<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
------------------
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________to_______________
Commission file number 000-21237
---------
RENTAL SERVICE CORPORATION
--------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 33-0569350
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
14505 N. HAYDEN RD., SUITE 322, SCOTTSDALE, ARIZONA 85260
-------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(602) 905-3300
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
There were 14,939,740 shares of Rental Service Corporation Common Stock,
$.01 par value, outstanding at November 10, 1997.
<PAGE>
RENTAL SERVICE CORPORATION
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
- ---------------------------------
ITEM 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996....................... 1
Consolidated Statements of Operations
Three and nine months ended September 30, 1997 and 1996........ 2
Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996.................. 3
Notes to Consolidated Financial Statements - September 30, 1997.... 4
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 10
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk......... 16
PART II OTHER INFORMATION
- ---------------------------------
ITEM 1. Legal Proceedings.................................................. 17
ITEM 6. Exhibits and Reports on Form 8-K................................... 17
SIGNATURES ................................................................. 20
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Consolidated Financial Statements
RENTAL SERVICE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 4,887,000 $ 1,452,000
Accounts receivable, net 43,694,000 20,856,000
Other receivables and prepaid expense 3,941,000 3,170,000
Income tax receivable 1,117,000 1,563,000
Parts and supplies inventories, net 20,701,000 10,099,000
Deferred taxes 8,787,000 8,645,000
Rental equipment, principally machinery, at cost, net 229,894,000 116,921,000
Operating property and equipment, at cost, net 30,640,000 20,043,000
Intangible assets, net 115,279,000 34,801,000
Other assets, primarily deferred financing costs, net 3,637,000 1,383,000
------------ ------------
$462,577,000 $218,933,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Accounts payable $ 16,168,000 $ 20,302,000
Payroll and other accrued expenses 29,461,000 21,540,000
Accrued interest payable 1,473,000 514,000
Income taxes payable 6,478,000 48,000
Deferred taxes 12,573,000 12,863,000
Bank debt and long term obligations 224,504,000 68,526,000
Obligations under capital leases 31,000 68,000
------------ ------------
Total liabilities 290,688,000 123,861,000
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 500,000
Issued and outstanding shares - none -- --
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 14,930,784 at September 30, 1997 and
11,376,378 at December 31, 1996 149,000 114,000
Additional paid-in capital 159,394,000 93,917,000
Common stock issuable - 153,651 shares at September 30, 1997 and none at
December 31, 1996 2,881,000 --
Retained earnings 9,465,000 1,041,000
------------ ------------
Total stockholders' equity 171,889,000 95,072,000
------------ ------------
$462,577,000 $218,933,000
============ ============
</TABLE>
See accompanying notes.
1
<PAGE>
RENTAL SERVICE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals $47,222,000 $25,212,000 $111,549,000 $67,742,000
Sales of parts, supplies and new equipment 20,167,000 5,890,000 47,119,000 16,450,000
Sales of used equipment 5,080,000 3,529,000 13,664,000 8,903,000
----------- ----------- ------------ -----------
Total revenues 72,469,000 34,631,000 172,332,000 93,095,000
Cost of revenues:
Cost of equipment rentals, excluding
equipment rental depreciation 23,829,000 14,977,000 57,506,000 40,977,000
Depreciation, equipment rentals 10,457,000 4,586,000 24,493,000 12,375,000
Cost of sales of parts, supplies and new
equipment 15,777,000 4,225,000 36,383,000 11,799,000
Cost of sales of used equipment 3,565,000 2,525,000 9,261,000 5,820,000
----------- ----------- ------------ -----------
Total cost of revenues 53,628,000 26,313,000 127,643,000 70,971,000
----------- ----------- ------------ -----------
Gross profit 18,841,000 8,318,000 44,689,000 22,124,000
Selling, general and administrative
expense 4,975,000 3,299,000 13,444,000 9,061,000
Depreciation and amortization, excluding
equipment rental depreciation 1,502,000 651,000 3,789,000 1,829,000
Amortization of intangibles 1,094,000 664,000 2,463,000 1,825,000
----------- ----------- ------------ -----------
Operating income 11,270,000 3,704,000 24,993,000 9,409,000
Interest expense, net 4,236,000 2,135,000 8,863,000 5,819,000
----------- ----------- ------------ -----------
Income before income taxes and
extraordinary items 7,034,000 1,569,000 16,130,000 3,590,000
Provision for income taxes 3,114,000 617,000 7,172,000 1,411,000
----------- ----------- ------------ -----------
Income before extraordinary items 3,920,000 952,000 8,958,000 2,179,000
Extraordinary items, loss on
extinguishment of debt less applicable
income tax benefit of $386,000 in 1997
and $822,000 in 1996 -- (1,269,000) (534,000) (1,269,000)
----------- ----------- ------------ -----------
Net income (loss) 3,920,000 (317,000) 8,424,000 910,000
Redeemable preferred stock accretion -- 524,000 -- 1,643,000
----------- ----------- ------------ -----------
Net income (loss) available to common
stockholders $ 3,920,000 $ (841,000) $ 8,424,000 $ (733,000)
=========== =========== ============ ===========
Earnings (loss) per common and common
equivalent share:
Income before extraordinary items $ .26 $ .07 $ .68 $ .09
Extraordinary items -- (.20) (.04) (.22)
----------- ----------- ------------ -----------
Net income (loss) $ .26 $ (.13) $ .64 $ (.13)
=========== =========== ============ ===========
Weighted average common and common
equivalent shares 15,318,689 6,288,724 13,149,622 5,772,636
=========== =========== ============ ===========
</TABLE>
See accompanying notes.
2
<PAGE>
RENTAL SERVICE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,424,000 $ 910,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 30,745,000 16,029,000
Extraordinary item 534,000 1,269,000
Interest paid in kind -- 1,706,000
Provision for losses on accounts receivable 1,789,000 989,000
Gain on sale of used equipment (4,403,000) (3,256,000)
Changes in operating assets and liabilities, net of effect of business
acquisitions:
Accounts receivable (12,186,000) (3,393,000)
Other receivables and prepaid expense (179,000) (3,983,000)
Income tax receivable 446,000 --
Intangible assets and other assets (105,000) 244,000
Parts and supplies inventories (1,917,000) (2,369,000)
Accounts payable (6,959,000) 3,532,000
Payroll and other accrued expenses (1,738,000) 1,852,000
Accrued interest payable 959,000 (131,000)
Income taxes payable 6,383,000 (2,209,000)
------------- -------------
Net cash provided by operating activities 21,793,000 11,190,000
INVESTING ACTIVITIES
Acquisitions of rental operations, net of cash acquired (122,723,000) (19,858,000)
Cash purchases of rental equipment and operating property and equipment (117,759,000) (60,559,000)
Proceeds from sale of used equipment 13,664,000 8,903,000
Proceeds from (additions to) assets held for sale -- 16,054,000
------------- -------------
Net cash used in investing activities (226,818,000) (55,460,000)
FINANCING ACTIVITIES
Proceeds from bank debt 366,811,000 170,698,000
Payments on bank debt (210,559,000) (175,793,000)
Payments of debt issuance costs (3,202,000) (885,000)
Payments on long term obligations (275,000) (12,702,000)
Payments on capital lease obligations (37,000) (533,000)
Proceeds from issuance of preferred stock -- 7,500,000
Repurchase of preferred stock -- (37,874,000)
Proceeds from issuance of common stock, net of issuance costs 55,643,000 95,223,000
Proceeds from exercise of stock options 79,000 --
Repurchase of common stock warrants -- (945,000)
------------- -------------
Net cash provided by financing activities 208,460,000 44,689,000
------------- -------------
Net increase in cash and cash equivalents 3,435,000 419,000
Cash and cash equivalents at beginning of period 1,452,000 1,455,000
------------- -------------
Cash and cash equivalents at end of period $ 4,887,000 $ 1,874,000
============= =============
Supplemental disclosure of cash flow information
Cash paid for interest $ 7,904,000 $ 4,244,000
Cash paid for income taxes $ 200,000 $ 1,540,000
</TABLE>
See accompanying notes.
3
<PAGE>
RENTAL SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Rental
Service Corporation (RSC or Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for the three and nine month periods ended September 30,
1997 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Registration Statement on Form S-1 (SEC File No. 333-26753), effective
May 29, 1997.
Certain amounts in the prior period financial statements have been
reclassified to conform with the current period financial statement
presentation.
Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share,
which is required to be adopted on December 31, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact is expected to result in no material change in
earnings per share (before or after extraordinary items) for the three and nine
month periods ended September 30, 1997 and 1996.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which is required to be adopted in the first quarter of 1998. SFAS No. 130
established standards for the reporting and display of comprehensive income and
its components. Comprehensive income includes certain non-owner changes in
equity that are currently excluded from net income. Because the Company
historically has not experienced transactions which would be included in
comprehensive income, adoption of SFAS No. 130 is not expected to have a
material effect on the financial position, results of operations or cash flows
of the Company.
2. BUSINESS ACQUISITIONS
A principal component of the Company's business strategy is to continue to
grow through acquisitions that augment its present operations as well as enter
into new geographic markets. In keeping with this strategy, the Company has made
numerous 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 excess purchase price
reflected as goodwill in the accompanying consolidated financial statements.
Purchase accounting values for all acquisitions have been assigned on a
preliminary basis, and are subject to adjustment when final information as to
the fair values of the net assets acquired is available. The operations of the
acquired businesses are included in the consolidated statements of operations
from the date of acquisition.
4
<PAGE>
RENTAL SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The following table sets forth, for the periods indicated, the net assets
acquired, liabilities assumed, common stock issued or issuable and cash purchase
price for these acquisitions.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
Assets acquired $ 64,706,000 $15,967,000
Goodwill and covenants not to compete 82,926,000 6,684,000
Less: common stock issued or issuable (12,238,000) --
Less: liabilities assumed (12,671,000) (2,793,000)
------------ -----------
Cash purchase price $122,723,000 $19,858,000
============ ===========
Number of acquisitions 15 5
</TABLE>
The following table sets forth the unaudited pro forma results of
operations for each period in which acquisitions occurred and for the
immediately preceding period as if those acquisitions were consummated at the
beginning of the immediately preceding period:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
Total revenues $202,371,000 $179,244,000
Income before extraordinary item 9,500,000 2,894,000
Net income 8,966,000 1,625,000
Earnings per common and common equivalent share:
Income before extraordinary item .70 .19
Net income .66 --
</TABLE>
Effective March 1, 1997, the Company reached a definitive agreement, to
acquire all of the outstanding stock of Comtect, Inc. and subsidiaries d/b/a
Industrial Air Tool (IAT) for $32.6 million in cash and 189,189 shares of RSC
common stock. Up to an additional 108,108 shares of RSC common stock may be paid
to the sellers over a three year period if certain performance objectives are
met. IAT is a leading "on-site" small tool provider, rental management company
and maintenance, repair and operations (MRO) supplier and operated a total of
four locations in Texas and Louisiana. The transaction closed on April 25, 1997,
and IAT's balance sheet was consolidated with the Company's under the purchase
method of accounting as of that date. This acquisition resulted in approximately
$23.8 million in goodwill, which is being amortized over 40 years. Pursuant to
the acquisition agreement, the Company assumed effective control of IAT's
operations on March 1, 1997 and has included IAT's revenues, costs and expenses
from such date in its consolidated statements of operations, net of related
imputed purchase price adjustments. The pro forma information above includes
this acquisition as if it had occurred as of the beginning of 1997 and 1996,
respectively.
On June 5, 1997, the Company acquired substantially all of the assets of
Brute Equipment Co. d/b/a Foxx Hy-Reach Company (Foxx) for $32.7 million in cash
and 284,250 shares of RSC common stock, of which 233,034 shares were paid to the
Seller at closing, with the remaining 51,216 shares to be issued one year from
the date of closing. Up to an additional 89,630 shares of RSC common stock may
be paid to the seller over a three year period if certain performance objectives
are met. Foxx specializes in the rental and sale of aerial equipment to
construction and industrial customers and operates a total of four locations in
Iowa and Illinois. This acquisition was recorded under the purchase method of
accounting and resulted in approximately $24.4 million in goodwill, which is
being amortized over 40 years. The pro forma information above includes this
acquisition as if it had occurred as of the beginning of 1997 and 1996,
respectively.
5
<PAGE>
RENTAL SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
On June 17, 1997, the Company acquired substantially all of the assets of
Central States Equipment, Inc. and Equipment Lessors, Inc. (collectively,
Central) for approximately $18.0 million in cash and 204,867 shares of RSC
common stock, of which 102,435 shares of RSC common stock will be paid to the
sellers over a five year period, and may be accelerated to three years if
certain performance objectives are met. Central specializes in the rental and
sale of aerial equipment, ladders and scaffolding and operates a total of four
locations in Kansas, Missouri and Oklahoma. This acquisition was recorded under
the purchase method of accounting and resulted in approximately $11.0 million in
goodwill, which is being amortized over 40 years. The pro forma information
above includes this acquisition as if it had occurred as of the beginning of
1997 and 1996, respectively.
The common stock issuable in the accompanying consolidated balance sheets
is associated with the common stock relating to the acquisitions of Foxx (51,216
shares) and Central (102,435 shares) which vests over future time periods.
Common stock issuable is treated as if it were outstanding since the date of the
respective acquisition for the calculation of weighted average common and common
equivalent shares. Weighted average common and common equivalent shares excludes
the effects of the potential issuance of all shares contingent on the
achievement of certain performance objectives, as the related objectives have
not currently been achieved.
3. BANK DEBT AND LONG TERM OBLIGATIONS
Bank debt and long-term obligations consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Revolving credit facility (Revolver) $224,119,000 $67,867,000
Notes payable 293,000 306,000
Equipment contracts payable 92,000 353,000
------------ -----------
$224,504,000 $68,526,000
============ ===========
</TABLE>
On June 4, 1997, the Company amended the Revolver to, among other things,
increase the availability to $300.0 million, decrease the interest rate margins
by 0.25% with further reductions if certain interest coverage ratios are met and
to reduce the unused line fee to 0.25% of the unused commitment. The total
amount of credit available under the amended Revolver is limited to a borrowing
base equal to the sum of (i) 85% of eligible accounts receivable of the
Company's subsidiaries and (ii) 100% of the value (lower of net book value or
market) of eligible rental equipment through December 31, 1998; 90% of the value
of eligible rental equipment from January 1, 1999 through December 31, 1999; 80%
of the value of eligible rental equipment from January 1, 2000 through December
31, 2000; and 75% of the value of eligible rental equipment from January 1, 2001
through the expiration date of the amended Revolver. The amended Revolver
expires on January 31, 2002. The amended Revolver also contains provisions to
annually adjust the prime and Eurodollar interest rate margins based on the
Company's achievement of specified interest coverage ratios. The obligation of
the lender to make loans or issue letters of credit under the Revolver is
subject to certain customary conditions. In addition, the Revolver has financial
covenants for RSC regarding debt incurrence, interest coverage, capital
expenditure investment and minimum EBITDA levels. The Revolver also contains
covenants and provisions that restrict, among other things, the Company's
subsidiaries ability to: (i) incur additional indebtedness; (ii) incur liens on
their property, (iii) enter into contingent obligations; (iv) make certain
capital expenditures and investments; (v) engage in certain sales of assets;
(vi) merge or consolidate with or acquire another person or engage in other
fundamental changes; (vii) enter into leases; (viii) engage in certain
transactions with affiliates; and (ix) declare or pay dividends to RSC.
Effective June 30, 1997, the Company further amended the Revolver to increase
the allowed level of investments and capital expenditures for 1997 to $138.0
million and to increase the maximum allowed total indebtedness to trailing
EBITDA ratio for each of the last three quarters of 1997. As of September 30,
1997, the Company was in compliance with all covenants of the Revolver, and
substantially all of the net consolidated assets of the Company were restricted
under the terms of the Revolver.
6
<PAGE>
RENTAL SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Borrowings under the Revolver are secured by all of the real and personal
property of the Company's subsidiaries and a pledge of the capital stock and
intercompany debt of the Company's subsidiaries. RSC is a guarantor of the
obligations of its subsidiaries under the Revolver, and has granted liens on
substantially all of its assets (including the stock of its subsidiaries) to
secure such guaranty. The Revolver also restricts the Company from declaring or
paying dividends on its common stock. In addition, the Company's subsidiaries
are guarantors of the obligations of the other subsidiaries under the Revolver.
The Revolver includes a $2 million letter of credit facility, with a fee equal
to 2.75% of the face amount of letters of credit payable to the lenders and
other customary fees payable to the issuer of the letter of credit. A commitment
fee equal to 0.25% of the unused commitment, excluding the face amount of all
outstanding and undrawn letters of credit, is also payable monthly in arrears.
The amounts outstanding under the Revolver at December 31, 1996 and
September 30, 1997 were $67,867,000 and $224,119,000, respectively, with
approximately $28,888,000 and $43,958,000, respectively, available based on the
borrowing base. There were no letters of credit outstanding at December 31, 1996
and September 30, 1997.
In connection with an amendment to the Revolver in January 1997, the
Company wrote-off the related unamortized deferred financing costs and recorded
a loss on extinguishment of debt of $920,000, which has been classified as an
extraordinary item, net of income taxes of $386,000, in the accompanying
consolidated statement of operations for the nine months ended September 30,
1997.
4. STOCKHOLDERS' EQUITY
Public Offering
On June 4, 1997, the Company completed a public offering of 6,072,000
shares of its common stock. Of the 6,072,000 shares, 3,000,000 were sold by the
Company, with the remainder sold by certain of the Company's existing
stockholders. Proceeds to the Company, net of the underwriting discount and
offering expenses, were approximately $55.6 million. The Company utilized these
proceeds to reduce its outstanding obligations under the Revolver in order to
provide borrowing availability for general corporate purposes, including
acquisitions.
Stock Option Plan
On February 5, 1997, the Company's stockholders approved and the Company
adopted the 1996 Equity Participation Plan of Rental Service Corporation (1996
Plan). The 1996 Plan authorizes the issuance of not more than 1,000,000 shares
of the Company's common stock (or the equivalent in other equity securities)
upon the exercise of options, stock appreciation rights and other awards, or
upon vesting of restricted or deferred stock awards (Awards). Under the 1996
Plan, Awards may be granted to officers, non-employee directors, key employees
and consultants of the Company at a price not to be less than 100% of the fair
market price on the date such Award is granted. At September 30, 1997, 362,438
shares of common stock were available for future Awards under the 1996 Plan.
Employee Stock Purchase Plan
On April 28, 1997 at the Company's Annual Meeting of Stockholders, the
Company's stockholders approved, and the Company adopted, the Employee Qualified
Stock Purchase Plan of Rental Service Corporation (QSP Plan). Under the QSP
Plan, the Company has reserved 250,000 shares of common stock for sale to
employees. The QSP Plan allows eligible employees of the Company to purchase
shares of common stock at the lesser of 85% of the fair market value of such
shares at the beginning of each semiannual offering period or 85% of the fair
market value of such shares on the date of exercise of an installment of the
purchase right. Purchases are limited to 15% of an employee's eligible
compensation, subject to a maximum purchase of 1,500 shares in any semiannual
offering period. The QSP Plan commenced on July 1, 1997.
7
<PAGE>
RENTAL SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. SUBSEQUENT EVENTS
On October 6, 1997, the Company reached a definitive agreement to acquire,
effective November 1, 1997, all of the outstanding capital stock of Rent-It-
Center, Inc. d/b/a/ Center Rentals and Sales and substantially all of the assets
certain affiliated entities (collectively, Center) for approximately $100.9
million in cash, 482,315 shares of RSC common stock and the assumption of
approximately $16.7 million of Center's debt. The purchase price is subject to
adjustment based on levels of stockholders' equity, inventory, equipment and
debt. Center is an independent rental company and also sells a variety of
equipment ranging from small tools to heavy equipment, including related
commodity supplies. Center operates a total of 14 locations in Colorado, New
Mexico, Texas, Kansas, Missouri and Nebraska. The transaction is anticipated to
close by December 2, 1997, and will be recorded under the purchase method of
accounting. Pursuant to the acquisition agreements, the Company assumed
effective control of Center's operations on November 1, 1997 and will include
Center's revenues, costs and expenses from such date in its consolidated
statements of operations, net of related imputed purchase price adjustments. The
closing is subject to a number of closing conditions, including completion of
the Company's due diligence procedures.
On October 28, 1997, the Company signed a letter-of-intent to acquire
substantially all of the assets of JDW Enterprises, Inc. d/b/a Valley Rentals
(Valley) for a total purchase price of $104.0 million, consisting of $93.6
million of cash and $10.4 million of RSC common stock. The purchase price is
subject to adjustment based on levels of accounts receivable, inventory and
equipment. Valley is an independent rental company located in the Southwest and
operates a total of ten locations in Arizona and New Mexico. The transaction is
anticipated to close by January 31, 1998, and will be recorded under the
purchase method of accounting. The closing is subject to a number of closing
conditions, including the execution of a definitive purchase agreement, RSC
board and bank approval and early termination or expiration of the waiting
period under the Hart-Scott-Rodino Act.
