hereby ratified by Landlord and Tenant.
Dated this 23rd day of April, 1997.
TENANT: LANDLORD:
RentX Industries, Inc. Plaza 6000 Partners
a Delaware Corporation a California Limited Partnership
By:/s/ GARY KULESZA By:/s/ DANIEL BRUCE STRONG
------------------------------ ---------------------------------
Gary Kulesza Daniel Bruce Strong
Title: Vice President Director of Marketing
Chief Operating Officer and Management
Landlord's Agent
Attest:/s/
--------------------------
-2-
<PAGE> 1
EXHIBIT 10.43
FORM OF
INDEMNIFICATION AGREEMENT
This Agreement is made as of the __________ day of
_____________________________, 1997, by and between Rent X Industries, Inc., a
Delaware Corporation ("the Company"), and the undersigned director and/or
officer of the Company (the "Indemnitee") with reference to the following
facts:
The Indemnitee is currently serving as a director and/or
officer of the Company and the Company wishes the Indemnitee to continue in
such capacity, and, if requested in the future, to serve in such other
positions with the Company and its subsidiaries as the Company may determine.
The Indemnitee is willing, under certain circumstances, to continue serving as
a director and/or officer of the Company.
The Indemnitee does not regard the indemnities available under
the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and Amended and Restated Bylaws (the "Bylaws")
as adequate to protect the Indemnitee against the risks of personal liability
associated with the Indemnitee's service to the Company. In this connection
the Company and the Indemnitee now agree they should enter into this
Indemnification Agreement in order to provide greater protection to Indemnitee
against such risks of service to the Company.
Section 145 of the General Corporation Law of the State of
Delaware, under which law the Company is organized, empowers corporations to
indemnify a person serving as a director, officer, employee or agent of the
corporation and a person who serves at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, and said Section 145, the Certificate of
Incorporation and the Bylaws specify that the indemnification set forth in said
Section 145, the Certificate of Incorporation and the Bylaws shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise.
In order to induce the Indemnitee to continue to serve as a
director and/or officer of the Company and in consideration of the Indemnitee's
continued service, the Company hereby agrees to indemnify the Indemnitee as
follows:
1. INDEMNITY. The Company will indemnify the
Indemnitee, the Indemnitee's executors, administrators or assigns, for any
Expenses (as defined below) which the Indemnitee is or becomes legally
obligated to pay in connection with any Proceeding. As used in this Agreement
the term "Proceeding" includes any threatened, pending or completed claim,
action, suit or proceeding, whether brought by or in the right of the Company
or otherwise and whether of a civil, criminal, administrative or investigative
nature, in which the Indemnitee may be or may have been involved as a party or
otherwise, by reason of the fact that Indemnitee is or was a director or
officer of the Company, by reason of any actual or alleged error or
misstatement or misleading statement made or suffered by the Indemnitee, by
reason of any action taken by the Indemnitee or of any inaction on the
Indemnitee's part while acting as such director or officer, or by reason of the
fact that the Indemnitee was serving at the request of the Company as a
director, trustee, officer, fiduciary,
<PAGE> 2
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise; provided, that in each such case Indemnitee acted in good
faith and in a manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, and, in the case of a criminal
proceeding, had no reasonable cause to believe that the Indemnitee's conduct
was unlawful. As used in this Agreement, the term "other enterprise" includes
(without limitation) employee benefit plans and administrative committees
thereof, and the term "fines" includes (without limitations) any excise tax
assessed with respect to any employee benefit plan.
2. EXPENSES. As used in this Agreement, the term
"Expenses" includes, without limitation, damages, judgments, fines, penalties,
settlements and costs, reasonable attorneys' fees and disbursements and costs
of attachment or similar bonds, and investigations in connection with
investigating, defending, being a witness or participating in any Proceeding,
and any expenses of establishing a right to indemnification under this
Agreement.