On October 31, 1997, the Company signed a definitive agreement to acquire
all of the outstanding capital stock of Siems Rental & Sales Co., Inc. (Siems)
for $8.0 million cash, $3.0 million of RSC common stock and the assumption of
approximately $13.5 million of Siems' debt. The purchase price is subject to
adjustment based on levels of stockholders' equity, equipment and debt. Siems is
an independent rental company engaged in the rental, sales and service of
various types of construction and industrial equipment. Siems operates a total
of six locations in Maryland, Delaware, Pennsylvania and Virginia. The
transaction is anticipated to close by December 15, 1997, and will be recorded
under the purchase method of accounting. Pursuant to the acquisition agreement,
the Company assumed effective control of Siems' operations on November 1, 1997
and will include Siems' revenues, costs and expenses from such date in its
consolidated statements of operations, net of related imputed purchase price
adjustments. The closing is subject to a number of closing conditions, including
early termination or expiration of the waiting period under the Hart-Scott-
Rodino Act.
On November 3, 1997, the Company began soliciting written consent of its
stockholders for the approval of an increase in the number of authorized shares
of its common stock, $.01 par value, from 20 million to 40 million shares.
The Company has received commitment letters from one of its lenders under
the Revolver to amend and restate the Revolver to increase its total available
financing to $600.0 million. This increase will consist of an increase in the
availability under the Revolver from $300.0 million to $500.0 million and a new
$100.0 million seven-year term loan facility. In addition, this new financing
package will extend the maturity date of the Revolver to five years from the
effective date of this amendment, will change the methodology for determining
the interest rate margins, will increase the allowed levels of capital
expenditures and acquisitions and will amend several covenants, including the
computation methodology of certain financial covenants. The Company is still
negotiating the final terms of this financing package, and it is expected that
this will be completed by November 25, 1997.
8
<PAGE>
RENTAL SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Subsequent to September 30, 1997, the Company completed the acquisitions of
substantially all of the assets of Kansas Enterprises, Inc. d/b/a AAA Rent-All;
Sunbelt Equipment & Rentals, Inc.; Roesch Equipment Company and Allen Equipment,
Inc. for a total combined purchase price of approximately $16.3 million. These
acquisitions have a combined nine locations in Florida, Illinois, Kansas and
Missouri.
As of November 10, 1997, the Company is party to additional letters-of-
intent to acquire seven businesses for a total combined purchase price of
approximately $15.3 million and having a combined 13 locations in Arkansas,
Florida, Georgia, Mississippi, South Carolina and Tennessee. Each of these
acquisitions is subject to a number of closing conditions, including the
execution of definitive purchase agreements and RSC board approval.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Revenues. Total revenues for the three months ended September 30, 1997
increased 109.3% to $72.5 million from $34.6 million in the same period in 1996.
This increase was primarily due to the inclusion of revenues from acquisitions
of 21 businesses (consisting of 43 locations) and the opening of 13 start-up
locations since September 30, 1996. Also contributing to the increased revenues
was the larger rental fleet resulting from the Company's significant investment
in capital expenditures. Equipment rental revenues increased 87.3% to $47.2
million from $25.2 million due to the larger rental fleet resulting from
acquisitions and capital expenditures. Sales of parts, supplies and new
equipment increased 242.4% to $20.2 million from $5.9 million due primarily to
the acquisition of IAT, effective in the Company's results of operations from
March 1, 1997, and the increased number of rental locations selling these items.
Sales of used equipment increased 43.9% to $5.1 million from $3.5 million due to
the larger rental fleet and the Company's continuing strategy of selling the
older items in its fleet.
Total revenues for the nine months ended September 30, 1997 increased 85.1% to
$172.3 million from $93.1 million in the same period in 1996. This increase was
primarily attributable to acquisitions, start-up locations and capital
expenditures. Equipment rental revenues increased 64.7% to $111.5 million from
$67.7 million due to a larger rental fleet as a result of acquisitions and
capital expenditures. Sales of parts, supplies and new equipment increased
186.4% to $47.1 million from $16.4 million, while sales of used equipment
increased 53.5% to $13.7 million from $8.9 million.
Gross Profit. Gross profit for the three months ended September 30, 1997
increased to $18.8 million, or 26.0% of total revenues, from $8.3 million, or
24.0% of total revenues, in the same period in 1996. Gross margin on equipment
rentals increased to 27.4% of equipment rental revenues from 22.4% for the three
months ended September 30, 1996 primarily due to the improved gross profit
resulting from the Company's cost controlling methods. Gross margin on sales of
parts, supplies and new equipment decreased to 21.8% of sales from 28.3%, due
primarily to the acquisition of IAT, effective in the Company's results of
operations from March 1, 1997, and a change in the product mix of parts,
supplies and new equipment sales. Excluding the effect of the acquisition of
IAT, the Company's gross margin on sales of parts, supplies and new equipment
would have been 26.9% for the three months ended September 30, 1997. The Company
believes that the gross margin on sales of parts, supplies and new equipment
will likely remain at this lower level due to the impact of IAT's product sales,
which generally have had lower gross margins than the parts, supplies and new
equipment sold by the Company prior to the acquisition of IAT. Gross margin on
sales of used equipment increased to 29.8% of sales from 28.4%, due primarily to
a change in the mix and age of the equipment being sold.
Gross profit for the nine months ended September 30, 1997 increased to $44.7
million, or 25.9% of total revenues, from $22.1 million, or 23.8% of total
revenues, in the same period in 1996. Gross margin on equipment rentals
increased to 26.5% of equipment rental revenues from 21.2% for the nine months
ended September 30, 1996, primarily due to the improved gross profit resulting
from the Company's cost controlling methods. Gross margin on sales of parts,
supplies and new equipment decreased to 22.8% of sales from 28.3%, due primarily
to the acquisition of IAT. Excluding the effect of the acquisition of IAT, the
Company's gross margin on sales of parts, supplies and new equipment would have
been 27.9% for the nine months ended September 30, 1997. Gross margin on sales
of used equipment decreased to 32.2% of sales from 34.6%, due primarily to a
change in the mix and age of the equipment being sold.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the three and nine months ended September 30, 1997
was $5.0 million, or 6.9% of total revenues, and $13.4 million, or 7.8% of total
revenues, respectively, compared to $3.3 million, or 9.5% of total revenues, and
$9.1 million, or 9.7% of total revenues, respectively, in the same periods in
1996. These percentage decreases are the result of total revenues increasing at
a faster rate than selling, general and administrative expenses.
10
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
Depreciation and Amortization, excluding equipment rental depreciation.
Depreciation and amortization, excluding equipment rental depreciation, for the
three and nine months ended September 30, 1997 was $1.5 million, or 2.1% of
total revenues, and $3.8 million, or 2.2% of total revenues, respectively,
compared to $651,000, or 1.9% of total revenues, and $1.8 million, or 2.0% of
total revenues, respectively, in the same periods in 1996. These increases are
primarily attributable to the larger fleet of service and delivery vehicles in
1997 versus 1996, which has grown as a result of the Company's increased number
of locations and larger rental fleet.
Amortization of Intangibles. Amortization of intangibles for the three and
nine months ended September 30, 1997 was $1.1 million, or 1.5% of total
revenues, and $2.5 million, or 1.4% of total revenues, respectively, compared to
$664,000, or 1.9% of total revenues, and $1.8 million, or 2.0% of total
revenues, respectively, in the same periods in 1996. These increases are due to
the additional goodwill and covenants not-to-compete associated with
acquisitions completed since September 30, 1996.
Interest Expense, net. Interest expense, net, for the three and nine months
ended September 30, 1997 was $4.2 million and $8.9 million, respectively,
compared to $2.1 million and $5.8 million, respectively, for the same periods in
1996. These increases are the result of the Company's increased average debt
outstanding for the three and nine month periods ended September 30, 1997
compared to the same periods in 1996. The increased debt has resulted from
acquisitions, capital expenditures and start-up locations financed under the
Company's revolving credit facility (Revolver).
Provision for Income Taxes. Provision for income taxes was $3.1 million and
$7.2 million, respectively, for the three and nine months ended September 30,
1997 compared to $617,000 and $1.4 million, respectively, in the same periods in
1996. The Company's effective tax rate was 44.3% and 44.5%, respectively, for
the three and nine months ending September 30, 1997, compared to 39.3% for the
same periods in 1996. The increases in the Company's effective tax rate are a
result of increased levels of non-deductible items, primarily goodwill.
Extraordinary Item. In connection with the implementation of an amendment to
the Revolver in January 1997, the Company wrote off the related unamortized
deferred financing costs and recorded a loss on extinguishment of debt of
$920,000, which has been classified as an extraordinary item, net of income
taxes of $386,000, in the consolidated statement of operations for the nine
months ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of cash have been the funding of capital
expenditures, acquisitions and start-up locations. The Company has historically
financed its capital expenditures, acquisitions and start-up locations primarily
through the issuance of equity securities, secured bank borrowings and net cash
provided by operating activities. The Company had cash and cash equivalents of
$4.9 million at September 30, 1997 and $1.5 million at December 31, 1996.
The Company received net proceeds of approximately $55.6 million from the sale
of 3,000,000 shares of common stock in a public offering completed on June 4,
1997. Through the application of these proceeds, the Company has improved its
liquidity and capital resources through the replacement of a portion of its
secured debt, as well as the related interest and debt obligations, with common
stock. Specifically, the Company used these proceeds to reduce the indebtedness
under its Revolver to provide borrowing availability for general corporate
purposes, including acquisitions.
During the nine months ended September 30, 1997, the Company's operating
activities provided net cash flow of $21.8 million, compared to $11.2 million
for the same period in the prior year. The principal causes for the variation in
cash flow between the periods were higher net income and increased depreciation
and amortization.
11
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
Net cash used in investing activities was $226.8 million in the nine months
ended September 30, 1997, compared to $55.5 million in the same period for the
prior year. The increase was attributable to a higher combined level of capital
expenditures and acquisitions. Acquisition spending totaled $122.7 million and
$19.9 million in the nine months ended September 30, 1997 and 1996,
respectively. In addition, the Company had capital expenditures of $117.8
million and $60.6 million in the nine months ended September 30, 1997 and 1996,
respectively. Capital expenditures were primarily for purchases of rental
equipment. Included in investing activities were proceeds from the sale of used
equipment, which were $13.7 million for the nine months ended September 30,
1997, compared to $8.9 million for the same period in the prior year.
Net cash provided by financing activities was $208.5 million for the nine
months ended September 30, 1997, compared to $44.7 million in the same period
for the prior year. The net cash provided by financing activities was primarily
due to issuances of common stock, specifically from the public offering
completed on June 4, 1997, and from borrowings under the Revolver.
The Company's principal source of liquidity is the Revolver, which consists of
a revolving line of credit and availability of letters of credit, which combined
initially could not exceed $125.0 million. On January 31, 1997, the Company
amended the Revolver to, among other things, increase the availability to $200.0
million, increase the advance rates on eligible rental equipment to 100%,
decrease the interest rate margins by 0.50% and extend the maturity date to
January 31, 2002. On June 4, 1997, the Company again amended the Revolver to,
among other things, increase the availability to $300.0 million, decrease the
interest rate margins by 0.25% with further reductions if certain interest
coverage ratios are met and to reduce the unused line fee to 0.25% of the unused
commitment. The amended Revolver increased the allowed investments and capital
expenditures to $90.0 million in 1997, $105.0 million in each of 1998 and 1999,
$115.0 million in 2000 and $105.0 million in 2001 (plus amounts reinvested from
asset sales). Effective June 30, 1997, the Company further amended the Revolver
to increase the allowed level of investments and capital expenditures for 1997
to $138.0 million and to increase the maximum allowed total indebtedness to
trailing EBITDA ratio for each of the last three quarters of 1997. In connection
with the implementation of the January 1997 amendment, the Company recorded an
extraordinary loss on extinguishment of debt of $920,000, net of income taxes of
$386,000, associated with the write-off of unamortized debt issuance costs.
The amended Revolver also contains provisions to annually adjust the prime and
Eurodollar interest rate margins based on the Company's achievement of specified
interest coverage ratios. The total amount of credit available under the amended
Revolver is limited to a borrowing base equal to the sum of (i) 85% of eligible
accounts receivable of the Company's subsidiaries and (ii) 100% of the value
(lower of net book value or market) of eligible rental equipment through
December 31, 1998; 90% of the value of eligible rental equipment from January 1,
1999 through December 31, 1999; 80% of the value of eligible rental equipment
from January 1, 2000 through December 31, 2000; and 75% of the value of eligible
rental equipment from January 1, 2001 through the expiration date of the amended
Revolver. The amended Revolver expires January 31, 2002. The obligation of the
lender to make loans or issue letters of credit under the Revolver is subject to
certain customary conditions. In addition, the Revolver has financial covenants
for RSC regarding debt incurrence, interest coverage, capital expenditure
investment and minimum EBITDA levels. The Revolver also contains covenants and
provisions that restrict, among other things, the Company's subsidiaries'
ability to: (i) incur additional indebtedness; (ii) incur liens on their
property, (iii) enter into contingent obligations; (iv) make certain capital
expenditures and investments; (v) engage in certain sales of assets; (vi) merge
or consolidate with or acquire another person or engage in other fundamental
changes; (vii) enter into leases; (viii) engage in certain transactions with
affiliates; and (ix) declare or pay dividends to RSC. As of September 30, 1997,
the Company was in compliance with all covenants of the Revolver, and
substantially all of the net consolidated assets of the Company were restricted
under the terms of the Revolver.
12
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
Borrowings under the Revolver are secured by all of the real and personal
property of the Company's subsidiaries and a pledge of the capital stock and
intercompany debt of the Company's subsidiaries. RSC is a guarantor of the
obligations of its subsidiaries under the Revolver, and has granted liens on
substantially all of its assets (including the stock of its subsidiaries) to
secure such guaranty. The Revolver also restricts the Company from declaring or
paying dividends on its common stock. In addition, the Company's subsidiaries
are guarantors of the obligations of the other subsidiaries under the Revolver.
The Revolver includes a $2 million letter of credit facility, with a fee equal
to 2.75% of the face amount of letters of credit payable to the lenders and
other customary fees payable to the issuer of the letter of credit. A commitment
fee equal to 0.25% of the unused commitment, excluding the face amount of all
outstanding and undrawn letters of credit, is also payable monthly in arrears.
At November 10, 1997, the principal amount outstanding under the Revolver was
$248.9 million, the interest rate on such borrowings was 7.4%, and an additional
$19.5 million was available to the Company under the Revolver. Additionally,
outstanding letters of credit totaled $200,000 at November 10, 1997.
The Company has received commitment letters from one of its lenders under the
Revolver to amend and restate the Revolver to increase its total available
financing to $600.0 million. This increase will consist of an increase in the
availability under the Revolver from $300.0 million to $500.0 million and a new
$100.0 million seven-year term loan facility. In addition, this new financing
package will extend the maturity date of the Revolver to five years from the
effective date of this amendment, will change the methodology for determining
the interest rate margins, will increase the allowed levels of capital
expenditures and acquisitions and will amend several covenants, including the
computation methodology of certain financial covenants. The Company is still
negotiating the final terms of this financing package, and it is expected that
this will be completed by November 25, 1997.
As part of its growth strategy, the Company is continually involved in the
investigation and evaluation of potential acquisitions and start-up locations.
The Company is currently evaluating a number of acquisition opportunities and
start-up locations and may at any time be a party to one or more letters of
intent or acquisition agreements. Since December 31, 1996, the Company has
completed 19 acquisitions of rental equipment businesses with an aggregate of 43
locations and has opened 14 new start-up locations. Additionally, the Company
has consolidated two of the locations acquired in the acquisition of IAT with
the Company's existing locations, has consolidated one additional acquired
location and has closed two other locations. At November 10, 1997, the Company
operates 146 locations throughout the United States. The Company's liquidity and
capital resources have been and will continue to be significantly impacted by
the Company's growth strategy and by the need to offer customers a modern and
well-maintained rental equipment fleet. The Company must be able to complete
acquisitions, open start-up locations and make the capital expenditures
necessary to acquire and maintain its rental fleet. At September 30, 1997, the
Company was obligated, under noncancellable purchase commitments, to purchase
$7.0 million of equipment. Such purchases are expected to be financed with cash
flows from operations and through borrowings under the Revolver.
On October 6, 1997, the Company reached a definitive agreement to acquire,
effective November 1, 1997, all of the outstanding capital stock of Rent-It-
Center, Inc. d/b/a/ Center Rentals and Sales and substantially all of the assets
certain affiliated entities (collectively, Center) for approximately $100.9
million in cash, 482,315 shares of RSC common stock and the assumption of
approximately $16.7 million of Center's debt. The purchase price is subject to
adjustment based on levels of stockholders' equity, inventory, equipment and
debt. Center is an independent rental company and also sells a variety of
equipment ranging from small tools to heavy equipment, including related
commodity supplies. Center operates a total of 14 locations in Colorado, New
Mexico, Texas, Kansas, Missouri and Nebraska, and had combined trailing twelve
months revenues of approximately $46.0 million. The transaction is anticipated
to close by December 2, 1997, and will be recorded under the purchase method of
accounting. Pursuant to the acquisition agreements, the Company assumed
effective control of Center's operations on November 1, 1997 and will include
Center's revenues, costs and expenses from such date in its consolidated
statements of operations, net of related imputed purchase price adjustments. The
closing is subject to a number of closing conditions, including completion of
the Company's due diligence procedures.
13
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
On October 28, 1997, the Company signed a letter-of-intent to acquire
substantially all of the assets of JDW Enterprises, Inc. d/b/a Valley Rentals
(Valley) for a total purchase price of $104.0 million, consisting of $93.6
million of cash and $10.4 million of RSC common stock. The purchase price is
subject to adjustment based on levels of accounts receivable, inventory and
equipment. Valley is a leading independent rental company in the Southwest,
operates a total of ten locations in Arizona and New Mexico, and has estimated
revenues of approximately $41.0 million for the year ending December 31, 1997.
The transaction is anticipated to close by January 31, 1998, and will be
recorded under the purchase method of accounting. The closing is subject to a
number of closing conditions, including the execution of a definitive purchase
agreement, RSC board and bank approval and early termination or expiration of
the waiting period under the Hart-Scott-Rodino Act.
On October 31, 1997, the Company signed a definitive agreement to acquire all
of the outstanding capital stock of Siems Rental & Sales Co., Inc. (Siems) for
$8.0 million cash, $3.0 million of RSC common stock and the assumption of
approximately $13.5 million of Siems' debt. The purchase price is subject to
adjustment based on levels of stockholders' equity, equipment and debt. Siems is
an independent rental company engaged in the rental, sales and service of
various types of construction and industrial equipment. Siems operates a total
of six locations in Maryland, Delaware, Pennsylvania and Virginia, and had 1996
revenues of approximately $18.8 million. The transaction is anticipated to close
by December 15, 1997, and will be recorded under the purchase method of
accounting. Pursuant to the acquisition agreement, the Company assumed effective
control of Siems' operations on November 1, 1997 and will include Siems'
revenues, costs and expenses from such date in its consolidated statements of
operations, net of related imputed purchase price adjustments. The closing is
subject to a number of closing conditions, including early termination or
expiration of the waiting period under the Hart-Scott-Rodino Act.
Subsequent to September 30, 1997, the Company completed the acquisitions of
substantially all of the assets of Kansas Enterprises, Inc. d/b/a AAA Rent-All;
Sunbelt Equipment & Rentals, Inc.; Roesch Equipment Company and Allen Equipment,
Inc. for a total combined purchase price of approximately $16.3 million. These
acquisitions have a combined nine locations in Florida, Illinois, Kansas and
Missouri, and had combined trailing twelve months revenues of approximately
$16.0 million.
As of November 10, 1997, the Company is party to additional letters-of-intent
to acquire seven businesses for a total combined purchase price of approximately
$15.3 million and having a combined 13 locations in Arkansas, Florida, Georgia,
Mississippi, South Carolina and Tennessee. Each of these acquisitions is subject
to a number of closing conditions, including the execution of definitive
purchase agreements and RSC board approval.