3. ENFORCEMENT. If a claim or request under this
Agreement is not paid by the Company, or on its behalf, within thirty days
after a written claim or request has been received by the Company, the
Indemnitee may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim or request and if successful in whole or in
part, the Indemnitee shall be entitled to be paid also the Expenses of
prosecuting such suit.
4. SUBROGATION. In the event of payment under this
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of the Indemnitee, who shall execute all papers
required and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Company
effectively to bring suit to enforce such rights; provided, however, that
neither this right of subrogation nor the exclusion set forth in Section 5(b)
below shall apply to any right of recovery of the Indemnitee or any payment
received by the Indemnitee from an entity that is the primary employer of the
Indemnitee or on whose behalf the Indemnitee serves as a director and/or
officer of the Company or an affiliate of any such entity.
5. EXCLUSIONS. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
the Indemnitee:
(a) to the extent that payment is actually made
to the Indemnitee under a valid, enforceable and collectible
insurance policy;
(b) to the extent that the Indemnitee is
indemnified and actually paid otherwise than pursuant to this
Agreement, subject to Section 4;
(c) in connection with a judicial action by or in
the right of the Company, in respect of any claim, issue or
matter as to which the Indemnitee shall have been adjudged to
be liable for knowingly fraudulent, dishonest or willful
misconduct in the performance of the Indemnitee's duty to the
Company;
- 2 -
<PAGE> 3
(d) if it is proved by final judgment in a court
of law or other final adjudication to have been based upon or
attributable to the Indemnitee's having gained any personal
profit or advantage to which the Indemnitee was not legally
entitled;
(e) for a disgorgement of profits made from the
purchase and sale by the Indemnitee of securities pursuant to
Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any state
statutory law or common law;
(f) brought about or contributed to by the
dishonesty of the Indemnitee; provided, however,
notwithstanding the foregoing, the Indemnitee shall be
protected under this Agreement as to any claims upon which
suit may be brought against the Indemnitee by reason of any
alleged dishonesty on the Indemnitee's part, unless a judgment
or other final adjudication thereof adverse to the Indemnitee
shall establish that the Indemnitee committed (i) acts of
active and deliberate dishonesty, (ii) with actual dishonest
purpose and intent, (iii) which acts were material to the
cause of action so adjudicated; or
(g) for any judgment, fine or penalty which the
Company is prohibited by applicable law from paying as
indemnity or for any other reason.
6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding any other provision of this Agreement, to the extent that the
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding or in defense of any claim, issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against any and
all Expenses incurred in connection therewith.
7. PARTIAL INDEMNIFICATION. If the Indemnitee is
entitled under any provision of this Agreement to indemnification by the
Company for a portion of any Expenses, but not for the total amount thereof,
the Company shall indemnify the Indemnitee for the portion of such Expenses to
which the Indemnitee is entitled.
8. ADVANCE OF EXPENSES. Expenses reasonably and
necessarily incurred by the Indemnitee in connection with any Proceeding,
except the amount of any settlement, shall be paid by the Company in advance
upon request of the Indemnitee that the Company pay such Expenses. The
Indemnitee hereby undertakes to repay to the Company the amount of any Expenses
theretofore paid by the Company to the extent that it is ultimately determined
that such Expenses were not reasonable or that the Indemnitee is not entitled
to indemnification in respect thereof.
Such advances shall be made by the Company unless: (a) the
Board of Directors determines, by a majority vote of a quorum of disinterested
directors based on clear and convincing evidence known to the Board of
Directors at the time such determination is made, that the
- 3 -
<PAGE> 4
Indemnitee would not be entitled to indemnification under applicable law, or
(b) if such a quorum is not obtainable or a quorum of disinterested directors
so directs, independent legal counsel determines, based on clear and convincing
evidence known to the counsel at the time such determination is made, that
Indemnitee would not be entitled to indemnification under applicable law.