The Company believes that cash flow from operations, together with
availability under the amended and restated Revolver and the new term loan
facility, and vendor financing in appropriate cases, will be sufficient to
support its operations for at least the next 12 months. However, to complete the
pending acquisitions and if significant additional acquisition opportunities
arise, the Company will need to seek additional capital to complete them. Such
acquisitions could be financed through the incurrence of additional
indebtedness, including convertible debt, or the issuance of common or preferred
stock (which may be issued to third parties or to sellers of acquired
businesses), depending on market conditions. If such financing were not
available, the Company's growth strategy could be hampered and its cash flow
from operations reduced, thereby constraining funds available for growth and
acquisitions. Further, additional indebtedness would increase RSC's leverage and
may make the Company more vulnerable to economic downturns and may limit its
ability to withstand competitive pressures. However, there can be no assurance
that the Company's business will generate sufficient cash flow or that future
borrowings or additional capital, if and when required, will be available on
terms acceptable to the Company, or at all.
On November 3, 1997, the Company began soliciting written consent of its
stockholders for the approval of an increase in the number of authorized shares
of its common stock, $.01 par value, from 20 million to 40 million shares.
14
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer and software systems as the millennium (Year 2000) approaches.
The Year 2000 problem is pervasive and complex, as virtually every computer
operation could be affected in some way by the rollover of the two-digit year
value to "00". The issue is whether systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause
complete system failures. The Company has received confirmation from all of its
systems' vendors that each of their systems will properly handle the rollover to
the Year 2000. Based on these facts, management believes that the Year 2000
problem will not have a material effect on the financial position, results of
operations or cash flows of the Company.
ENVIRONMENTAL
The Company and its operations are subject to a variety of federal, state and
local laws and regulations governing, among other things, worker safety, air
emissions, water discharge and the generation, handling, storage,
transportation, treatment and disposal of hazardous substances and wastes. 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 related costs of investigation
and property damage. The Company incurs ongoing expenses associated with the
removal of older underground storage tanks and the performance of appropriate
remediation at certain of its locations. The Company has accrued $763,000 at
September 30, 1997, related to the removal of underground tanks and remediation
expenses. The Company believes that the impact of the cost of such remediation
on its cash flows will not be material since the Revolver and cash flows from
operations provide sufficient availability to pay these costs.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share,
which is required to be adopted on December 31, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact is expected to result in no material change in
earnings per share (before or after extraordinary items) for the three and nine
month periods ended September 30, 1997 and 1996.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which is required to be adopted in the first quarter of 1998. SFAS No. 130
established standards for the reporting and display of comprehensive income and
its components. Comprehensive income includes certain non-owner changes in
equity that are currently excluded from net income. Because the Company
historically has not experienced transactions which would be included in
comprehensive income, adoption of SFAS No. 130 is not expected to have a
material effect on the financial position, results of operations or cash flows
of the Company.
INFLATION AND GENERAL ECONOMIC CONDITIONS
Although the Company cannot accurately anticipate the effect of inflation on
its operations, it does not believe that inflation has had, or is likely in the
foreseeable future to have, a material impact on its results of operations. The
Company's operating results may be adversely affected by events or conditions in
a particular region, such as regional economic, 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 under the Revolver.
15
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
FORWARD-LOOKING STATEMENTS
This report may contain certain forward-looking statements, including without
limitation, statements concerning the Company's operations, economic performance
and financial condition, including in particular, the integration of
acquisitions and start-up locations into the Company's existing operations, are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The words "believe," "expect," "anticipate" and other
similar expressions identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of their dates. These forward-looking statements are based largely on
the Company's current expectations and are subject to a number of risks and
uncertainties, including without limitation, those described in the Company's
Registration Statement on Form S-1 (Registration No. 333-26753, effective May
29, 1997) and other risks and uncertainties indicated from time to time in the
Company's filings with the Securities and Exchange Commission. Actual results
could differ materially from these forward-looking statements. In addition,
important factors to consider in evaluating such forward-looking statements
include changes in external market factors, changes in the Company's business
strategy or an inability to execute its strategy due to changes in its industry
or the economy generally, the emergence of new or growing competitors and
various other competitive factors. In light of these risks and uncertainties,
there can be no assurance that the forward-looking statements contained in this
report will in fact occur. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect any future events or circumstances.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
None
16
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
The Company and its subsidiaries are parties to various litigation
matters, in most cases involving ordinary and routine claims incidental
to the business of the Company. The ultimate legal and financial
liability of the Company with respect to such pending litigation cannot
be estimated with certainty, but the Company believes, based on its
examination of such matters, that such ultimate liability will not have
a material adverse effect on the business or financial condition of the
Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- ------------------------------------------------------------------------------------
<S> <C>
* 1.1 Underwriting Agreement pertaining to the Company's Registration Statement on Form
S-1 (Registration No. 333-26753), effective May 29, 1997.
# 10.1 First Amendment to the Amended and Restated Credit Agreement, dated as of January
31, 1997.
+ 10.2 Third Amendment, Consent and Limited Waiver to the Amended and Restated Credit
Agreement, dated as of May 22, 1997.
* 10.3 Fourth Amendment to the Amended and Restated Credit Agreement, dated as of August
1, 1997.
10.4 Letter Agreement dated October 14, 1997, between the Company, the Company's
subsidiaries and BT Commercial Corporation relating to the Second Amended and
Restated Credit Agreement - $200,000,000 Increase in Senior Secured Revolving
Credit Facility.
10.5 Letter Agreement dated October 14, 1997, between the Company, the Company's
subsidiaries and BT Commercial Corporation relating to the Second Amended and
Restated Credit Agreement - Proposed $100,000,000 Secured Term Loan Facility.
@ 10.6 The 1996 Equity Participation Plan of Rental Service Corporation.
+ 10.7 Form of Incentive Stock Option Agreement for Employees.
+ 10.8 Form of Non-Qualified Stock Option Agreement for Directors.
++ 10.9 Employee Qualified Stock Purchase Plan of Rental Service Corporation.
</TABLE>
17
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
Item 6. Exhibits and Reports on Form 8-K (continued)
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------------------------------
<C> <S>
& 10.10 Stock Purchase Agreement by and among Andy G. Gessner; Larry R. Bush; Stacy K.
Bush; Larry R. Bush, Trustee of the Stacy K. Bush Trust and Roy B. Bush as
"Sellers," Acme Dixie, Inc. as "Buyer", Rental Service Corporation as "Parent" and
Comtect, Inc. and Comtect, Inc.'s Subsidiaries being IAT Interests of Nevada, Inc.;
RNJB, Inc.; CFTSIJC, Inc.; Industrial Air Tool Pasadena, Inc.; Industrial Air Tool
Texas City, Inc.; PST, Inc. of Louisiana and LRB Supply, Inc. as the "Company,"
dated March 14, 1997.
& 10.11 Asset Purchase Agreement by and among Brute Equipment Co. d/b/a "Foxx Hy-Reach
Company" as "Seller," Rental Service Corporation, Walker Jones Equipment Company as
"Buyer" and Thomas H. Foster, dated April 25, 1997.
& 10.12 Asset Purchase Agreement by and among Central States Equipment, Inc. and Equipment
Lessors, Inc. as "Sellers," Walker Jones Equipment Company as "Buyer" and the
stockholders of Sellers, dated April 26, 1997.
10.13 Stock Purchase Agreement by and among David P. Lanoha and The Lanoha Charitable
Remainder Trust and National Christian Charitable Foundation and Richard F. Lanoha
Family Trust as "Sellers," RSC Acquisition Corp. as "Buyer," Rental Service
Corporation as "Parent" and Rent-It-Center, Inc. d/b/a Center Rental and Sales,
Inc. as the "Company," dated October 6, 1997.
10.14 Asset Purchase Agreement by and among David P. Lanoha as "Seller," RSC Acquisition
Corp. as "Buyer," Rental Service Corporation as "Parent" and Lanoha Leasing Limited
Liability Company as the "Company," dated October 6, 1997.
10.15 Asset Purchase Agreement by and among David P. Lanoha as "Seller," RSC Acquisition
Corp. as "Buyer," Rental Service Corporation as "Parent" and Zuni Rental
Enterprises L.L.C. as the "Company," dated October 6, 1997.
10.16 Asset Purchase Agreement by and among David P. Lanoha as "Seller," RSC Acquisition
Corp. as "Buyer," Rental Service Corporation as "Parent" and Center Rental &
Sales/Omaha, LLC as the "Company," dated October 6, 1997.
10.17 Stock Purchase Agreement by and among Leonard A. Siems, Marvin W. Abbott and the
Trustees (as defined) as "Sellers," RSC Alabama, Inc. as "Buyer," Rental Service
Corporation as "Parent" and Siems Rental & Sales Co., Inc as the "Company," dated
October 31, 1997.
11.1 Statement re: computation of earnings per share.
21.1 Subsidiaries of Rental Service Corporation.
27.1 Financial Data Schedule
</TABLE>
__________
* Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997, and
incorporated herein by reference.
# Filed as an exhibit to the Company's Current Report on Form
8-K dated January 31, 1997, and incorporated herein by
reference.
+ Filed as an exhibit to the Company's Registration Statement
on Form S-1 (Registration No. 333-26753, effective May 29,
1997), and incorporated herein by reference.
@ Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Registration No. 333-22403), and incorporated
herein by reference.
++ Filed with the Company's Proxy Statement on Schedule 14A
filed March 26, 1997, and incorporated herein by reference.
& Filed as an exhibit to the Company's Current Report on Form
8-K dated April 14, 1997, and incorporated herein by
reference.
18
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
Item 6. Exhibits and Reports on Form 8-K (continued)
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1997.
19
<PAGE>
RENTAL SERVICE CORPORATION
SEPTEMBER 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RENTAL SERVICE CORPORATION
--------------------------
(Registrant)
Date: November 13, 1997 By: /s/ Martin R. Reid
----------------- ------------------
Martin R. Reid
Chairman and Chief Executive Officer
Date: November 13, 1997 By: /s/ Robert M. Wilson
----------------- --------------------
Robert M. Wilson
Senior V.P. and Chief Financial Officer
20
<PAGE>
Exhibit 10.4
October 14, 1997
RSC Alabama, Inc.
RSC Industrial Corporation
RSC Duval Inc.
RSC Rents, Inc.
The Air & Pump Company
Walker Jones Equipment, Inc.
Rental Service Corporation
RSC Acquisition Corp.
RSC Holdings, Inc.
14505 Hayden Road, #322
Scottsdale, Arizona 85260
RE: SECOND AMENDED AND RESTATED CREDIT AGREEMENT - $200,000,000 INCREASE IN
SENIOR SECURED REVOLVING CREDIT FACILITY
Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of September 24, 1996 (as amended by the First Amendment to
Amended and Restated Credit Agreement dated as of January 1, 1997, the Second
Amendment, Consent and Limited Waiver to Amended and Restated Credit Agreement
dated as of April 10, 1997, the Third Amendment, Consent and Limited Waiver to
Amended and Restated Credit Agreement dated as of May 22, 1997 and Fourth
Amendment to Amended and Restated Credit Agreement dated as of August 1, 1997,
the "Credit Agreement") among RSC Alabama, Inc. (formerly known as Acme Alabama,
Inc.), RSC Industrial Corporation (formerly known as Acme Dixie Inc.), RSC Duval
Inc. (formerly known as Acme Duval Inc.), RSC Rents, Inc. (formerly known as
Acme Rents, Inc.), The Air & Pump Company and Walker Jones Equipment, Inc.
(collectively, the "Borrowers"), Rental Service Corporation, RSC Acquisition
Corp. and RSC Holdings, Inc. (collectively, the "Parent Guarantors"), each
financial institution identified on Annex I thereto (together with its
successors and permitted assigns pursuant to Section 12.8 thereof, a "Lender"),
the Issuing Bank and BT Commercial Corporation ("BTCC") acting as agent for the
Lenders and the Issuing Bank (in such capacity, together with any successor
agent appointed pursuant to Section 11.8 thereof, the "Agent"). Undefined
capitalized terms used herein shall have the meanings ascribed to such terms in
the Credit Agreement.
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 2
BTCC understands from discussions with representatives of the
Borrowers and the Parent Guarantors that the Borrowers and the Parent Guarantors
have requested a second amendment and restatement of the Credit Agreement (i)
increasing the total Commitments thereunder by $200,000,000 (such increase being
referred to as the "Incremental Commitment"), (ii) extending the Expiration Date
(as so extended, the "Extended Expiration Date") to the fifth anniversary of the
effective date of the Second Amended and Restated Credit Agreement (as defined
below), (iii) revising the Financial Covenants to levels to be agreed upon by
the Credit Parties, the Agent and the Lenders after the delivery of new
projections giving effect to the Second Amended and Restated Credit Agreement,
the New Term Facility (as defined below) and any Acquisitions which have been
disclosed to the Agent and which have been consummated or are to be consummated
on or before December 31, 1997, (iv) providing that the maximum aggregate amount
of Acquisitions that the Credit Parties may enter into from the effective date
of the Second Amended and Restated Credit Agreement until the Extended
Expiration Date shall be an amount equal to the sum of (A) $160,000,000
(excluding consideration consisting of the common stock of RSC), plus (B) net
----
cash proceeds received by RSC immediately and directly from the issuance of the
common stock of RSC during such period or from the issuance of unsecured
subordinated Indebtedness during such period on terms (including subordination
terms) and subject to conditions satisfactory to the Agent and the Lenders or
from any combination thereof, (v) revising the definitions of Applicable
Eurodollar Rate Margin and Applicable Prime Rate Margin to replace the Interest
Coverage Ratio tests therein with comparable tests based on the ratio of (A) the
aggregate amount of all Indebtedness of the Credit Parties outstanding as of any
Quarterly Determination Date occurring after the effective date of the Second
Amended and Restated Credit Agreement to (B) EBITDA, as determined as of such
Quarterly Determination Date, for the twelve-month period ending on such
Quarterly Determination Date (together with corresponding revisions to the form
of Compliance Certificate attached to the Credit Agreement as Exhibit O), (vi)
revising the definition of Borrowing Base to provide that the advance rate
against Eligible Rental Equipment shall be eighty-five percent (85%) from
January 1, 2000 through December 31, 2000 and eighty percent (80%) from January
1, 2001 through the Extended Expiration Date and (vii) permitting the Credit
Parties to enter into a $100,000,000 senior secured term loan (the "New Term
Facility"), as more particularly described in our commitment letter of even date
herewith to you with respect to the New Term Facility, on such terms and subject
to conditions satisfactory to the Agent and the Lenders all of which shall be
incorporated into the Second Amended and Restated Credit Agreement (it being
agreed and understood that any consent to the terms and conditions of the New
Term Facility shall not be indicative of a willingness on the part of BTCC or
any Lender to consent to the incurrence by the Credit Parties of any other debt
on similar terms). Such an amendment and restatement, containing such terms and
conditions acceptable to the Borrowers, the Parent Guarantors, the Agent and the
Lenders and being in form and substance acceptable to the Agent and the Lenders,
is referred to herein as the "Second Amended and Restated Credit Agreement."
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 3
Based upon our preliminary review of the information which the Credit
Parties have provided to us, BTCC, in its capacity as a Lender under the Credit
Agreement, is pleased to confirm that it is willing to provide the Incremental
Commitment upon the effectiveness of the Second Amended and Restated Credit
Agreement and also hereby commits to purchase (at no more than par value) from
one or more of the other Lenders, upon the effectiveness of the Second Amended
and Restated Credit Agreement, up to $100,000,000 in the aggregate of the
Commitments of such Lender or Lenders in the event any such Lender does not
desire to continue to provide financing to the Borrowers under the Second
Amended and Restated Credit Agreement (the "Backstop Commitment"). BTCC's
commitment to provide the Incremental Commitment and the Backstop Commitment is
also subject to the satisfaction of all the conditions set forth herein, in the
Fee Letter (as defined below) and in the Second Amended and Restated Credit
Agreement and review of the assets, liabilities (including existing contingent
liabilities), business and operations of the Credit Parties giving effect to the
Second Amended and Restated Credit Agreement. Further, BTCC and its counsel
have not yet completed due diligence efforts necessary to substantiate the
factual premises upon which the terms and conditions of this Commitment Letter
are based. BTCC's willingness to commit to provide the Incremental Commitment
and the Backstop Commitment is subject to its satisfactory completion of such
review and due diligence and its continuing satisfaction therewith.
BTCC, as Agent, will structure the Second Amended and Restated Credit
Agreement and use its best efforts to obtain approval thereof from the other
Lenders. The Credit Parties hereby agree to provide the Agent and the other
Lenders, promptly upon request, with all information deemed necessary by them to
evaluate the Incremental Commitment, the Backstop Commitment, the New Term
Facility and the terms of the Second Amended and Restated Credit Agreement,
including, without limitation, information and projections prepared by the
Credit Parties or their advisors relating to the transactions described herein,
all as reasonably requested by the Agent. Each of the Credit Parties further
agrees to use its reasonable best efforts to make the appropriate officers and
representatives thereof available to participate in information meetings for the
Lenders at times and places as the Agent may reasonably request.
Each of the Credit Parties represents and warrants that (a) all
information which has been or is hereafter made available to the Agent, any
Lender or any other financial institution which agrees to provide any portion of
the Incremental Commitment (a "New Lender") by any Credit Party or any of their
respective representatives in connection with the transactions contemplated
hereby is and will be complete and correct in all material respects for the
purposes prepared and does not and will not contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made,
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 4
and (b) all financial projections that have been or will hereafter be prepared
by the Credit Parties and made available to the Agent, any Lender or any New
Lender have been or will be prepared in good faith based upon reasonable
assumptions, which assumptions shall be disclosed as part of such projections.
In arranging and structuring the Second Amended and Restated Credit Agreement,
the Incremental Commitment and the Backstop Commitment, the Agent may be using
and relying on such information and projections without independent verification
thereof.
Each of the Credit Parties agrees that any and all information,
materials or analysis furnished to us, or developed by us, in connection with
the due diligence review described herein or in arranging and structuring the
Second Amended and Restated Credit Agreement, including, without limitation,
information bearing on the creditworthiness of any of the Credit Parties or
their Affiliates (collectively, "Information"), may be shared by us with the
other Lenders, the New Lenders and our Affiliates, including, without
limitation, Bankers Trust Company and BT Alex. Brown Corporation (collectively
"BT Affiliates") provided that none of such Information shall be used in any
manner which would violate applicable law. Each of the Credit Parties also
confirms that it has no objection to discussions between our personnel and the
personnel of the other Lenders, the New Lenders or the BT Affiliates concerning
any Credit Party or any Affiliate of any Credit Party, the Information, the
proposed Second Amended and Restated Credit Agreement, or any other potential
transaction between any Credit Party, BTCC, any Lender, any New Lender or any BT
Affiliate.
In connection with the Second Amended and Restated Credit Agreement,
BTCC may, in its discretion, allocate to the Lenders and the New Lenders
portions of any fees payable to BTCC in connection with the Incremental
Commitment and the Second Amended and Restated Credit Agreement. Each of the
Credit Parties agrees that none of the Lenders nor any New Lender will receive
from any Credit Party or any of their respective Affiliates any compensation of
any kind for its participation in the Incremental Commitment except as expressly
provided for in this Commitment Letter or in the fee letter of even date
herewith (the "Fee Letter").
BTCC's commitment to provide the Incremental Commitment and the
Backstop Commitment is further subject to there not having occurred and being
continuing a material adverse change in financial, banking or capital market
conditions generally since the date hereof that, in the sole judgment of BTCC,
would substantially impair the subsequent marketability of the Incremental
Commitment or the Backstop Commitment. In addition, in the event that: (i)
prior to the execution and delivery of definitive documentation with respect to
the Second Amended and Restated Credit Agreement, BTCC becomes aware of
information, or an event occurs, which BTCC reasonably believes could have a
Material Adverse Effect or (ii) the Credit Parties do not, for any reason other
than a cancellation by BTCC of its
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 5
commitment pursuant to the foregoing clause (i), execute and deliver the
definitive documentation with respect to the Second Amended and Restated Credit
Agreement on or before November 30, 1997 or such other date as may be agreed
upon in writing by the parties hereto, then BTCC may, in its sole and absolute
discretion, terminate all of its obligations hereunder.
The commitment of BTCC hereunder is also subject to negotiation and
execution of the Second Amended and Restated Credit Agreement, amendments to the
other Credit Documents and other agreements, documents and instruments which the
Agent and the Lenders may reasonably request (the Second Amended and Restated
Credit Agreement and the other Credit Documents, as amended by such amendments
and such other agreements, documents and instruments, collectively, the "Amended
Credit Documents") in form and substance satisfactory to the Credit Parties, the
Agent, the Lenders and their respective counsel. Whether or not the Amended
Credit Documents are executed (including, without limitation, by reason of the
failure to receive approval of each Lender (other than BTCC)), each of the
Credit Parties agrees as follows:
(a) to promptly reimburse BTCC for all reasonable costs and expenses including,
without limitation, (i) the fees, disbursements and other reasonable
charges of attorneys and paralegals, (ii) reasonable out-of-pocket expenses
of BTCC personnel, (iii) other legal, appraisal, environmental, audit,
consulting, search and filing fees and expenses incurred by BTCC or any BT
Affiliate in connection with (x) the arrangement, structuring, negotiation,
preparation, review, execution, delivery, collection and enforcement of
this Commitment Letter, the Fee Letter and the Amended Credit Documents and
(y) the completion of the due diligence investigation described herein;
(b) to indemnify and hold harmless BTCC, each Lender and each of their
respective Affiliates, and each director, officer, agent, counsel and
employee thereof (each an "Indemnified Person") from and against all
losses, claims, damages, costs and other expenses ("Losses") to which any
of them may become subject arising out of or relating to this Commitment
Letter, the Amended Credit Documents, the New Term Facility or any other
transaction contemplated hereby or thereby except for any such Losses
caused by the gross negligence or willful misconduct of such Indemnified
Person, and to reimburse BTCC and each other Indemnified Person for any
reasonable expenses (including the fees, disbursements and other charges of
attorneys and paralegals) incurred in connection with the investigation of,
preparation for or defense of any actual or threatened claim, action or
proceeding arising therefrom (including any such costs of responding to
discovery requests or subpoenas), regardless of whether BTCC or such
Indemnified Person is a party thereto; and
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 6
(c) that neither the Agent nor any Lender shall be liable under this Commitment
Letter or the Amended Credit Documents or any other transaction
contemplated hereby or thereby or in respect of any act, omission or event
relating to the Amended Credit Documents or the New Term Facility, on any
theory of liability, for any punitive, special, indirect or consequential
damages.
The contents of this Commitment Letter and the Fee Letter are
confidential. None of the Credit Parties will show, circulate or otherwise
disclose them or their contents to any other Person (other than Brentwood
Associates, Affiliates of Brentwood Associates and the officers, directors,
employees, attorneys and advisors of the respective Credit Parties, on a
confidential basis, as necessary, in connection with the evaluation of the terms
and conditions set forth herein and therein, who shall agree to maintain their
confidentiality) without our prior written consent; and none of the Credit
Parties will file any of them or disclose their contents in any filing with any
Governmental Authority, unless prior to the filing the Credit Parties have
formally accepted this Commitment Letter and the Fee Letter, as provided herein.
This Commitment Letter and the Fee Letter may not be assigned by any Credit
Party without the prior written consent of the Agent and the Lenders, and the
undertakings by BTCC herein and therein are made solely for the benefit of the
Credit Parties and may not be relied upon or enforced by any other Person. If
the Commitment Letter and the Fee Letter are not accepted by the Credit Parties,
the Credit Parties will immediately return to us the originals and copies of the
Commitment Letter and the Fee Letter and any summaries thereof which the Credit
Parties or their respective advisors may have created. If the Commitment Letter
and Fee Letter are accepted by the Credit Parties and the Credit Parties have
complied with the terms hereof and thereof, RSC and the Credit Parties may
thereafter disclose the information contained in only the Commitment Letter as
they deem required by law. Prior to acceptance, any disclosure by any Credit
Party in violation hereof shall be deemed to constitute the Credit Parties'
acceptance of this Commitment Letter and the Fee Letter.
BTCC's commitment to provide the Incremental Commitment and the
Backstop Commitment on the terms and conditions set forth in this Commitment
Letter is specifically contingent upon the execution and delivery of this
Commitment Letter and the Fee Letter and the satisfaction of all of the other
conditions referred to as conditions to the Incremental Commitment, the Backstop
Commitment and the Second Amended and Restated Credit Agreement. BTCC's
commitment to provide the Incremental Commitment and the Backstop Commitment
pursuant to the terms of this Commitment Letter will expire at 5:00 p.m. Los
Angeles, California time on October 17, 1997, unless on or before that time this
Commitment Letter and the Fee Letter have been duly executed and delivered to
BTCC. In addition and in any event, BTCC's commitment hereunder will expire (i)
if any fees or other amounts payable to BTCC hereunder, under the Fee Letter or
the Credit Documents are not paid when due and (ii) on November 30, 1997 or such
other date as may be agreed upon in writing by the parties
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 7
hereto, if the Second Amended and Restated Credit Agreement shall not have been
executed by the Credit Parties, the Agent and the Lenders by that date.
This Commitment Letter may be executed in counterparts which, when
taken together, shall constitute an original. This Commitment Letter shall be
governed by and construed in accordance with the laws of the State of New York.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 8
Please indicate your acceptance of and agreement to the foregoing by
signing and returning the enclosed copies of this Commitment Letter and the Fee
Letter to BT Commercial Corporation, 300 S. Grand Avenue, 41st Floor, Los
Angeles, CA 90071 Attention: Thomas L. Ventling.
Very truly yours,
BT COMMERCIAL CORPORATION
By: /s/ Thomas L. Ventling
--------------------------------------
Thomas L. Ventling
Senior Vice President
Accepted and agreed this
14th day of October, 1997
RSC ALABAMA, INC.
RSC INDUSTRIAL CORPORATION
RSC DUVAL INC.
RSC RENTS, INC.
THE AIR & PUMP COMPANY
WALKER JONES EQUIPMENT, INC.
RENTAL SERVICE CORPORATION
RSC ACQUISITION CORP.
RSC HOLDINGS, INC.
By: /s/ Robert M. Wilson
--------------------------------------
Name: Robert M. Wilson
Title: Senior Vice President &
Chief Financial Officer
<PAGE>
Exhibit 10.5
October 14, 1997
RSC Alabama, Inc.
RSC Industrial Corporation
RSC Duval Inc.
RSC Rents, Inc.
The Air & Pump Company
Walker Jones Equipment, Inc.
Rental Service Corporation
RSC Acquisition Corp.
RSC Holdings, Inc.
14505 Hayden Road, #322
Scottsdale, Arizona 85260
RE: SECOND AMENDED AND RESTATED CREDIT AGREEMENT -- PROPOSED $100,000,000
SECURED TERM LOAN FACILITY
Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of September 24, 1996 (as amended by the First Amendment to
Amended and Restated Credit Agreement dated as of January 1, 1997, the Second
Amendment, Consent and Limited Waiver to Amended and Restated Credit Agreement
dated as of April 10, 1997, the Third Amendment, Consent and Limited Waiver to
Amended and Restated Credit Agreement dated as of May 22, 1997 and Fourth
Amendment to Amended and Restated Credit Agreement dated as of August 1, 1997,
the "Credit Agreement") among RSC Alabama, Inc. (formerly known as Acme Alabama,
Inc.), RSC Industrial Corporation (formerly known as Acme Dixie Inc.), RSC Duval
Inc. (formerly known as Acme Duval Inc.), RSC Rents, Inc. (formerly known as
Acme Rents, Inc.), The Air & Pump Company and Walker Jones Equipment, Inc.
(collectively, the "Borrowers"), Rental Service Corporation ("RSC"), RSC
Acquisition Corp. and RSC Holdings, Inc. (collectively, the "Parent
Guarantors"), each financial institution identified on Annex I thereto (together
with its successors and permitted assigns pursuant to Section 12.8 thereof, a
"Revolving Credit Lender"), the Issuing Bank and BT Commercial Corporation
("BTCC") acting as agent for the Revolving Credit Lenders and the Issuing Bank
(in such capacity, together with any successor agent appointed pursuant to
Section 11.8 thereof, the "Agent"). Undefined capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement.
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 2
BTCC understands from discussions with representatives of RSC and its
Subsidiaries (collectively, the "Credit Parties") that, as part of a proposed
second amendment and restatement of the Credit Agreement (the "Second Amended
and Restated Credit Agreement"), the Credit Parties desire additional financing
to consummate acquisitions and for other lawful general corporate purposes which
financing shall consist of a seven year $100,000,000 term loan secured by a
first priority lien on substantially all assets of the Credit Parties (the "Term
Loan"). The borrowers of the Term Loan will be the Borrowers under the existing
Credit Agreement. The Term Loan and other obligations of the Borrowers will be
guaranteed by the Parent Guarantors on substantially the same terms as the
guarantees of the Parent Guarantors in the Credit Agreement. The principal
amount of the Term Loan will be repayable in 6 equal annual installments of
$1,000,000 payable on each anniversary of the funding of the Term Loan with a
final installment of $94,000,000 payable on the seventh anniversary of the
funding of the Term Loan. Interest on the Term Loan will be payable monthly in
arrears and will accrue at a rate equal to the Prime Lending Rate plus 1.75% or,
----
at the Borrower's option so long as no Default or Event of Default has occurred
and is continuing, the Adjusted Eurodollar Rate plus 2.75%. From the date of
----
occurrence of an Event of Default, interest shall accrue at the applicable rates
set forth in Section 4.6 of the Credit Agreement. In the event that any
prepayment of all or a portion of the Term Loan (other than a mandatory
prepayment) is made on or prior to the second anniversary of the funding
thereof, a prepayment penalty shall be payable to the Agent, for the ratable
benefit of the Term Lenders (as defined below), on the date of such prepayment
in an amount equal to (i) two percent (2.00%) of the amount prepaid, if such
prepayment is made on or prior to the first anniversary of the funding of the
Term Loan or (ii) one percent (1.00%) of the amount prepaid, if such prepayment
is made after such first anniversary and on or prior to the second anniversary
of the funding of the Term Loan. We also understand that the terms and
conditions of the Term Loan will be incorporated into the Second Amended and
Restated Credit Agreement and the Credit Documents in existence at the time of
the funding of the Term Loan; provided, that, the Second Amended and Restated
--------
Credit Agreement and such Credit Documents will include, in addition to the
provisions outlined in this Commitment Letter, provisions to be negotiated by
the parties which BTCC may deem appropriate once the final structure of the Term
Loan has been determined and BTCC has completed its due diligence review.
Based upon our preliminary review of the information which the Credit
Parties have provided to us, BTCC is pleased to confirm that it is willing to
provide the Term Loan (i) on the terms and conditions set forth above, (ii) upon
obtaining the approval of each Revolving Credit Lender and (iii) on the other
terms and conditions described in this Commitment Letter, the Fee Letter (as
defined below) and the Second Amended and Restated Credit Agreement. BTCC's
commitment to provide the Term Loan is also subject to the satisfaction of all
the conditions set forth herein and in the Fee Letter, including satisfactory
completion of BTCC's
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 3
due diligence review as described herein and review of the assets, liabilities
(including existing contingent liabilities), business and operations of the
Credit Parties giving effect to the Term Loan and the Second Amended and
Restated Credit Agreement. Further, BTCC and its counsel have not yet completed
due diligence efforts necessary to substantiate the factual premises upon which
the terms and conditions of this Commitment Letter are based. BTCC's willingness
to commit to provide the Term Loan is subject to its satisfactory completion of
such review and due diligence and its continuing satisfaction therewith.
BTCC, as Agent, will structure the Term Loan and form a syndicate of
financial institutions (together with BTCC, each a "Term Lender" and,
collectively, the "Term Lenders") to join with it in providing the Term Loan.
The Credit Parties hereby agree to assist the Agent in forming any such
syndicate and to provide the Agent and the other Term Lenders, promptly upon
request, with all information deemed necessary by them to evaluate the Term Loan
and to complete successfully the syndication, including, without limitation, (i)
an information package for delivery to potential syndicate members and
participants and (ii) information and projections prepared by the Credit Parties
or their advisors relating to the transactions described herein, all as
reasonably requested by the Agent. Each of the Credit Parties further agrees to
use its reasonable best efforts to make the appropriate officers and
representatives thereof available to participate in information meetings for
potential syndicate members and participants at such times and places as the
Agent may reasonably request.
Each of the Credit Parties represents and warrants that (a) all
information which has been or is hereafter made available to the Agent or any
Term Lender by any Credit Party or any of their respective representatives in
connection with the transactions contemplated hereby is and will be complete and
correct in all material respects for the purposes prepared and does not and will
not contain any untrue statement of material fact or omit to state a material
fact necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made,
and (b) all financial projections that have been or will hereafter be prepared
by the Credit Parties and made available to the Agent or any Term Lender have
been or will be prepared in good faith based upon reasonable assumptions, which
assumptions shall be disclosed as part of such projections. The Credit Parties
further agree to supplement the information and projections referred to in
clauses (a) and (b) above from time to time until completion of the syndication
so that the representation and warranty in the preceding sentence remains
correct. In arranging, structuring and syndicating the Term Loan, the Agent may
be using and relying on such information and projections without independent
verification thereof.
Each of the Credit Parties agrees that any and all information,
materials or analysis furnished to us, or developed by us, in connection with
the due diligence review described herein or in arranging, structuring and
syndicating the Term Loan, including,
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 4
without limitation, information bearing on the creditworthiness of any of the
Credit Parties or their Affiliates (collectively, "Information"), may be shared
by us with the other Term Lenders and our Affiliates, including, without
limitation, Bankers Trust Company and BT Alex. Brown Corporation (collectively
"BT Affiliates") provided that none of such Information shall be used in any
manner which would violate applicable law. Each of the Credit Parties also
confirms that it has no objection to discussions between our personnel and the
personnel of the other Term Lenders or the BT Affiliates concerning any Credit
Party or any Affiliate of any Credit Party, the Information, the Term Loan or
any other potential transaction between any Credit Party, BTCC, any Term Lender
or any BT Affiliate.
In connection with the syndication of the Term Loan, BTCC may, in its
discretion, allocate to the Term Lenders portions of any fees payable to BTCC in
connection with the Term Loan. Each of the Credit Parties agrees that none of
the Term Lenders will receive from any Credit Party or any of their respective
Affiliates any compensation of any kind for its participation in the Term Loan
except as expressly provided for in this Commitment Letter or in the fee letter
of even date herewith (the "Fee Letter").
BTCC's commitment to provide the Term Loan is further subject to there
not having occurred and being continuing a material adverse change in financial,
banking or capital market conditions generally since the date hereof that, in
the sole judgment of BTCC, would substantially impair either the syndication of
the Term Loan or the subsequent marketability of the Term Loan. In addition, in
the event that: (i) prior to the execution and delivery of the Second Amended
and Restated Credit Agreement, BTCC becomes aware of information, or an event
occurs, which BTCC reasonably believes could have a Material Adverse Effect or
(ii) the Credit Parties do not, for any reason other than a cancellation by BTCC
of its commitment pursuant to the foregoing clause (i), execute and deliver the
Second Amended and Restated Credit Agreement on or before November 30, 1997 or
such other date as may be agreed upon in writing by the parties hereto, then
BTCC may, in its sole and absolute discretion, terminate all of its obligations
hereunder.
The commitment of BTCC hereunder is also subject to negotiation and
execution of the Second Amended and Restated Credit Agreement, amendments to the
other Credit Documents and other agreements, documents and instruments which the
Agent and the Term Lenders may reasonably request (the Second Amended and
Restated Credit Agreement and the other Credit Documents, as amended by such
amendments and such other agreements, documents and instruments, collectively,
the "Amended Credit Documents") in form and substance satisfactory to the Credit
Parties, the Agent, the Term Lenders and their respective counsel. Whether or
not the Amended Credit Documents are executed (including, without limitation, by
reason of the failure to receive approval of each Revolving Credit Lender (other
than BTCC)), each of the Credit Parties agrees as follows:
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 5
(a) to promptly reimburse BTCC for all reasonable costs and expenses including,
without limitation, (i) the fees, disbursements and other reasonable
charges of attorneys and paralegals, (ii) reasonable out-of-pocket expenses
of BTCC personnel, (iii) other legal, appraisal, environmental, audit,
consulting, search and filing fees and expenses incurred by BTCC or any BT
Affiliate in connection with (x) the arrangement, structuring, negotiation,
preparation, review, execution, delivery, collection and enforcement of
this Commitment Letter, the Fee Letter and the Amended Credit Documents,
(y) the completion of the due diligence investigation described herein and
(z) the syndication of the Term Loan;
(b) to indemnify and hold harmless BTCC, each Term Lender and each of their
respective Affiliates, and each director, officer, agent, counsel and
employee thereof (each an "Indemnified Person") from and against all
losses, claims, damages, costs and other expenses ("Losses") to which any
of them may become subject arising out of or relating to this Commitment
Letter, the Amended Credit Documents or any other transaction contemplated
hereby or thereby except for any such Losses caused by the gross negligence
or willful misconduct of such Indemnified Person, and to reimburse BTCC and
each other Indemnified Person for any reasonable expenses (including the
fees, disbursements and other charges of attorneys and paralegals) incurred
in connection with the investigation of, preparation for or defense of any
actual or threatened claim, action or proceeding arising therefrom
(including any such costs of responding to discovery requests or
subpoenas), regardless of whether BTCC or such Indemnified Person is a
party thereto; and
(c) that neither the Agent nor any Term Lender shall be liable under this
Commitment Letter or the Amended Credit Documents or any other transaction
contemplated hereby or thereby or in respect of any act, omission or event
relating to the Amended Credit Documents on any theory of liability, for
any punitive, special, indirect or consequential damages.
The contents of this Commitment Letter and the Fee Letter are
confidential. None of the Credit Parties will show, circulate or otherwise
disclose them or their contents to any other Person (other than Brentwood
Associates, Affiliates of Brentwood Associates and the officers, directors,
employees, attorneys and advisors of the respective Credit Parties, on a
confidential basis, as necessary, in connection with the evaluation of the terms
and conditions set forth herein and therein, who shall agree to maintain their
confidentiality) without our prior written consent; and none of the Credit
Parties will file any of them or disclose their contents in any filing with any
Governmental Authority, unless prior to the filing the Credit Parties have
formally accepted this Commitment Letter and the Fee Letter, as provided herein.
This Commitment Letter and the Fee Letter may not be assigned by any Credit
Party without the
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 6
prior written consent of the Agent and the Term Lenders, and the undertakings by
BTCC herein and therein are made solely for the benefit of the Credit Parties
and may not be relied upon or enforced by any other Person. If the Commitment
Letter and the Fee Letter are not accepted by the Credit Parties, the Credit
Parties will immediately return to us the originals and copies of the Commitment
Letter and the Fee Letter and any summaries thereof which the Credit Parties or
their respective advisors may have created. If the Commitment Letter and Fee
Letter are accepted by the Credit Parties and the Credit Parties have complied
with the terms hereof and thereof, RSC and the Credit Parties may thereafter
disclose the information contained in only the Commitment Letter as they deem
required by law. Prior to acceptance, any disclosure by any Credit Party in
violation hereof shall be deemed to constitute the Credit Parties' acceptance of
this Commitment Letter and the Fee Letter.
BTCC's commitment to provide the Term Loan on the terms and conditions
set forth in this Commitment Letter is specifically contingent upon the
execution and delivery of this Commitment Letter and the Fee Letter and the
satisfaction of all of the other conditions referred to as conditions to the
Term Loan. BTCC's commitment to provide the Term Loan pursuant to the terms of
this Commitment Letter will expire at 5:00 p.m. Los Angeles, California time on
October 17, 1997, unless on or before that time this Commitment Letter and the
Fee Letter have been duly executed and delivered to BTCC. In addition and in
any event, BTCC's commitment hereunder will expire (i) if any fees or other
amounts payable to BTCC hereunder or under the Fee Letter are not paid when due
and (ii) on November 30, 1997 or such other date as may agreed upon in writing
by the parties hereto, if the Amended Credit Documents shall not have been
executed by the Credit Parties, the Agent and the Term Lenders by that date.
This Commitment Letter may be executed in counterparts which, when
taken together, shall constitute an original. This Commitment Letter shall be
governed by and construed in accordance with the laws of the State of New York.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE>
Rental Service Corporation et al.
October 14, 1997
Page 7
Please indicate your acceptance of and agreement to the foregoing by
signing and returning the enclosed copies of this Commitment Letter and the Fee
Letter to BT Commercial Corporation, 300 S. Grand Avenue, 41st Floor, Los
Angeles, CA 90071
Attention: Thomas L. Ventling.
Very truly yours,
BT COMMERCIAL CORPORATION
By: /s/ Thomas L. Ventling
-----------------------
Thomas L. Ventling
Senior Vice President
Accepted and agreed this
14th day of October, 1997
RSC ALABAMA, INC.
RSC INDUSTRIAL CORPORATION
RSC DUVAL INC.
RSC RENTS, INC.
THE AIR & PUMP COMPANY
WALKER JONES EQUIPMENT, INC.
RENTAL SERVICE CORPORATION
RSC ACQUISITION CORP.
RSC HOLDINGS, INC.