9. NOTICE AND DEFENSE OF CLAIM. The Indemnitee, as a
condition precedent to the Indemnitee's right to be indemnified under this
Agreement, shall give to the Company notice in writing as soon as practicable
of any claim made against the Indemnitee for which indemnity will or could be
sought under this Agreement. Notice to the Company shall be given at its
principal office, shall be directed to the Corporate Secretary (or such other
address as the Company shall designate in writing to the Indemnitee) and shall
be effective only upon actual receipt. In addition, the Indemnitee shall give
the Company such information and cooperation as it may reasonably require and
as shall be within the Indemnitee's power.
With respect to any such Proceeding: (a) the Company will be
entitled to participate therein at its own expense; and (b) except as otherwise
provided below, to the extent that it may wish, the Company jointly with any
other indemnifying party similarly notified will be entitled to assume the
defense thereof, with counsel reasonably satisfactory to Indemnitee. After
notice from the Company to Indemnitee, given within a reasonable time, of its
election so to assume the defense thereof, the Company will not be liable to
Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding except
as otherwise provided below. Indemnitee shall have the right to employ the
Indemnitee's own counsel in such Proceeding but the fees and expenses of such
counsel incurred after notice from the Company of its assumption of the defense
thereof shall be at the expense of Indemnitee unless (i) the employment of
counsel by Indemnitee has been authorized by the Company, or (ii) Indemnitee
shall have obtained the written opinion of reputable counsel with expertise in
such matters (such counsel to be reasonably satisfactory to a majority of
disinterested directors) that there may be one or more defenses available to
Indemnitee that could reasonably be expected to result in a conflict of
interest between the Company and Indemnitee in the conduct of the defense of
such action, in each of which cases the reasonable fees and expenses of
Indemnitee's counsel shall be at the expense of the Company. The Company shall
not be entitled to assume the defense of any Proceeding brought by or on behalf
of the Company or that is the subject of the opinion provided by Indemnitee
under clause (ii) above.
The Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any Proceeding effected
without its prior written consent. Indemnitee shall execute and deliver such
agreements, releases and other documents as the Company may reasonably request
to effect a settlement of any Proceeding. Without Indemnitee's consent, the
Company shall not enter into any settlement that provides for any action by
Indemnitee other than the payment of amounts against which Indemnitee is
entitled to indemnification hereunder. In the event that the Company proposes
to settle any Proceeding by the payment of damages against which Indemnitee is
entitled to indemnification hereunder and in an amount that the plaintiff has
indicated
- 4 -
<PAGE> 5
would be acceptable, and the Indemnitee refuses to enter into a reasonable
settlement agreement, the Company shall not thereafter be responsible for any
costs of defense or the amount by which any judgment or settlement thereafter
paid exceeds the damages that the Company proposed to pay in settlement.
Neither the Company nor Indemnitee will unreasonably withhold their consent to
any proposed settlement.
10. NO EMPLOYMENT AGREEMENT. Nothing contained herein
shall be deemed to create a contract of employment between the Company and
Indemnitee.
11. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
instrument.
12. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. Nothing
herein shall be deemed to diminish or otherwise restrict the Indemnitee's right
to indemnification under any provision of the Certificate of Incorporation or
Bylaws of the Company and amendments thereto or under law.
13. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with Delaware law without giving effect to the
principles of conflicts of laws.
14. COVERAGE. The provisions of this Agreement shall
apply with respect to the Indemnitee's service in any of the capacities
described in Section 1 above prior to as well as after the date of this
Agreement. The right of Indemnitee to be indemnified hereunder shall continue
after the termination of Indemnitee's service as an officer and/or director of
the Company with respect to all periods prior to such termination.
15. AMENDMENTS; WAIVERS. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
16. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by both of the parties hereto
and their respective successors, assignees (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), heirs,
executors and personal and legal representatives.
17. SEVERABILITY. If any provision of this Agreement
(including any provision within a single section, paragraph or sentence) is
held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable in any respect, the validity and enforceability of any such
provision in every other respect and of the remaining provisions of this
Agreement shall not be in any way impaired and shall remain enforceable to the
full extent permitted by law.