By: /s/ Robert M. Wilson
-------------------------------
Name: Robert M. Wilson
Title: Senior Vice President &
Chief Financial Officer
<PAGE>
Exhibit 10.13
STOCK PURCHASE AGREEMENT
by and among
David P. Lanoha
And
The Lanoha Charitable Remainder Trust
And
National Christian Charitable Foundation
And
Richard F. Lanoha Family Trust
as "Sellers"
RSC Acquisition Corp.
as "Buyer"
Rental Service Corporation
as "Parent"
and
Rent-It- Center, Inc. d/b/a Center Rental and Sales, Inc.
as the "Company"
October 6, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS................................................................. 1
4
1.1. Defined Terms.
1.2. Other Defined Terms...................................................... 4
ARTICLE II. SALE AND TRANSFER OF SHARES
2.1. Transfer of Shares....................................................... 4
2.2. Purchase Price........................................................... 4
2.3. Employment and Non-competition Agreements................................ 4
2.4. Holdback................................................................. 4
2.5. Transfer Taxes and Fees.................................................. 4
2.6. Closing of Books; Benefits and Risks of Ownership........................ 4
ARTICLE III. CLOSING................................................................... 4
3.1. Closing.................................................................. 4
3.2. Conveyances at Closing................................................... 4
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF DAVID P. LANOHA AND THE COMPANY.......... 4
4.1. Organization of the Company.............................................. 4
4.2. Authorization............................................................ 4
4.3. No Violation............................................................. 4
4.4. Capitalization........................................................... 4
4.5. Related Entities......................................................... 4
4.6. Equipment and Other Assets; Absence of Encumbrances...................... 4
4.7. Facilities............................................................... 4
4.8. Contracts and Commitments................................................ 4
4.9. Permits.................................................................. 4
4.10. Financial Statements.................................................... 4
4.11. Books and Records....................................................... 4
4.12. Litigation.............................................................. 4
4.13. Labor Matters........................................................... 4
4.14. Compliance with Law..................................................... 4
4.15. No Brokers.............................................................. 4
4.16. No Other Agreements to Sell the Company................................. 4
4.17. Proprietary Rights...................................................... 4
4.18. Tax Matters............................................................. 4
4.19. Accounts Receivable..................................................... 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
4.20. Inventory............................................................... 4
4.21. Employees and Employee Benefits......................................... 4
4.22. Compliance With Environmental Laws...................................... 4
4.23. Liabilities............................................................. 4
4.24. Insurance............................................................... 4
4.25. Conduct of the Business................................................. 4
4.26. Knowledge............................................................... 4
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.......................... 4
5.1. Organization of Buyer and Parent......................................... 4
5.2. Authorization............................................................ 4
5.3. No Conflict or Violation................................................. 4
5.4. Consents and Approvals................................................... 4
ARTICLE VI. COVENANTS OF BUYER, THE COMPANY AND SELLER................................. 4
6.1. Further Assurances....................................................... 4
6.2. No Solicitation.......................................................... 4
6.3. Notification of Certain Matters.......................................... 4
6.4. Access to Information.................................................... 4
6.5. Conduct of Business...................................................... 4
6.6. Guarantee................................................................ 4
6.7. Environmental Assessments and Remediation................................ 4
6.8. Registration Rights...................................................... 4
6.9. Cooperation Regarding Dealerships........................................ 4
6.10. 1997 Tax Returns........................................................ 4
ARTICLE VII. CONDITIONS TO SELLERS' OBLIGATIONS........................................ 4
7.1. Representations, Warranties and Covenants................................ 4
7.2. No Proceedings, Litigation or Laws....................................... 4
7.3. Certificates.............................................................32
7.4. Other Conditions.........................................................32
7.5. Consents.................................................................32
ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS........................................32
8.1. Representations, Warranties and Covenants................................32
8.2. Consents.................................................................33
8.3. No Proceedings or Litigation.............................................33
8.4. Opinion of Counsel.......................................................33
8.5. Certificates.............................................................35
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
8.6. Employment and Non-Competition Agreements............................... 35
8.7. Release of Encumbrances................................................. 35
8.8. Board Approval.......................................................... 35
8.9. Corporate Documents..................................................... 35
8.10. Schedules and Due Diligence Review..................................... 35
8.11. No Material Adverse Change............................................. 35
8.12. Other Transactions..................................................... 35
ARTICLE IX. CONSENTS TO ASSIGNMENT.................................................... 35
9.1. Consents to Assignment.................................................. 35
ARTICLE X. ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING............................. 36
10.1. Books and Records; Tax Examinations.................................... 36
10.2. Survival of Representations, Etc....................................... 36
10.3. Indemnifications....................................................... 37
10.4. Further Action......................................................... 40
ARTICLE XI. MISCELLANEOUS............................................................. 40
11.1. Termination............................................................ 40
11.2. Assignment............................................................. 41
11.3. Notices................................................................ 41
11.4. Choice of Law.......................................................... 42
11.5. Entire Agreement; Amendments and Waivers............................... 42
11.6. Multiple Counterparts.................................................. 42
11.7. Expenses............................................................... 42
11.8. Invalidity............................................................. 42
11.9. Titles................................................................. 43
11.10. Publicity; Confidentiality............................................ 43
11.11. Remedies.............................................................. 43
11.12. Arbitration........................................................... 43
11.13. Seller Representative................................................. 43
ARTICLE XII. SPECIAL PROVISIONS....................................................... 44
</TABLE>
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of October 6, 1997 (the
"Agreement"), is by and among RSC Acquisition Corp., a Delaware corporation,
"Buyer"), Rental Service Corporation, a Delaware corporation ("Parent"), the
Lanoha Charitable Remainder Trust, Richard F. Lanoha Family Trust, National
Christian Charitable Foundation and David P. Lanoha (each a "Seller" and
collectively, the "Sellers") and Rent-It-Center, Inc., a Colorado corporation
(herein "Center Rental" or the "Company").
RECITALS
--------
A. The Company is engaged in the business of equipment rentals and
sales, operating under the "Center Rental" name .
B. Sellers own, of record and beneficially, all of the issued and
outstanding shares of capital stock of the Company (the "Shares").
C. Buyer desires to purchase from Sellers, and Sellers desire to sell
to Buyer, all of the Shares upon the terms and subject to the conditions of this
Agreement, whereupon Buyer will own all of the equity interests in the Company
(the "Purchase").
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1 Defined Terms. As used herein, the terms below shall have the following
-------------
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning set forth in the Exchange Act.
---------
"Agreement" shall have the meaning specified in the first paragraph of
---------
this Agreement.
"Ancillary Agreements" shall mean the Employment and Non-Competition
--------------------
Agreements to be entered into with David Lanoha, Jack Markle and Doug
Bonnettete, substantially in the forms attached hereto as exhibits and such
other agreements mutually agreed to be necessary or desirable to consummate the
transactions contemplated hereby.
<PAGE>
"Assets" shall mean the assets of the Company as reflected on the
------
Balance Sheet dated August 31, 1997, and those assets acquired (less those
assets disposed of) in the ordinary course of Business since the Balance Sheet
Date.
"Balance Sheet" shall mean the balance sheet of the Company as of the
-------------
Balance Sheet Date.
"Balance Sheet Date" shall mean August 31, 1997.
------------------
"Books and Records" shall mean (a) all records and lists pertaining to
-----------------
the Business, customers, suppliers or personnel of the Company, (b) all product,
business and marketing plans of the Company and (c) all books, ledgers,
subledgers, trial balances, files, reports, plans, drawings and operating
records of every kind maintained by the Company.
"Business" shall mean the Company's equipment rental and sales
--------
business.
"Buyer" shall have the meaning specified in the first paragraph of
-----
this Agreement.
"Closing Date" shall mean November 28, 1997, or such later date before
------------
January 31, 1998 on which the parties otherwise agree.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Company" shall have the meaning specified in the first paragraph of
-------
this Agreement.
"Contract" shall mean any agreement, contract, note, factoring
--------
agreement, loan, evidence of indebtedness, purchase order, letter of credit,
franchise agreement, lease, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation or commitment to which the Company is
a party or is bound and which relates to the Business or Assets, whether oral or
written.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
-----------
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Effective Control Balance Sheet" shall mean the balance sheet of the
-------------------------------
Company at October 31, 1997.
2
<PAGE>
"Equipment" shall mean all of the rental and non-rental furniture,
---------
fixtures, furnishings, machinery, automobiles, trucks, spare parts, tools,
supplies, shop equipment, equipment and other tangible personal property owned
by the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"Escrow Agent" shall mean the Chase/Mellon Trust Company or another
------------
entity designated by Buyer and the Seller Representative to act as escrow agent
under the Escrow Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement dated as
----------------
of the Closing Date by and among Buyer, Seller Representative and the Escrow
Agent, substantially in the form attached hereto as an Exhibit.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"Excluded Stockholders" means National Christian Charitable Foundation
---------------------
("NCCF"), the Lanoha Charitable Remainder Trust and the Richard F. Lanoha Family
Trust.
"Facilities" shall mean the rental yards, stores, offices, maintenance
----------
and storage facilities, shops, warehouses, improvements and other structures,
together with all related fixtures and improvements, located at or on the Owned
Real Property or the Leased Real Property.
"Financial Statements" shall mean the Balance Sheet and the related
--------------------
statement of operations of the Company for the 10 month period ended on the
Balance Sheet Date.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended.
"Inventory" shall mean all of the Company's inventory held for resale
---------
and all of the Company's new repair or replacement parts, supplies and packaging
items and similar items with respect to the Business, in each case wherever the
same may be located.
"Leased Real Property" shall mean all real property leased by the
--------------------
Company, including without limitation, all rights, easements and privileges
appertaining or relating thereto, all buildings, fixtures, and improvements
located thereon and all Facilities thereon, if any.
"Material Adverse Effect" or "Material Adverse Change" shall mean with
------------------------ -----------------------
respect to the Business or the Assets any significant and substantial adverse
effect or change in the condition (financial or other), business, results of
operations, prospects, assets, liabilities or operations of the Business or the
Assets or on the ability of the Sellers or the Company to consummate the
transactions contemplated hereby, or any event or condition which would, with
the passage of time, constitute a "Material Adverse Effect" or "Material Adverse
----------------------- ----------------
Change."
- ------
3
<PAGE>
"Material", when used as an adjective, refers to something the
existence or absence of which, as the context requires, would have a Material
Adverse Effect.
"Owned Real Property" shall mean all real property owned in fee by the
-------------------
Company which is used in the conduct of the Business.
"Parent" shall mean Rental Service Corporation, a Delaware
------
corporation.
"Permits" shall mean all licenses, permits, franchises, approvals,
-------
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.
"Related Entity" shall mean any corporation, partnership, trust or
--------------
other organization in which the Company or any of the Sellers (excluding NCCF)
has a material interest and shall include, without limitation, Lanoha Leasing
Limited Liability Company, Center Rental & Sales/Omaha, LLC, Zuni Rental
Enterprises L.L.C (such limited liability entities being called the "LLC's").
"Related Purchase Agreements" shall mean the asset purchase agreements
---------------------------
pursuant to which the Related Purchase Transaction is consummated.
"Related Purchase Transaction" shall mean the purchases by the Buyer
----------------------------
of substantially all of the assets of the LLC's.
"Rental and Non-Rental Asset Listing" shall mean the assets reflected
-----------------------------------
on the Balance Sheet and rental items that exist in the equipment inventory as
of August 31, 1997.
"Rental Ready" shall mean that all required maintenance has been
------------
performed and that the equipment does not require any repairs in excess of
$100,000 in the aggregate for the Company and all Related Entities.
"Representative" shall mean any officer, director, principal,
--------------
attorney, agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder.
"Sellers" shall have the meaning specified in the first paragraph of
-------
this Agreement.
"Shares" shall mean all of the issued and outstanding shares of
------
capital stock of the Company.
"Seller Representative" shall mean David Lanoha, whom Sellers have
---------------------
irrevocably made, constituted and appointed their agent pursuant to Section
11.13 hereof.
4
<PAGE>
"Tax" shall mean any federal, state, local, foreign or other tax,
---
levy, impost, fee, assessment or other government charge, including without
limitation income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation interest, penalties and additions in connection therewith.
"Year-End Balance Sheets" shall mean the balance sheet of the Company
-----------------------
at each of October 31, 1994, 1995, and 1996.
"Year-End Financial Statements" shall mean the Year End Balance Sheet
-----------------------------
dated as of October 31, 1994, 1995, and 1996, and the related statements of
operations of the Company for the fiscal years then ended.
1.2 Other Defined Terms.
--------------------
The following terms shall have the meanings defined for such terms in
the Sections set forth below:
Term Section
---- --------
Actions 4.12
Benefit Arrangement 4.21.1
Cash Purchase Price 2.2.1
Claim 10.3.4
Claim Notice 10.3.4
Closing 3.1
Consultant 6.7.1
Damages 10.3.1
Employee Plans 4.21.1
Environmental Laws 4.22.2
Environmental Assessments 6.7.1
ERISA Affiliate 4.21.1
GAAP 4.10
Hazardous Substance 4.22.1.3
Holdback Amount 2.4.1
Multiemployer Plan 4.21.1
PBGC 4.21.1
Pension Plan 4.21.1
Parent Common Stock 2.2.1
Proposed Acquisition Transaction 6.2
Proprietary Rights 4.17.1
Purchase Price 2.2.1
Release 4.22.1.2
Remediation Standard 6.7.2
Required Remediation 6.7.2
Seller Representative 11.13.1
5
<PAGE>
Welfare Plan 4.21.1
ARTICLE II.
SALE AND TRANSFER OF SHARES
---------------------------
2.1. Transfer of Shares.
------------------
Upon the terms and subject to the conditions contained herein, at the
Closing, Sellers will sell, convey, transfer, assign and deliver to Buyer, and
Buyer will acquire from Sellers, the Shares, for the consideration specified in
Section 2.2.1 less the Holdback Amount specified in Section 2.2.3.
2.2. Purchase Price.
---------------
2.2.1 At the Closing, upon the terms and subject to the conditions set
forth herein, Buyer shall pay to Sellers in consideration for the Shares, the
aggregate amount of (i) Forty-Eight Million Eight Hundred and Thirty-Six
Thousand Dollars ($48,836,000), subject to adjustment as set forth in Section
2.2.4 below (the "Cash Purchase Price") payable by wire transfer of immediately
available funds to accounts designated by Sellers in the amounts as set forth on
Schedule 2.2.1 and (ii) Three Hundred Ten Thousand One Hundred and Ninety-Eight
(310,198) shares of Common Stock, par value $.01 per share, of Parent (the
"Parent Common Stock"). The cash and shares referred to in clauses (i) and (ii)
are collectively called the "Purchase Price". Any shares of Parent Common Stock
paid to Sellers will be contributed by Parent to Buyer in a transaction intended
to qualify under Section 351 of the Code immediately prior to the delivery of
such Parent Common Stock to Sellers. The Cash Purchase Price, Parent Common
Stock and the Holdback Amount (as specified below), and any remittance to
Sellers of the Holdback Amount shall be allocated among the Sellers in
accordance with Schedule 2.2.1.
2.2.2. If between the date of this Agreement and the Closing Date, the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock dividend, stock combination,
exchange of shares or readjustment, the number of shares of Parent Common Stock
issued to Sellers pursuant to Section 2.2.1 shall be proportionately adjusted.
2.2.3 No fractional shares of Parent Common Stock shall be issued, but
in lieu thereof, each Seller who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock shall receive from Buyer an amount of
cash equal to the product of the fraction of a share of Parent Common Stock to
which such holder would otherwise be entitled, multiplied by $23.24.
2.2.4. On October 25, 1997 (or such other date as the parties agree), the
Company will conduct, and Buyer shall observe, a physical inventory of the
Company's merchandise inventory, supplies inventory and rental inventory.
Sellers may participate in or have their representatives participate in or
observe such inventory. To the extent that the net book value of any Missing
Inventory is greater than $150,000, the Cash Purchase Price will be reduced
dollar for dollar by
6
<PAGE>
the amount of such shortfall applicable to Inventory owned by the Company.
"Missing Inventory" means Inventory shown on the combined perpetual inventory
listing of the Company and the Related Entities at October 25, 1997 (or such
other date on which the applicable inventory is taken), which is missing or not
accounted for in the physical inventory. In addition, the Cash Purchase Price
will be reduced dollar for dollar to the extent shareholders' equity of the
Company at October 31, 1997, is less than $22,659,757 (excluding non-cash year-
end tax accruals).
2.3. Employment and Non-competition Agreements. Company shall enter into
------------------------------------------
Employment and Non-competition Agreements, in substantially the form attached
hereto as Exhibits with each of David P. Lanoha, Jack Markle and Doug Bonnette.
2.4. Holdback.
---------
2.4.1. The "Holdback Amount" shall be (subject to increase pursuant to
Section 6.7.3) Ten Million Dollars ($10,000,000) (which shall also serve as the
Holdback Amount in the Related Purchase Transaction) in cash which, at Closing,
shall be placed in escrow pursuant to the Escrow Agreement pending the Sellers'
indemnification obligations, if any, as set forth in Section 10.3, and any
remediation required under Section 6.7 hereof which is not resolved by the
Closing Date. The Escrow Agent will remit to Sellers the entire Holdback Amount,
net of any amount which Buyer is entitled under the provisions of Sections 6.7
and 10.3 hereof, when such amounts have been determined, all in accordance with
the provisions of the Escrow Agreement. In the event of any disagreement between
Buyer and Sellers regarding the dollar amount of any such indemnification or
remediation obligation, Buyer and Sellers shall submit such dispute to a third-
party arbitrator for binding arbitration pursuant to Section 11.12 of this
Agreement. Sellers will pay all costs of the escrow.
2.5 Transfer Taxes and Fees.
------------------------
Sellers shall be responsible for any documentary and transfer taxes and any
sales, use or other taxes imposed by reason of the transfer of Shares provided
hereunder and any deficiency, interest or penalty asserted with respect thereto.
Sellers shall pay the fees and costs of recording or filing all UCC termination
statements and other releases of Encumbrances.
2.6 Closing of Books; Benefits and Risks of Ownership. The transactions
--------------------------------------------------
contemplated by this Agreement shall be deemed effective as of November 1, 1997,
and all profits and losses of the Company from and after November 1, 1997, shall
be solely for the account of, and inure solely to the benefit or detriment of,
Buyer, except as otherwise set forth in this Agreement. The accounting books and
records of the Company will be closed as of the close of business on October 31,
1997. Sellers shall operate the Company subject to and pursuant to the
requirements of this Agreement by, from and after November 1, 1997, until such
time as this Agreement is terminated or closed. Without the consent of Buyer,
until the Closing Date, the Company or Sellers shall not repurchase, sell or
transfer any Shares, make or declare any dividends or make other distributions
to shareholders (other than a $6 per share dividend paid prior to October 31,
1997 up to an aggregate of $100,000) or otherwise take any action restricted
under this Agreement. If this transaction does not close for any reason on or
prior to January 31, 1998, and
7
<PAGE>
is not extended by agreement of the parties, then the Company shall pay within
ten days to the Buyer profits accumulated during the period from November 1,
1997, to the date that the closing is deemed not to occur, but not later than
January 31, 1998. If this transaction does not close for any reason on or prior
to January 31, 1998 and is not extended by agreement of the parties, then the
Buyer shall within ten days pay to the Company all losses accumulated by the
Company during the period from November 1, 1997, to the date that the closing is
deemed not to occur, but not later than January 31, 1998.
2.7. Effective Control Balance Sheet. The Company will prepare the Effective
--------------------------------
Control Balance Sheet in accordance with GAAP, which Effective Control Balance
Sheet will fairly and accurately reflect the assets and liabilities of the
Company as of October 31, 1997.
ARTICLE III.
CLOSING
-------
3.1. Closing. The Closing of the transactions contemplated herein (the
-------
"Closing") shall be held on the Closing Date at a time and place as the parties
shall mutually agree.
3.2. Conveyances at Closing.
----------------------
3.2.1. Sellers' Delivery Obligations. To effect the sale and transfer
------------------------------
referred to in Section 2.1 hereof, Sellers will, at the Closing, execute and
deliver to Buyer:
3.2.1.1. certificates evidencing the Shares, free and clear of
any Encumbrances of any nature whatsoever, duly endorsed in blank for transfer
or accompanied by stock powers duly executed in blank;
3.2.1.2. all Ancillary Agreements required to be executed by any
of the Sellers;
3.2.1.3. all certificates, opinions of counsel and other
documents described in Article VIII; and
3.2.1.4. all Permits and any other third party consents required
for the valid transfer of the Shares as contemplated by this Agreement, or for
the continued operation of the Business following such transfer.
3.2.2. Buyer's Delivery Obligations. To effect the sale and transfer
-----------------------------
referred to in Section 2.1 hereof, Buyer will, at the Closing, execute and
deliver to Sellers:
3.2.2.1. all Ancillary Agreements required to be executed by
Buyer; and
3.2.2.2. all certificates, opinions of counsel and other
documents described in Article VII.
8
<PAGE>
3.2.2.3. the payment of the Purchase Price and repayment of the
Company's outstanding loan to Colorado National Bank.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
---------------------------------------------------------
David P. Lanoha and the Company hereby jointly and severally represent and
warrant to Buyer and Parent as follows, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.1 Organization of the Company. The Company is a corporation duly organized,
----------------------------
validly existing and in good standing under the laws of the State of Colorado.
Copies of the Articles of Incorporation and Bylaws of the Company, and all
amendments thereto, heretofore or hereafter delivered to Buyer are accurate and
complete as of the date hereof. The Company is duly qualified or licensed to do
business as a foreign corporation in good standing in the states where
Facilities are located and in other states where this is legally required,
except where the failure to be so qualified would not have a Material Adverse
Effect.
4.2 Authorization. Each of the Sellers and the Company has full power and
--------------
authority (corporate or other) to enter into this Agreement and the Ancillary
Agreements, as the case may be, and to carry out the transactions contemplated
hereby and thereby, and the Company and each of the Sellers has taken all action
required by law, its charter documents, as the case may be, or otherwise to be
taken by it to authorize the execution, delivery and performance of this
Agreement and the Ancillary Agreements, as the case may be, and the consummation
of the transactions contemplated hereby and thereby. This Agreement and the
Ancillary Agreements, as the case may be, are the legal, valid and binding
obligations of each of the Sellers and the Company, enforceable against each of
them in accordance with their respective terms, subject to bankruptcy,
insolvency, moratorium and creditors' rights generally. A copy of the
resolutions of the Company's board of directors and stockholders authorizing
this Agreement and the related transactions is attached hereto as Schedule 4.2.
4.3 No Violation. None of the execution, delivery and performance of this
-------------
Agreement and the Ancillary Agreements nor the consummation of the transactions
contemplated hereby and thereby will (i) violate any provision of the Articles
of Incorporation or Bylaws of the Company, (ii) violate, result in a breach of,
conflict with, or constitute a default (or an event which, with the giving of
notice or lapse of time or both, would constitute a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of any note, bond,
mortgage, or indenture, contract, agreement, lease, sublease, license, permit,
franchise, distributorship agreement or other instrument or arrangement to which
any Seller or the Company is a party or by which any of the Shares or any of the
assets or properties of the Company or any Seller are bound or affected, which
violation, breach, conflict or default will have a Material Adverse Effect,
(iii) result in the creation or imposition of any Encumbrance upon any of the
Shares or any property or Assets of the Company or any Seller under any
agreement or commitment to which the Company or any Seller is a party or by
which
9
<PAGE>
the Company or any Seller is bound or affected, or to which the property of the
Company or any Seller is subject, or (iv) violate, conflict with or result in
the breach of (or cause an event which could have a Material Adverse Effect as a
result of) any statute or law or any judgment, decree, order, regulation or rule
of any court or governmental authority to which any Seller, the Company, the
Business or any of the properties or Assets of any of the foregoing is subject,
which violation, breach or conflict would have a Material Adverse Effect. Except
as set forth on Schedule 4.3 or as required by the HSR Act, no action, consent,
approval or authorization by or filing with any person or entity, including,
without limitation, any governmental authority, is required in connection with
the execution, delivery and performance by each of the Sellers and the Company
of this Agreement and the Ancillary Agreements, as the case may be, or the
consummation by each of the Sellers and the Company of the transactions
respectively contemplated by each of them herein and therein, except consents,
the failure of which to obtain would not have a Material Adverse Effect.
4.4. Capitalization.
---------------
4.4.1 The authorized and the issued equity securities of the Company are
as set forth on Schedule 4.4. Sellers are and will be on the Closing Date the
record and beneficial owners and holders of the Shares as set forth on Schedule
4.4 (which schedule also sets forth the address of each such Seller and the
certificate numbers of the certificates representing the Shares), free and clear
of all Encumbrances (other than a legend indicating only that the Shares have
not been registered under the Securities Act).
4.4.2. There are no other shares of capital stock of the Company issued
and outstanding and no shares of treasury stock. All Shares are validly issued,
fully paid and nonassessable. None of the Shares was issued in violation of any
preemptive rights. There are no outstanding (i) securities convertible into or
exchangeable or exercisable for any of the Company's capital stock; (ii)
options, warrants, calls or other rights, including, without limitation, rights
to demand registration or to sell in connection with any registration by the
Company under the Securities Act, with respect to the issued capital stock of
the Company, or to purchase or subscribe to capital stock of the Company or
securities convertible into or exchangeable or exercisable for capital stock of
the Company; (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale, transfer, and/or
assignment of any capital stock of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights; or (iv) Shares
pledged as collateral to secure any agreement or obligation. There are no
voting trust agreements or other contracts, agreements, arrangements,
commitments, plans, proxies or understandings restricting or otherwise relating
to any conveyance, voting or dividend rights with respect to the Shares. Upon
consummation of the transactions contemplated by this Agreement and registration
of the Shares in the name of Buyer in the stock records of the Company, the
Buyer will own all of the issued and outstanding equity securities of the
Company of every sort whatsoever, free and clear of all Encumbrances.
4.5. Related Entities.
-----------------
10
<PAGE>
4.5.1. Schedule 4.5(a) sets forth a complete and accurate list of all of
the Related Entities, all of which are, directly or indirectly, wholly-owned by
any or all of the Sellers and/or Jack Markle or Doug Bonnette. Schedule 4.5(a)
also sets forth the jurisdiction of incorporation of each of the Related
Entities, each jurisdiction in which each such Related Entity is qualified to do
business, and the ownership interests thereof.
4.5.2. Schedule 4.5(b) sets forth a list of all agreements among the
Company, any of the Sellers and the Related Entities.
4.6. Equipment and Other Assets; Absence of Encumbrances. The Asset listing
----------------------------------------------------
attached as Schedule 4.6 sets forth the asset description and original cost of
all Equipment. Buyer shall have the right, prior to Closing, to inspect all of
the Assets (wherever located) that are reflected on the Balance Sheet. All
rental equipment is Rental Ready.
4.7. Facilities.
-----------
4.7.1. Real Property. The Company has no Owned Real Property. All of the
-------------
Leased Real Property is listed on Schedule 4.7. The Sellers and the Company have
delivered to Buyer an accurate copy of the Leases covering the Leased Real
Property. Neither the Company nor, to its knowledge, any lessor under the
Leases, is in breach or default of its obligations thereunder. The Company
enjoys peaceful and undisturbed possession of the Leased Real Property.
Except as set forth on Schedule 4.7, there are no leases,
subleases, licenses, occupancy agreements, options, rights, concessions or other
agreements or arrangements, written or oral, granting to any person the right to
purchase, use or occupy the Facilities or any portion thereof. The Facilities
are supplied with utilities and other services necessary for the operation of
the Business.
4.7.2. Improvements, Fixtures and Equipment. The Facilities and the
------------------------------------
improvements thereon, including without limitation all Equipment (including all
fixtures) and other tangible assets owned, leased or used by the Company at the
Facilities are insured to the extent and in a manner customary in the industry,
are in the reasonable business judgment of the Company sufficient for the
operation of the Business as presently conducted and are in conformity, in all
material respects, with all applicable laws, ordinances, orders, regulations and
other requirements currently in effect. None of the improvements is subject to
any commitment or other arrangement for their sale or use by any Affiliate of
the Company or third parties other than purchase options set forth in leases
identified on Schedule 4.7. Buyer shall have the right, prior to Closing, to
inspect all of the Facilities.
4.7.3. Conformity. All Facilities have received all material required
----------
approvals of governmental authorities (including without limitation Permits and
a certificate of occupancy or other similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof.
4.8. Contracts and Commitments.
-------------------------
11
<PAGE>
4.8.1. Contracts. Schedule 4.8 sets forth a complete and accurate list
---------
of all material Contracts of the following categories:
4.8.1.1. Contracts not made in the ordinary course of the Company's
conduct of the Business;
4.8.1.2. Employment contracts and severance agreements;
4.8.1.3. Supply, purchase, distribution, franchise, license, sales
or commission agreements related to the Business;
4.8.1.4. Contracts involving expenditures or liabilities, actual or
potential, in excess of $5,000 or otherwise material to the Business, and not
cancelable (without liability) within 30 calendar days;
4.8.1.5. Contracts or commitments relating to commission
arrangements with others;
4.8.1.6. Factoring agreements, promissory notes, loans, agreements,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money, whether the Company shall be the
borrower, lender or guarantor thereunder or whereby any Equipment or Inventory
are pledged (excluding credit provided by the Company in the ordinary course of
the Business to its customers);
4.8.1.7. Leases of personal property not cancelable (without
liability) within 30 calendar days; and
4.8.1.8. Contracts containing covenants limiting the freedom of the
Company or any officer, director or shareholder of the Company to engage in any
line of business or compete with any person.
4.8.1.9. Sellers have either delivered to Buyer or have made
available to Buyer complete copies of all of the Contracts listed on Schedule
4.8, including all amendments and supplements thereto.
4.8.2. Absence of Breaches or Defaults. All of the material Contracts are
-------------------------------
valid and in full force and effect, subject to any repudiation claims of other
parties not known to Sellers. The Company has duly performed all of its material
obligations under the Contracts to the extent those obligations to perform have
accrued, and no material violation of, or material default or breach under any
Contracts by the Company or, to the best of Sellers' knowledge, any other party
has occurred and neither the Company nor, to Sellers' knowledge, any other party
has repudiated any provisions thereof. All of the material Contracts will be
enforceable by the Company after the Closing to the same extent as if the
transactions contemplated by this Agreement had not been consummated, subject to
compliance with applicable change of control provisions, all of which are
identified on Schedule 4.3.
12
<PAGE>
4.9. Permits. The Company has all material Permits required to conduct the
-------
Business, except where the failure to obtain such Permits would not have a
Material Adverse Effect. All material Permits of the Company related to the
Business are valid and in full force and effect and are listed on Schedule 4.9.
4.10. Financial Statements. The Company has heretofore delivered to Buyer the
--------------------
Financial Statements and Year-End Financial Statements. Except as set forth on
Schedule 4.10, the Financial Statements and Year-End Financial Statements (a)
are in accordance with the underlying books and records of the Company, (b) have
been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied throughout the periods covered thereby, excluding
any footnotes which may be required by GAAP, and (c) fairly and accurately
present the assets, liabilities (including all reserves) and financial position
of the Business and the business of the LLC's as of the respective dates thereof
and the results of operations and changes in cash flows for the periods then
ended (subject to normal year-end adjustments). Except as set forth on Schedule
4.10, at the Balance Sheet Date there were no liabilities of the Company, which,
in accordance with GAAP, should have been shown or reflected in the Financial
Statements or the notes thereto, which are not shown or reflected in the
Financial Statements or the notes thereto.
4.11. Books and Records. The Company has made and kept (and given Buyer access
-----------------
to) Books and Records and accounts, which, in reasonable detail, accurately and
fairly reflect the activities of the Company. The minute books of the Company
made available to Buyer accurately and adequately reflect all action previously
taken by the shareholders, board of directors and committees of the board of
directors of the Company. The stock book records of the Company made available
to Buyer are true, correct and complete, and accurately reflect all transactions
effected in the Company's stock through and including the date hereof.
4.12. Litigation. Except as set forth on Schedule 4.12, there is no action,
----------
order, writ, injunction, judgment or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, arbitral action, governmental audit or
investigation (collectively, "Actions") pending, or to the best of the Sellers'
or Company's knowledge, threatened or anticipated (a) against, related to or
affecting the Company or the Business or (b) seeking to delay, limit or enjoin
the transactions contemplated by this Agreement. The Company is not in default
with respect to or subject to any judgment, order, writ, injunction or decree of
any court or governmental agency, and there are no unsatisfied judgments against
the Company or the Business.
4.13. Labor Matters. The Company is not a party to any labor agreement with
-------------
respect to its employees with any labor organization, union, group or
association and none of the Company's employees are represented by employee
unions (or any other similar labor or employee organizations). The Company has
not experienced within the past five (5) years any attempt by organized labor or
its representatives to make the Company conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company.
13
<PAGE>
4.14. Compliance with Law. The Company, the conduct of the Business and the
--------------------
operation of the Facilities have not materially violated and are in material
compliance with all laws, statutes, ordinances, regulations, rules and orders of
any foreign, federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree or order of any court
or governmental agency, department or authority, including without limitation
Environmental Laws (as defined in Section 4.22.2), relating to the Assets,
Facilities or Business or operations of the Company, except where the violation
or failure to comply, individually or in the aggregate would not have a Material
Adverse Effect on the Facilities, Assets or Business. The Company and the
conduct of the Business and the operation of the Facilities are in material
conformity with all energy, public utility, zoning, building and health codes,
regulations and ordinances, the Americans with Disabilities Act, ERISA, OSHA and
Environmental Laws and all other foreign, federal, state, and local governmental
and regulatory requirements. The Company has not received any notice to the
effect that, or otherwise been advised that, it is not in compliance with any
such statutes, regulations, rules, judgments, decrees, orders, ordinances or
other laws, and the Company has no reason to anticipate that any existing
circumstances are likely to result in violations of any of the foregoing.
4.15. No Brokers. None of the Sellers, the Company or any of the Company's
----------
officers, directors, employees or Affiliates has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in an obligation on the part of the Company or Buyer to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
4.16. No Other Agreements to Sell the Company. None of the Sellers nor the
---------------------------------------
Company have any commitment or legal obligation, absolute or contingent, to any
other person or firm other than the Buyer to sell, assign, transfer or effect a
sale of any of the Shares or the Assets or to effect any merger, consolidation,
liquidation, dissolution or other reorganization of the Company, and no person
or entity has notified any Seller or the Company that it believes such a
commitment or legal obligation exists.
4.17. Proprietary Rights.
------------------
4.17.1. Proprietary Rights. Schedule 4.17 lists all of the Company's
------------------
material federal, state and foreign registrations of trademarks, service marks
and other marks, trade names or other trade rights, and all pending applications
for any such registrations, all other trademarks and other marks, trade names
and other trade rights or in which the Company has any interest whatsoever, and
all other trade secrets, if any, and other proprietary rights, whether or not
registered, and all computer software (including without limitation the tool
rental control software used by the Company) other than software generally
available to the public, created or used by or on behalf of the Company, in each
case relating to the Business (collectively, "Proprietary Rights"). The
Proprietary Rights listed in Schedule 4.17 are all those used by the Company in
connection with the Business other than software generally available to the
public.
4.1.7.2. Royalties and Licenses. No person has a right to receive a
----------------------
royalty or similar payment in respect of any material Proprietary Rights.
Except as set forth on Schedule 4.17.2 the
14
<PAGE>
Company has no licenses granted, sold or otherwise transferred by or to it or
other agreements to which it is a party, relating in whole or in part to any of
the material Proprietary Rights.
4.1.7.3. Ownership and Protection of Proprietary Rights. Except as set
----------------------------------------------
forth on Schedule 4.17.3, the Company owns or licenses, and has the sole right
to use or (as it so elects) to sublicense, each of the Proprietary Rights, and
the Company is not a party to any litigation with respect to any of the
Proprietary Rights. The Company has not received any notice of invalidity or
infringement of any rights of others with respect to such Proprietary Rights.
The Company has taken all reasonable and prudent steps in the reasonable
business judgment of the Company to protect the Proprietary Rights from
infringement by any other firm, corporation, association or person. The
Company's use of the Proprietary Rights is not, to Sellers' knowledge,
infringing upon or otherwise violating the rights of any third party in or to
such Proprietary Rights, nor has such infringement been alleged by any third
party. All of the material Proprietary Rights are valid and enforceable rights
of the Company and will not cease to be valid and in full force and effect by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated by this Agreement.
4.1.8. Tax Matters.
-----------
4.1.8.1. Filing of Tax Returns. The Company has timely filed
---------------------
with the appropriate taxing authorities all returns (including without
limitation information returns and other material information) in respect of
Taxes required to be filed through the date hereof and will timely file any such
returns required. The returns and other information filed are complete and
accurate in all material respects. Except as specified in Schedule 4.18, since
October 31, 1990 neither the Company, nor any group of which the Company now or
was a member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any taxes. The
Company has made available to Buyer complete and accurate copies of the
Company's federal, state and local income tax returns for its fiscal years ended
October 31, 1994, 1995 and 1996, and will deliver to Buyer copies of the
Company's federal, state and local tax returns for the twelve months ended
October 31, 1997 when completed and will deliver, upon Buyer's request, any
other Tax returns.
4.1.8.2. Payment of Taxes. All Taxes, in respect of taxable
----------------
periods ending on or before the date of the Effective Control Balance Sheet,
have been timely paid, or will be timely paid prior to such date, or will be
fully accrued for on the Effective Control Balance Sheet. Any unpaid Taxes
relating to periods ending on or before the date of the Effective Control
Balance Sheet (whether full or partial periods) that are not fully accrued for
on the Effective Control Balance Sheet will be subject to full indemnification
by Sellers in accordance with Section 10.3 hereof (without being limited as to
amount).
4.1.8.3. Audits, Investigations or Claims. Except as set forth in
--------------------------------
Schedule 4.18, the federal income tax returns and any required state tax returns
of the Company have been examined by the Internal Revenue Service and any
applicable state taxing authority for all periods from November 1, 1990, to and
including the Closing, and except to the extent shown therein, no deficiencies
for Taxes, have been assessed by any taxing or other governmental
15
<PAGE>
authority against the Company. Except as set forth in Schedule 4.18, there are
no pending or, to the best of the Sellers' or Company's knowledge, threatened
audits, investigations or claims for or relating to any material additional
liability in respect of Taxes, and there are no matters under discussion with
any governmental authorities with respect to Taxes that in the reasonable
judgment of the Company, or its counsel, is likely to result in a material
additional liability for Taxes. Audits of federal, state, and local returns for
Taxes by the relevant taxing authorities have been completed for each period
subsequent to October 31, 1990 except as set forth in Schedule 4.18 and, except
as set forth therein, the Company has not been notified that any taxing
authority intends to audit a return for any period. Except as set forth in
Schedule 4.18, no extension of a statute of limitations relating to Taxes is in
effect with respect to the Company.
4.1.8.4. Lien. There are no liens for Taxes (other than as could be
----
asserted for current Taxes not yet due and payable) on the Assets.
4.19. Accounts Receivable. The accounts receivable reflected in the Balance
-------------------
Sheet represent bona fide claims of the Company against debtors for sales,
services performed or other charges arising on or before the date hereof, and
all the goods delivered and services performed which gave rise to said accounts
were delivered or performed in accordance with the applicable orders, Contracts
or customer requirements. All of such accounts receivable are collectible in the
ordinary course of business except to the extent of a bad debt reserve
representing the same percentage of accounts receivable of the Company at the
Closing Date as were reserved against on the Balance Sheet. The Company owns all
such accounts receivable, free and clear of all Encumbrances.
4.20. Inventory. All the Inventory (both rental and non-rental, supplies
---------
inventory and merchandise inventory) is located at the Facilities, except items
of rental equipment on lease to customers. There has been no material decrease
in the book value or fair value of the Inventory since the Balance Sheet Date,
except for sales of Inventory in the ordinary course of business. The values at
which the Inventory is shown on the Balance Sheet have been determined on the
average cost method in accordance with Federal tax regulations, consistently
applied throughout the periods covered by the Financial Statements. The
inventory is salable or rentable, as the case may be, in the ordinary course of
business consistent with past practice.
4.21. Employees and Employee Benefits.
-------------------------------
4.21.1. As used in this Section 4.21, the following terms have the
meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting,
-------------------
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including without limitation any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits, life, health, disability or accident
benefits (including without limitation any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit-sharing bonuses, stock
options, stock
16
<PAGE>
appreciation rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not a Welfare
Plan, Pension Plan or Multiemployer Plan, (B) is entered into, maintained,
contributed to or required to be contributed to, as the case may be, by the
Company or an ERISA Affiliate or under which the Company or any ERISA Affiliate
may incur any liability, and (c) covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
--------------
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant
---------------
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, the Company as
defined in Section 414(b), (c), (m) or (o) of the Code, or under "common
control" with the Company, within the meaning of Section 4001(b)(1) of ERISA.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined
------------------
in Section 4001(a)(3) of ERISA, (A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability and (B) which covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Pension Plan" shall mean any "employee pension benefit plan" as
------------
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the five years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability; (B)
covers any employee or former employee of the Company or any ERISA Affiliate
(with respect to their relationship with such entities); and (C) is not a
Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
------------
defined in Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability; (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities); and (C) is not a Multiemployer Plan.