- 5 -
<PAGE> 6
18. NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person
(by express courier or otherwise), by telecopier or three days after being
deposited in the United States mail, certified mail, return receipt requested,
first class postage prepaid, as follows:
If to the Company: RENTX Industries, Inc.
6000 East Evans Avenue
Denver, Colorado 80222
Attention: Secretary
Telecopier: (303) 782-5370
If to Indemnitee:
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and signed as of the day and year first above
written.
RENTX INDUSTRIES, INC.
By
-----------------------------------
----------------------------------
(Name of Director/Officer)
- 6 -
<PAGE> 1
EXHIBIT 11.1
RENTX INDUSTRIES, INC.
STATEMENT RE: PER SHARE EARNINGS
<TABLE>
<CAPTION>
Period from
15-May-96 Six months ended July 31,
to 1-Jan-97 1996 1997
----------- ---- ----
<S> <C> <C> <C>
Weighted Average Shares Outstanding 1,000 1,000 1,000
Net effect of common stock equivalents
issued prior to IPO filing based on the
treasury stock method using projected IPO
price of $9:
Shares assumed issued for convertible
Series A Preferred Stock 3,439,000 3,439,000 3,439,000
Shares assumed issued for convertible
Series B Preferred Stock 1,810,538 1,810,538 1,810,538
Shares assumed issued for convertible
Series C Preferred Stock 471,480 471,480 471,480
Shares assumed issued for stock options 194,854 194,854 194,854
Less: Treasury stock assumed purchased (105,064) (105,064) (105,064)
---------- --------- ---------
Common shares used in computing net income
(loss) per common share 5,811,808 5,811,808 5,811,808
========== ========= =========
Computation of treasury stock assumed purchased:
Proceeds from options having an exercise price
below the IPO price and issued twelve months
prior to initial filing $ 945,574
Divided by: Expected IPO price $ 9
----------
105,064 shares
==========
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OF NAMES UNDER WHICH
NAME OF SUBSIDIARY INCORPORATION SUBSIDIARY IS DOING BUSINESS
- ------------------ ------------- ----------------------------
<S> <C> <C>
Newmanco, Inc. New Mexico A-1 Rental Centers
A-1 Power Center
Titus Rental Service Michigan Suburban Rent-It Co.
Companies, Inc. Able Party Rental
Rental Service Companies, Inc.
Brighton Rental Services
Able Table and Chair Rental Service, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Experts" and to the
use of our reports as follows, in the Registration Statement (Form S-1) and
related Prospectus of RentX Industries, Inc. dated September 24, 1997:
o Report dated August 29, 1997, with respect to the financial statements of
RentX Industries, Inc. as of January 31, 1997 and for the period from May 15,
1996 (commencement of operations) through January 31, 1997
o Report dated July 2, 1997, with respect to the combined financial statements
of Rental Country U.S.A., Inc., Rifle Rentals, Inc., G.R.M. Company, Inc.,
and Rocky Mountain Rentals, Inc. (dba E-Z Way Rentals) for the years ended
December 31, 1994 and 1995 and the seven months ended July 31, 1996
o Report dated July 18, 1997, with respect to the financial statements of
Redwine Enterprises, Inc., fka U-Rent, Inc., for the period from January 1,
1996 through October 31, 1996
o Report dated July 11, 1997, with respect to the combined financial
statements of Hays Rental and Sales of El Dorado, Inc., Hays Rental and Sales
of Camden, Inc., Hays Rental and Sales of Magnolia, Inc., Hays Rental and
Sales of Hot Springs, Inc., Hays Rental and Sales of Arkadelphia, Inc. and
Hays Leasing Company, Inc. (dba Hays Rental and Sales) as of October 31,
1996 and 1995 and for each of the three years in the period ended
October 31, 1996
o Report dated May 28, 1997, with respect to the financial statements of CVR,
Inc. (formerly Central Virginia Rental Company) as of December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996
o Report dated June 6, 1997, with respect to the financial statements of
Newmanco, Inc. (dba A-1 Rental Centers) as of September 30, 1995 and 1996 and
for each of the three years in the period ended September 30, 1996
o Report dated July 30, 1997, with respect to the financial statements of
Titus Rental Service Companies, Inc. (dba Suburban Rent-It Company and Able
Party Rental) as of March 31, 1996 and 1997 and for each of the three years
in the period ended March 31, 1997
o Report dated July 11, 1997, with respect to the financial statements of
Mer-Cal Enterprises, Inc. (dba Duncan Rent-Alls) as of December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996
o Report dated August 8, 1997, with respect to the financial statements of
Redi Rentals, Inc. as of May 31, 1996 and 1997 and for the years ended
May 31, 1995, 1996 and 1997.