4.21.2. Schedule 4.21(a): (i) contains a list of all current employees of
the Company, and their wage rates or salaries, as of the date of this Agreement,
and (ii) sets forth the dates of employment for such employees.
17
<PAGE>
4.21.3. Disclosure; Delivery of Copies of Relevant Documents and Other
--------------------------------------------------------------
Information. Schedule 4.21(b) contains a complete list of Employee Plans. True
- -----------
and complete copies of each of the following documents have been made available
by the Company to Buyer: (i) each Welfare Plan, Pension Plan and Multiemployer
Plan (and, if applicable, related trust agreements) and all amendments thereto,
all written interpretations thereof and written descriptions thereof which have
been distributed to the Company's employees and all annuity contracts or other
funding instruments; (ii) each Benefit Arrangement including written
interpretations thereof and written descriptions thereof which have been
distributed to the Company's employees (including descriptions of the number and
level of employees covered thereby) and a complete description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan; (iv) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and each Welfare Plan; (v) all actuarial reports
prepared for the last three plan years for each Pension Plan; (vi) a description
of complete age, salary, service and related data as of the last day of the last
plan year for employees and former employees of the Company; and (vii) a
description setting forth the amount of any liability of the company as of the
Closing Date for payments more than thirty (30) calendar days past due with
respect to each Welfare Plan.
4.21.4. Representations.
---------------
4.21.4.1. Pension Plans. Neither the Company nor any ERISA
-------------
Affiliate has or contributes to or maintains or has any obligation to make
payments to any Pension Plan. No Pension Plan is subject to the minimum funding
requirements of Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any ERISA Affiliate is required to provide security to a Pension
Plan under Section 401(a)(29) of the Code. Each Pension Plan which is intended
to be qualified (and each related trust agreement, annuity contract or other
funding instrument) is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and has been so qualified
during the period from its adoption to date. Neither the Company nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an entity
that has engaged in, a transaction described in Section 4069 of ERISA. There has
been no "reportable event" (as defined in Section 4043(c) of ERISA and the PBGC
regulations under such Section) with respect to any Pension Plan and neither the
Company nor any ERISA Affiliate is subject to Section 4043(b) of ERISA.
4.21.4.2. Multiemployer Plans. Neither the Company nor any ERISA
--------------------
Affiliate has any Multiemployer Plans.
4.21.4.3. Welfare Plans. Except as disclosed on Schedule
-------------
4.21.4.3., none of the Company, any ERISA Affiliate or any Welfare Plan has any
present or future obligation to make any payment to, or with respect to any
present or former employee of the Company or any ERISA Affiliate pursuant to,
any retiree medical benefit plan, or other retiree Welfare Plan, and no
condition exists which would prevent the Company from amending or terminating
any such benefit plan or Welfare Plan. To the best of Sellers' and Company's
knowledge, each Welfare Plan which is a "group health plan," as defined in
Section 607(1) of ERISA, has been operated in
18
<PAGE>
compliance with provisions of Part 6 of Title I, Subtitle B of ERISA and Section
4980B of the Code at all times.
4.21.4.4. Compliance with Law. Each Employee Plan has been
-------------------
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Employee Plan, including without limitation ERISA
and the Code.
4.21.4.5. Employment at Will. The employment of all persons
------------------
presently employed or retained by the Company is terminable at will.
4.21.4.6. Unrelated Business Taxable Income. No Employee Plan
---------------------------------
(or trust or other funding vehicle pursuant thereto) is subject to any tax under
Code Section 511.
4.21.4.7. Deductibility of Payments. There is no contract,
-------------------------
agreement, plan or arrangement covering any employee or former employee of the
Company (with respect to its relationship with such entities) that, individually
or collectively, provides for the payment by the Company of any amount (i) that
is not deductible by the Company under Section 162(a)(1) or 404 of the Code,
whichever is applicable, (ii) for which the deduction by the Company would be
disallowed under Section 162(m) of the Code, or (iii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
4.21.4.8. Fiduciary Duties and Prohibited Transactions. Neither
--------------------------------------------
the Company nor any plan fiduciary of any Welfare Plan or Pension Plan has
engaged in any transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code, or has otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA, except for any such violation which would not have a
Material Adverse Effect. To the best of Sellers' and Company's knowledge, the
Company has not knowingly participated in a violation of Part 4 of Title I,
Subtitle B of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan
(or other employee benefit plan subject to ERISA) and has not been assessed any
civil penalty under Section 502(l) of ERISA.
4.21.4.9. Validity and Enforceability. Each Welfare Plan,
---------------------------
Pension Plan, related trust agreement, annuity contract or other funding
instrument and Benefit Arrangement is legally valid and binding and in full
force and effect.
4.21.4.10. Litigation. There is no action, order, writ,
----------
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or investigation relating to or
seeking benefits under any Employee Plan that is pending, or, to Sellers'
knowledge, threatened or anticipated against the Company, any ERISA Affiliate or
any Employee Plan.
4.21.4.11. No Amendments. Neither the Company nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create any
additional Employee Plans or to amend or modify any existing Employee Plan other
than required by the Code or ERISA..
19
<PAGE>
4.21.4.12. No Other Material Liability. No event has occurred in
---------------------------
connection with which the Company or any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating to any Employee Plans or (B)
pursuant to any obligation of the Company to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
4.21.4.13. Unpaid Contributions. Neither the Company nor any
--------------------
ERISA Affiliate has any liability for unpaid contributions under Section 515 of
ERISA with respect to any Pension Plan or Welfare Plan. The Company has paid or
will pay by October 31, 1997, all employer matching contributions to its 401(k)
Plan through October 31, 1997.
4.21.4.14. Insurance Contracts. To the Sellers' knowledge,
-------------------
neither the Company nor any Employee Plan holds as an asset of any Employee Plan
any interest in any annuity contract, guaranteed investment contract or any
other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship or rehabilitation proceedings.
4.21.4.15. No Acceleration or Creation of Rights. Neither the
-------------------------------------
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will result in the acceleration or creation
of any rights of any person to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting except by plan termination
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan except by plan termination or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
4.22. Compliance With Environmental Laws.
----------------------------------
4.22.1. Definitions. The following terms, when used in this Section
-----------
4.22, shall have the following meanings. Unless the context otherwise requires,
any of these terms may be used in the singular or the plural depending on the
reference.
4.22.1.1. "Company". For purposes of this Section 4.22 only,
-------
the term "Company" shall include (i) all Related Entities of the Company,
including, without limitation the Sellers, (ii) all partnerships, joint ventures
and other entities or organizations in which the Company was at any time or is a
partner, joint venturer, member or participant and (iii) all predecessor or
former corporations, partnerships, joint ventures, organizations, businesses or
other entities, whether in existence as of the date hereof or at any time prior
to the date hereof, the assets or obligations of which have been acquired or
assumed by the Company or to which the Company has succeeded.
4.22.1.2. "Release" shall mean and include any spilling,
-------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the work place
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
20
<PAGE>
4.22.1.3. "Hazardous Substance" shall mean any quantity of
-------------------
asbestos in any form, urea formaldehyde, PCBs, radon gas, crude oil or any
fraction thereof, all forms of natural gas, petroleum products or by-products,
any radioactive substance, any toxic, infectious, reactive, corrosive, ignitable
or flammable chemical or chemical compound and any other hazardous substance,
material or waste (as defined in or for purposes of any Environmental Law),
whether solid, liquid or gas.
4.22.2. Compliance With Environmental and Zoning Law. Except as set
--------------------------------------------
forth on Schedule 4.22 and except as set forth in the environmental assessments
referred to in Section 6.7, the Facilities have been owned, leased, operated and
maintained in material compliance with all environmental laws, regulations and
requirements (collectively, "Environmental Laws"). There is no present or past
Environmental Condition in any way relating to the Business or Facilities.
"Environmental Condition" means the introduction into the soil, groundwater or
environment of the Facilities (through leak, spill, release, discharge, escape,
emission, dumping disposal or otherwise) of any pollution, including without
limitation any contaminant, irritant or pollutant or Hazardous Substance
(whether or not upon the property of the Business and whether or not such
pollution constituted at the time thereof a violation of any Environmental Law)
as a result of which either Sellers, the Company or Buyer has or may become
liable in any material respect to any person or federal, state or local
government or agency or by reason of which any of the Assets may suffer or be
subjected to any lien.
4.22.3. Facilities. Except as set forth in the environmental
----------
assessments referred to in Section 6.7 and in Schedule 4.22, the Facilities are,
and at all times have been, owned, leased and operated in material compliance
with all Environmental Laws and in a manner that will not give rise to any
liability under any Environmental Laws.
4.22.4. Permits. The Company has, and at all times has had, all
-------
material Permits required under any Environmental Law and the Facilities are,
and at all times have been, in material compliance with all such Permits subject
to the environmental assessments referred to in Section 6.7.
4.22.5. Permits Required. The consummation of any of the transactions
----------------
contemplated by this Agreement will not require an application for issuance,
renewal, transfer or extension of, or any other administrative action regarding,
any Permit required under any Environmental Law subject to the environmental
assessments referred to in Section 6.7.
4.22.6. Notice of Violation. Except as set forth on Schedule 4.22.6,
-------------------
the Company has not received any notice at any time since January 1, 1992 (or,
if the notice alleged material non-compliance, at any time whatsoever) that it
or the Facilities is or were claimed to be in violation of the provisions of any
Environmental Law or in non-compliance with the conditions of any Permit, and
there is no pending or, to Sellers' knowledge, threatened lawsuit, governmental
or other legal action to that effect.
4.22.7. Pending Actions. There is not now pending or, to Seller's best
---------------
knowledge, threatened, nor has there ever been, any Action against the Company,
nor, to the best of Sellers'
21
<PAGE>
knowledge, is there any basis for any Action, under any Environmental Law or
otherwise with respect to any Release or mishandling of any Hazardous Substance.
4.22.8. Judgments. There are no consent decrees, judgments, judicial or
---------
administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way materially affect the Company or the
Facilities.
4.22.9. Hazardous Substances. Except as set forth on Schedule 4.22.9,
--------------------
there is not and has not been any Hazardous Substance used, generated, treated,
stored, transported, disposed of, handled or other placement of Hazardous
Substances on, under, about or from any Facility, except for quantities of any
such Hazardous Substances stored or otherwise held on, under or about any such
Facility in material compliance with all Environmental Laws and necessary for
the operation of the Business.
4.22.10. Handling of Hazardous Substances. The Company has at all times
--------------------------------
used, generated, treated, stored, transported, disposed of or otherwise handled
its Hazardous Substances in compliance in all material respects with all
Environmental Laws and in a manner that will not result in material liability of
the Company or Buyer under any Environmental Law.
4.22.11. Since August 31, 1997, (i) there has been no actual or
threatened Material Adverse Change or event that would result in a Material
Adverse Change, including without limitation the loss of any material customers;
(ii) there has not been any sale or other disposition of any of the Assets, or
any Encumbrance placed on the Assets, except in the ordinary course of business;
the Company has been operated in the ordinary course consistent with past
practice so as to preserve the Business intact, to keep available to the
business the service of Company's employees and to preserve the Business and the
goodwill of the Company's suppliers, customers, distributors and others having
business relations with it; and (iv) except as set forth on Schedule 4.22.11,
Seller has not purchased or entered into any agreement to purchase any item,
other than in the ordinary course of business consistent with past practices,
having a cost in excess of $5,000.
4.22.12. Except as set forth on Schedule 4.22.12 and except for
compliance with HSR Act, no notice to, declaration, filing or registration with,
or authorization or consent or approval of, or Permit from, any governmental or
regulatory body or authority or any other person or entity is required to be
made or obtained by Sellers or the Company in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
4.22.13. Storage Tank. To Sellers' knowledge, Schedule 4.22, together
------------
with the Environmental Assessments to be delivered, sets out the past and
present underground and above ground tanks at the Facilities.
4.22.14. Environmental Audits or Assessments. True, complete and correct
-----------------------------------
copies of the written reports, if any, and all parts thereof, including any
drafts of such reports if such drafts are in the possession or control of the
Company, of all environmental audits or assessments
22
<PAGE>
(including tank closure reports) which have been conducted at any Facility
within the past five years, either by the Company or any attorney, environmental
consultant or engineer engaged by the Company or Sellers for such purpose, will
be delivered to Buyer and a list of all such reports, audits and assessments and
any other similar report, audit or assessment not in the possession or control
of the Company and of which the Company or Sellers have knowledge is included on
Schedule 4.22.
4.22.15. Indemnification Agreements. Except for all Facility leases and
--------------------------
facility access agreements and Contracts, the Company is not a party, whether as
a direct signatory or as successor, assign or third party beneficiary, or
otherwise bound, to any Contract under which the Company is obligated by or
entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions.
4.22.16. Releases or Waivers. The Company has not released any other
-------------------
person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
4.22.17. Notices, Warnings and Records. The Company has given all
-----------------------------
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all Environmental Laws, except where the
failure to do so would have a Material Adverse Effect.
4.23. Liabilities. Except as set forth on Schedule 4.23, the Company has no
-----------
material liabilities or obligations (absolute, accrued, contingent or otherwise)
except (i) liabilities which are reflected on the Balance Sheet, (ii)
liabilities incurred in the ordinary course of the Business and consistent with
past practice since the Balance Sheet Date, and (iii) liabilities arising under
Contracts identified in Schedule 4.8 to which the Company is a party.
4.24. Insurance
---------
4.22.1. Schedule 4.24 describes all currently in force policies of
insurance and all policies for the year ended October 31, 1996 (including the
insurer, type of insurance and period of coverage) to which the Company or any
Related Entity is a party or under which the Company, any Related Entity or any
employee, officer or director of the Company or any Related Entity (in his or
her capacity as such) is or has been insured. All such policies will continue
in full force and effect following the Closing. Incurrence policies shall be
deemed to be in force regardless of when they were issued.
4.24.2. [RESERVED.]
4.24.3. The Company and any Related Entity have paid all accumulated
premiums due, or have accrued same as a liability and has otherwise performed
substantially all of its material respective obligations, under each such
current insurance policy.
23
<PAGE>
4.25 Conduct of the Business. Except as set forth in Schedule 4.25, since
-----------------------
the Balance Sheet Date, the Company has conducted its operations in the ordinary
course of the Business and substantially in accordance with past practice, and
has not taken any action that, if taken after the date hereof, would violate
Section 6.5.
4.26 Knowledge. Sellers' "knowledge" or "best knowledge" or similar words
---------
includes the actual knowledge of David P. Lanoha, Jack Markle, Doug Bonnette and
such knowledge that such individuals obtained or would have obtained after
inquiry to determine the relevant fact at the branch manager level, after a
review of the Company files maintained at or above the branch manager level and
after inquiry of personnel responsible for inputting information into those
files..
Sellers, except NCCF, hereby severally, but not jointly, represent and
warrant to Buyer and Parent as follows, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.27 Each Seller owns, and upon consummation of the transactions
contemplated by this Agreement, the Buyer will own and have good and marketable
title to, all of the issued and outstanding equity securities of the Company
indicated to be owned by such Seller on Schedule 4.27 to this Agreement, free
and clear of all Encumbrances. Each of the Sellers has full power and authority
(corporate or other) to enter into this Agreement, and to carry out the
transactions contemplated hereby and thereby, and the Company and each of the
Sellers has taken all action required by law, its charter documents, or
otherwise to be taken by it to authorize the execution, delivery and performance
of this Agreement, and the consummation of the transactions contemplated hereby
and thereby. This Agreement is the legal, valid and binding obligation of each
of the Sellers, enforceable against each of them in accordance with its terms.
Sellers hereby severally, but not jointly, represent and warrant to
Buyer and Parent as follows, which representations and warranties are, as of the
date hereof, and will be, as of the Closing Date, true and correct:
4.28 Each Seller confirms that it is acquiring the Parent Common Stock for its
own account as principal, for investment purposes only, and not with a view to,
or for, resale or distribution thereof, and no other person has or will have a
direct or indirect beneficial interest in such Parent Common Stock.
4.29 Each Seller understands that the offering and sale of the Parent Common
Stock is intended to be a transaction by an issuer not involving any public
offering exempt from registration under the Securities Act by virtue of Section
4(2) of the Securities Act and the rules and regulations of the Commission
thereunder.
4.30 Each Seller who will be receiving Parent Common Stock represents that it
is an "accredited investor" as such term is defined in Rule 501 under the
Securities Act.
4.31 Each Seller understands and acknowledges that there are substantial
risks of loss of investment involved in an investment in the Parent Common
Stock, and that the investment in
24
<PAGE>
the Parent Common Stock is an illiquid investment subject to transfer
restrictions, and Sellers represent and warrant that they have the financial
ability to bear the economic risk of such investment.
4.32 Each Seller who will be receiving Parent Common Stock has such knowledge
and experience in financial and business matters, including investments of the
type represented by the Parent Common Stock, as to be capable of evaluating the
merits of investment in therein.
4.33 Each Seller has been furnished with a copy of the recent periodic
reports filed by Parent with the Commission and any documents that may have been
made available otherwise or upon its request, has carefully read and understands
such materials and has evaluated the risks of an acquisition of the Parent
Common Stock and the parties acknowledge that each Seller is relying upon the
fact that all such information is true and correct in all material respects and
does not contain any omissions of material facts necessary to make the facts
stated therein, as of their dates, not misleading.
4.34 Each Seller has been given the opportunity to ask questions of, and
receive answers from, representatives of Parent in order for it to evaluate the
merits and risks of investment in the Parent Common Stock.
4.35 No Seller has been furnished with or has relied upon any oral or written
representation, warranty or information in connection with the offering of the
Parent Common Stock except for that set forth in this Agreement and in Parent's
Prospectus, 10K and Parent's Annual Report.
4.36 The stock certificates evidencing the Parent Common Stock to be
delivered pursuant to this Agreement will bear a legend indicating that the
securities have not been registered and are subject to restrictions on transfer
and the holdback and registration rights set forth herein.
NCCF hereby represents and warrants to Buyer and Parent as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
4.37 NCCF acquired all of the issued and outstanding equity securities of the
Company indicated to be owned by NCCF on Schedule 4.27 to this Agreement without
knowledge of any Encumbrance or adverse claim, and NCCF has no knowledge of any
Encumbrances upon the equity securities owned by it and has, to its knowledge,
good and marketable title thereto. No Encumbrances have been placed upon or
suffered to exist upon such securities during the time in which NCCF has owned
such securities. NCCF has full power and authority to enter into this Agreement,
and to carry out the transactions contemplated hereby and thereby, and NCCF has
taken all action required by law, its charter documents, or otherwise to be
taken by it to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby and
thereby. This Agreement is the legal, valid and binding obligation of NCCF,
enforceable against NCCF in accordance with its terms, except as limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally or by equitable principles (whether
considered in an action at law or in
25
<PAGE>
equity) and (ii) limitations imposed by federal or applicable state law or
equitable principles upon the availability of specific performance, injunctive
relief or other equitable remedies.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
Buyer and Parent hereby represent and warrant to Sellers as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
5.1. Organization of Buyer and Parent. Buyer is a corporation duly organized,
--------------------------------
validly existing and in good standing under the laws of the State of Delaware.
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
5.2. Authorization. Except as provided in Section 8.8, each of Buyer and
-------------
Parent has all requisite corporate power and authority, and has taken all
corporate action necessary, to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its respective obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
Buyer and Parent and is, and (following their execution and delivery by Buyer,
Parent, the Company, the Seller Representative or the Sellers, as applicable,
each of the Ancillary Agreements will be) a legal, valid and binding obligation
of Buyer or Parent, as applicable, enforceable against Buyer or Parent, as
applicable, in accordance with its terms.
5.3. No Conflict or Violation. Neither the execution, delivery or performance
------------------------
of this Agreement or the Ancillary Agreements nor the consummation of the
transactions contemplated hereby or thereby, nor compliance by Buyer or Parent
with any of the provisions hereof or thereof, will (a) violate or conflict with
any provision of the Certificate of Incorporation or Bylaws of Buyer or Parent,
or (b) violate any statute, rule, regulation, ordinance, code, order, judgment,
ruling, writ, injunction, decree, award or agreement binding upon Buyer or
Parent.
5.4. Consents and Approvals. No notice to, declaration, filing or registration
----------------------
with, or authorization, consent or approval of, or permit from, any governmental
or regulatory body or authority, or any other person or entity, is required to
be made or obtained by Buyer or Parent in connection with the execution,
delivery and performance of this Agreement or the Ancillary Agreements and the
consummation of the transactions contemplated hereby or thereby, except (a) as
may be required by Buyer to operate the Business after the Closing, (b) as has
been obtained on or prior to the date hereof or (c) as set forth in Schedule
5.4.
ARTICLE VI.