Ernst & Young LLP
Denver, Colorado
September 24, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated May 9, 1997 (except
for Note 6, as to which the date was May 15, 1997), regarding Zodiac Rentals,
and to the reference to our Firm under the heading "Experts," in the
Registration Statement on Form S-1 for a stock offering by RentX Industries,
Inc. and in any subsequent registration statement relating to the same offering
filed pursuant to Rule 462(b) under the Securities Act of 1933.
Pester & Company
PESTER & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS, P.C.
Denver, Colorado
September 24, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated May 19,1997, regarding A to Z
Rentals and Sales, Inc., and to the reference to our Firm under the heading
"Experts" in the Registration Statement on Form S-1 for a stock offering by
RentX Industries, Inc., and in any subsequent registration statement relating
to the same offering filed pursuant to Rule 462(b) under the Securities Act of
1933.
/s/ LEMASTER & DANIELS PLLC
September 24, 1997
<PAGE> 1
EXHIBIT 23.4
[WILLIAMS & PARSONS, PA LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated June 26, 1997,
regarding U-Do-It Rental Centers, Inc. and Affiliate and to the reference to
our Firm under the heading "Experts" in the Registration Statement on form S-1
for a stock offering by RentX Industries, Inc. and in any subsequent
registration statement relating to the same offering filed pursuant to Rule
462(b) under the Securities Act of 1933.
/s/ WILLIAMS & PARSONS PA
Williams & Parsons PA
Certified Public Accountants
Sandpoint, ID 83864
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS FOR RENTX INDUSTRIES, INC. FOR THE PERIOD ENDED JANUARY
31, 1997 AND THE SIX MONTH PERIOD ENDED JULY 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM S-1.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> OTHER 6-MOS
<FISCAL-YEAR-END> JAN-31-1997 JAN-31-1998
<PERIOD-START> MAY-15-1996 FEB-01-1997
<PERIOD-END> JAN-31-1997 JUL-31-1997
<CASH> 707,712 2,670,887
<SECURITIES> 0 0
<RECEIVABLES> 1,605,305 4,182,849
<ALLOWANCES> 246,893 663,916
<INVENTORY> 374,932 1,394,847
<CURRENT-ASSETS> 0 0
<PP&E> 10,719,153 30,961,348
<DEPRECIATION> 486,396 1,607,203
<TOTAL-ASSETS> 29,082,565 67,989,567
<CURRENT-LIABILITIES> 0 0
<BONDS> 17,048,220 41,121,050
0 0
10,050,000 20,295,000
<COMMON> 1 1
<OTHER-SE> (270,134) (1,057,300)
<TOTAL-LIABILITY-AND-EQUITY> 29,082,565 67,989,567
<SALES> 1,617,329 2,470,193
<TOTAL-REVENUES> 10,838,364 16,068,649
<CGS> 897,298 1,715,640
<TOTAL-COSTS> 7,482,275 11,288,542
<OTHER-EXPENSES> 2,648,504 3,964,206
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 783,122 1,296,239
<INCOME-PRETAX> (75,537) (403,544)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (75,537) (403,544)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (75,537) (403,544)
<EPS-PRIMARY> (.01) (.07)
<EPS-DILUTED> 0 0
</TABLE>