COVENANTS OF BUYER, THE COMPANY AND SELLER
------------------------------------------
Buyer, the Company and Sellers each covenant with the others as
follows:
26
<PAGE>
6.1. Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from third parties;
provided, however, that no party shall be required to make any payments,
commence litigation or agree to modifications of the terms of Contracts or
Leases in order to obtain any such waivers, consents or approvals, (B) to obtain
all necessary Permits as are required to be obtained under any federal, state,
local or foreign law or regulations, (C) to effect all necessary registrations
and filings, including without limitation required filings under the HSR Act and
all other submissions of information requested by governmental authorities, and
(D) to fulfill all conditions to this Agreement.
6.2. No Solicitation. From the date hereof through the Closing or the earlier
---------------
termination of this Agreement, each of the Company and the Sellers shall not,
and shall cause their Representatives (including without limitation investment
bankers, attorneys and accountants) not to, directly or indirectly, enter into,
solicit, initiate or continue any discussions or negotiations with, or encourage
or respond to any inquiries or proposals by, or participate in any negotiations
with, or provide any information to, or otherwise cooperate in any other way
with, any corporation, partnership, person or other entity or group, other than
Buyer and its Representatives, concerning any sale of all or a portion of the
Assets, the Shares or the Business, or any merger, consolidation, liquidation,
dissolution or similar transaction involving the Company (each such transaction
collectively being referred to herein as a "Proposed Acquisition Transaction").
The Company and the Sellers shall not, directly or indirectly, through any
Representative or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any person or entity relating to any Proposed
Acquisition Transaction or participate in any negotiations regarding, or furnish
to any other person any information with respect to the other party for the
purposes of, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person to seek
or effect a Proposed Acquisition Transaction. The Company and the Sellers each
hereby severally represent that it is not now engaged in discussions or
negotiations with any party (other than Buyer) with respect to any of the
foregoing. The Company or Sellers shall promptly notify Buyer (orally and in
writing) of any offer, inquiry or contact with any person with respect to a
Proposed Acquisition Transaction, including the terms thereof and the identity
of the prospective purchaser or soliciting party.
6.3. Notification of Certain Matters. From the date hereof through the
-------------------------------
Closing, Buyer or Parent shall give prompt notice to Sellers and the Company of
(a) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of the Buyer or
Parent contained in this Agreement or in any exhibit or schedule hereto to be
untrue or inaccurate in any material respect and (b) any failure of Buyer or
Parent to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by
27
<PAGE>
it under this Agreement or any exhibit or schedule hereto; provided, however,
that such disclosure shall not be deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any condition.
From the date hereof through the Closing, Sellers (except for the
Excluded Stockholders, other than with respect to their respective
representations, warranties and covenants) and the Company shall give prompt
notice to Buyer or Parent of (a) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any representation or
warranty of the Sellers or Company contained in this Agreement or in any
exhibit or schedule hereto to be untrue or inaccurate in any material respect
and (b) any failure of Sellers or Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or schedule hereto; provided, however, that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition.
6.4. Access to Information. From the date hereof through the Closing, the
---------------------
Company shall, and shall cause its Representatives to, afford the
Representatives of Buyer and its Affiliates complete access at all reasonable
times to the Assets and the Facilities for the purpose of inspecting and
conducting appropriate tests upon the same, and to the officers, employees,
agents, attorneys, accountants, properties, Books and Records and Contracts of
the Company, and shall furnish Buyer and its Representatives all financial,
operating and other data and information as Buyer or its Affiliates, through
their respective Representatives, may reasonably request, including but not
limited to data relating to operating procedures, workers' compensation history,
legal, tax and environmental, zoning and other legal compliance.
6.5. Conduct of Business. From the date hereof through the Closing, the Sellers
-------------------
(except the Excluded Stockholders) shall, except as contemplated by this
Agreement or as consented to by Buyer in writing, operate the Business in the
ordinary course of the Business and substantially in accordance with past
practice and will not take any action inconsistent with this Agreement or with
the consummation of the Closing. Without limiting the generality of the
foregoing, the Company shall not, except as specifically contemplated by this
Agreement or as consented to in writing by Buyer:
6.5.1. issue or repurchase any shares of capital stock or warrants,
options or other rights to acquire any such shares;
6.5.2. enter into, extend, materially modify, terminate or renew any
Contract;
6.5.3. purchase or enter into any agreement to purchase any item of
Inventory or Equipment;
6.5.4. make any material increase in compensation or benefits payable
to any employee of the Company, or adopt any new employee benefit plan or
policy;
6.5.5. sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets, or any interests therein;
28
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6.5.6. accelerate the collection of accounts receivable, extend the
payment of accounts payable, or reduce inventories in a manner inconsistent with
the ordinary course of the Business's operation; or
6.5.7. fail to pay its accounts payable and any debts owed or
obligations due by it, or pay or discharge when due any liabilities.
6.6. Guarantee. Through but not after the Closing, Parent hereby
---------
guarantees the covenants and obligations of Buyer required to be performed by it
hereunder.
6.7. Environmental Assessments and Remediation.
-----------------------------------------
6.7.1. Buyer will retain an environmental consultant (the
"Consultant") to perform Phase 1 (and, at Buyer's option, Phase 2) environmental
assessments with respect to each of the Facilities. Upon its availability,
Consultant will deliver such assessments to Buyer and the Company. In the event
any such assessment recommends the performance of additional investigation
(including, without limitation, Phase 2 environmental assessments), such
additional investigation shall, if requested by Buyer, be undertaken promptly
and delivered to each of the Company and Buyer. The environmental assessments
and investigations undertaken pursuant to this Section 6.7.1 are collectively
referred to herein as the "Environmental Assessments." Buyer shall be solely
responsible for the cost of the Environmental Assessments.
6.7.2. In the event any of the Environmental Assessments reveals any
remediation work which must be completed in order to bring the Facilities into
compliance with applicable Environmental Laws or eliminate any potential
environmental liability, the Consultant shall be directed to prepare and to
deliver to each of the Company and Buyer a written report setting forth in
reasonable detail the scope of required remediation and an estimate of the cost
of completing such remediation. For the purposes of Section 6.7, "required
remediation" shall mean any action necessary to (i) comply with any governmental
order, (ii) comply with any Environmental Law effective at the Closing or (iii)
eliminate a potential environmental liability which has the reasonable
probability of ripening into, with the passage of time, the violation of any
Environmental Law (the "Remediation Standard"), as applicable to the Facilities
or the operation thereof by the Company as of the Closing Date.
6.7.3. Within 60 days of completion of the Consultant's report referred
to in Section 6.7.2, the Company shall engage a reliable environmental
engineering firm reasonably acceptable to Buyer to perform any required
remediation, as well as to remove any underground storage tanks on property
leased from Related Entities and perform all required remediation in connection
therewith. The Company and the Seller Representative shall use their respective
best efforts to cause such required remediation to be completed on or before the
Closing Date, and the Company shall bear all costs of such required remediation;
Buyer may, in its sole discretion, authorize Sellers to defer any portion of the
required remediation which the Company and its contractors are unable to
complete prior to Closing, in which case Sellers, other than the Excluded
Stockholders, shall cause the portion of the required remediation so deferred to
be completed as promptly as practicable, but in no event later than 180 days
following Closing, at the Sellers', other than the Excluded Stockholders, sole
expense (which may be satisfied from the
29
<PAGE>
Holdback Amount pursuant to the Escrow Agreement or from the funds held back by
Buyer as set forth in Section 6.7.4). In the event of such deferral, Buyer will
provide reasonable access to Sellers and their agents to complete such
remediation and shall otherwise reasonably cooperate at Sellers' expense in such
remediation. Buyer may monitor the performance of the required remediation and
application of the Remediation Standard, and at its election may cause the
Consultant to review the performance of the required remediation. If Buyer
directs the Consultant to undertake such review, the required remediation shall
be deemed completed only upon certification of its completion by the Consultant.
If, however, there is a dispute as to the performance of the required
remediation or the application of the Remediation Standard, any such dispute
shall be settled by a mutually agreed-upon environmental expert not otherwise
involved in the required remediation, whose determination shall be final and
binding on the parties. The estimated costs of the required remediation not
completed by Closing will be withheld and retained by Buyer outside of escrow.
Notwithstanding the foregoing, by December 31, 1997, Sellers. other than the
Excluded Stockholders, will begin to cause the underground storage tanks located
on property leased by the Company from Related Entities to be removed and any
required remediation to be completed in connection therewith.
6.7.4. The Holdback Amount shall secure, among other things, the
completion by Sellers of any required remediation which has not been resolved by
the Closing Date pursuant to this Section 6.7. Upon the completion of the
required remediation, certification of such completion by the Consultant or
mutually agreed-upon third party expert, and payment by Sellers of all expenses
of such remediation and certification, all in accordance with the standards set
forth in this Section 6.7, no further claims may be made against the Holdback
Amount on account of Sellers' obligations under this Section 6.7. However, if
such required remediation has not been completed by Sellers due to their failure
to timely perform and to continue performance of required remediation, and so
certified on or prior to the date which is no later than 180 days following the
Closing Date, Buyer shall be entitled to engage its own environmental
engineering firm to complete such required remediation, and to distribute such
portion of the Holdback Amount as is necessary to pay the fees and costs of such
firm, or other costs incurred, in completing such required remediation.
6.8. Registration Rights.
--------------------
6.8.1. In the event that, at any time prior to the first anniversary of
the Closing Date, Parent files a registration statement under the Securities Act
covering shares of Parent Common Stock, other than a registration statement on
Form S-4 or Form S-8, or a registration statement filed pursuant to "demand" or
similar contractual registration rights of any other stockholders of Parent,
then Sellers shall have the right to include in such registration statement (on
a "piggyback" basis) any or all of their shares of Parent Common Stock on the
same terms and conditions (including pro rata cutbacks) as all other selling
stockholders in such registration, and to receive the benefit of any
representations, indemnities, opinions or comfort letters given by the Parent
(or its counsel or underwriters) to any underwriter in connection with such
registration, provided, however, that if the managing underwriter or
underwriters in the registered offering advise the Parent that the inclusion in
the offering of shares of Parent Common Stock owned by Sellers would have a
Material Adverse Effect on the marketability or price of the offering, then
30
<PAGE>
the number of shares of Parent Common Stock to be included by Sellers shall be
reduced on a pro rata basis in proportion to the number of shares of Parent
Common Stock requested to be included by each Seller and by any other
stockholder of the Company.
6.8.2. Anything herein to the contrary notwithstanding, in the event
that the Parent files a registration statement with respect to an underwritten
public offering under the Securities Act in which any class of Parent Common
Stock is offered, no Seller shall effect any public sale or distribution (except
pursuant to said registration statement) of any of the shares of Parent Common
Stock (which shares, for purposes of this Section 6.8.2, shall include any and
all voting securities received by such Seller as a stock dividend, stock split
or other recapitalization or similar distribution on or in the respect of the
shares of Parent Common Stock) or any of Parent's other equity securities, or of
any securities convertible into or exchangeable for such securities, during the
period following delivery of notice to Sellers which begins ten (10) days before
the filing of such registration statement with the Securities and Exchange
Commission and ends ninety (90) days after such registration statement has
become effective or ten (10) days after it has been withdrawn. After January 4,
2001, this Section 6.8.2 shall cease to apply.
6.9. Cooperation Regarding Dealerships. Sellers, other than the Excluded
---------------------------------
Stockholders, and the Company will cooperate with Buyer and use their reasonable
best efforts to assist Buyer in obtaining the transfer of all dealerships and
dealership agreements of the Company and each Related Entity, including any
required due to change of control provisions.
6.10 1997 Tax Returns. Sellers other than the Excluded Stockholders will
----------------
prepare or cause to be prepared, executed and timely filed all income tax
returns for the Company's fiscal year ended October 31, 1997. The Company will
provide access to its books and records to facilitate such preparation. The
Company will have the opportunity to review such return for at least 15 days
prior to filing, and the Seller will not file any return to which the Company
reasonably objects. The Sellers, other than the Excluded Stockholders, will
reimburse and indemnify the Company for all taxes due with respect to such
returns in excess of estimated tax payments made by the Company through August
31, 1997. In addition, as set forth elsewhere herein, David P. Lanoha will be
responsible for any additional income taxes or assessments or claims asserted by
any Tax authority and will fully indemnify the Company with respect thereto.
ARTICLE VII.
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
Except as otherwise provided herein, the obligations of Sellers to
consummate the transactions provided for hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by Sellers:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Buyer and
Parent shall have
31
<PAGE>
performed and satisfied all agreements and covenants required hereby to be
performed by them prior to or on the Closing Date.
7.2. No Proceedings, Litigation or Laws. No Action by any governmental
----------------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Sellers if the
transactions contemplated hereunder are consummated. The waiting period under
the HSR Act shall have expired or been terminated, and there shall not be any
statute, rule or regulation that makes the purchase and sale of the Shares,
Business or the Assets contemplated hereby illegal or otherwise prohibited.
32
<PAGE>
7.3. Certificates. Buyer and Parent shall furnish Sellers with such
------------
certificates of their officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Sellers. Seller shall have received an opinion of Latham & Watkins in form
reasonably satisfactory to Seller Representative.
7.4. Other Conditions. By October 31, 1997, Jack Markle and Buyer shall
----------------
have both approved the form of his employment agreement in writing; Buyer's
board of directors shall have approved the transactions contemplated by this
Agreement; Buyer shall have delivered a letter from the agent bank for its
revolving credit facility indicating that the transaction has been approved; and
Buyer shall have completed its due diligence review and delivered notice to
Sellers that it is satisfied with its due diligence review of the Company. If
the above conditions are not timely satisfied, then Sellers shall have the
option to terminate this Agreement.
7.5. Consents. All Permits and waivers necessary for the consummation by
--------
Sellers of the transactions contemplated hereby and required to be obtained by
Buyer or Parent shall have been obtained.
7.6. Other Transactions. The Related Purchase Transaction shall have been
------------------
consummated.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for hereby
are subject, to the satisfaction, on or prior to the Closing Date, of each of
the following conditions, any of which may be waived by Buyer:
8.1. Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Sellers and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Sellers
and the Company shall have performed and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
33
<PAGE>
8.2. Consents. All Permits and waivers necessary for the consummation
--------
by Buyer and Parent of the transactions contemplated hereby and for the
continued operation of the Business after the Closing (including, without
limitation, all required waivers of Parent's lenders and all required waivers of
the Company's vendors under supplier agreements other than as set forth on
Schedule 8.2) shall have been obtained. Company will use its reasonable best
efforts to obtain oral or written consents from customers as may be reasonably
requested by Buyer to continue doing business with the Company from and after
the date of this Agreement.
8.2. No Proceedings or Litigation. No Action by any governmental authority or
----------------------------
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer materially if the transactions
contemplated hereby are consummated, including without limitation any Material
Adverse Effect on the right or ability of the Company to own, operate, possess
or transfer the Assets after the Closing. The waiting period under the HSR Act
shall have expired or been terminated, and there shall not be any statute, rule
or regulation that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.3. Opinion of Counsel. The Company shall have delivered to Buyer an opinion
------------------
of Graft, Thomson and Toedte, P.C., counsel to the Company and the Sellers,
dated as of the Closing Date, in form and substance reasonably satisfactory to
Buyer, to the effect that:
8.4.1. Incorporation. Company has been duly incorporated and is validly
-------------
existing and in good standing under the laws of the State of Colorado and is in
good standing as a foreign corporation in each state in which it owns or leases
property or operates a Facility;
8.4.2. Corporate Power and Authority. The Company has the necessary
-----------------------------
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and to own, lease and operate the Assets and its
other properties and to conduct the Business as presently conducted;
8.4.3. Corporate Action. The execution, delivery and performance of
----------------
this Agreement and the Ancillary Agreements to which the Company is a party have
been duly authorized by all necessary corporate action of the Company, and this
Agreement and the Ancillary Agreements have been duly executed and delivered by
the Company or the Sellers, as applicable ;
8.4.4. Obligation of the Company or Sellers. This Agreement and each
------------------------------------
Ancillary Agreement constitutes a legally valid and binding obligation of the
Company or the Sellers, as applicable, enforceable against the Company or the
Sellers in accordance with its terms, except as limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or by equitable principles (whether considered in an
action at law or in equity), (ii) limitations imposed by federal or applicable
state law or equitable principles upon the availability of specific performance,
injunctive relief or other equitable remedies, or (iii) other customary
limitations reasonably satisfactory to Buyer's counsel;
8.4.5. No Breach. Neither the execution and delivery of this Agreement
---------
or the Ancillary Agreements by the Company or the Sellers, as applicable, nor
the consummation of the
34
<PAGE>
transactions contemplated hereby or thereby will (i) violate or conflict with
any provision of the Articles of Incorporation or Bylaws of the Company, or of
the charter documents or other organizational instrument of any Seller that is
not a natural person, (ii) breach, or cause a default under, any term or
provision of any material contract listed on a schedule to such opinion to which
contract the Company or the Sellers are a party or by which the Assets are
bound, or (iii) violate any judgment, decree, injunction, writ or order
applicable to the Company or the Sellers;
8.4.6. No Permits Required. No Permit of, or filing with, any
-------------------
governmental authority or, to the best knowledge of such counsel, any other
person, is required for the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or the Sellers, as applicable, or the
consummation by the Company or the Sellers of the transactions contemplated
hereby or thereby, except as set forth in this Agreement or the schedules or
exhibits hereto;
8.4.7. No Actions Pending. Except as set forth in this Agreement or the
------------------
schedules hereto, to the best knowledge of such counsel, no Action is pending or
threatened (i) against the Company or the Business, (ii) against any of the
officers or directors of the Company as such, (iii) in which the Company is a
plaintiff, or (iv) which questions the validity or legality of the transactions
contemplated hereby;
8.4.8. No Violation of Law. To the best knowledge of such counsel,
-------------------
neither the execution and delivery of this Agreement or the Ancillary Agreements
by the Company or the Sellers, as applicable, nor the consummation of the
transactions contemplated hereby or thereby will violate or result in a failure
to comply with any statute, law, ordinance, regulation, rule or order of any
federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to the
Company, the Sellers or the Business; and, to the best knowledge of such
counsel, the Company has all licenses, franchises and other authority required
to conduct the Business as it is now being conducted;
8.4.9. Title to Shares. The authorized capital stock of the Company
---------------
consists of common stock, and the issued and outstanding common of the Company
consists solely of the Shares, all of which are owned of record and beneficially
by the Sellers, free and clear of all Encumbrances. To the knowledge of such
counsel, there are no outstanding warrants, options or other rights to acquire,
or securities convertible into or exercisable or exchangeable for, shares of
capital stock of the Company, nor any commitments or agreements by the Company
to issue any such rights or securities or shares of capital stock. Upon Closing,
Buyer will acquire good and valid title to all of the Shares, free and clear of
all Encumbrances.
8.4.10. Other Opinions. Such other opinions as any lender to Buyer may
--------------
reasonably request. In rendering such opinions, such counsel may rely as to
factual matters upon certificates and assurances of public officials, Sellers,
and officers of the Company. In addition, such opinions may be subject to such
additional qualifications and exceptions as are reasonably acceptable to counsel
to Buyer.
8.4.11. Schedules. At or prior to Closing, the Sellers shall attach all
---------
Schedules to this Agreement and the Buyer shall have the opportunity to review
and approve such Schedules, such approval to not be unreasonably withheld. The
Company will deliver all schedules within ten
35
<PAGE>
days after execution of this Agreement, and Buyer will have five days to
disapprove such schedules, failing which they will be deemed a part of this
Agreement.
8.5. Certificates. Sellers and the Company shall furnish Buyer with such
------------
certificates of Sellers, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.6. Employment and Non-Competition Agreements. Buyer or a subsidiary of Buyer
-----------------------------------------
shall have entered into an Employment and Non-Competition Agreement with Mr.
Lanoha, Mr. Markle and Mr. Bonnette in the forms attached.
8.7. Release of Encumbrances. The Company shall have filed (where necessary)
-----------------------
and delivered to Buyer all documents necessary to release the Assets from all
Encumbrances which documents shall be in a form reasonably satisfactory to
Buyer's counsel.
8.8. Board Approval. The Board of Directors of Parent shall have approved the
--------------
execution, delivery and performance of this Agreement.
8.9. Corporate Documents. Buyer shall have received from the Company
-------------------
resolutions adopted by its board of directors approving this Agreement and the
Ancillary Agreements to which it will be a party, and the transactions
contemplated hereby and thereby.
8.10. Schedules and Due Diligence Review. Buyer and its Representatives shall
----------------------------------
be provided the opportunity to have conducted a due diligence review of the
Company's Books and Records, Financial Statements, and other records and
accounts of the Business, and Sellers shall have delivered to Buyer all
Schedules required by this Agreement. Buyer shall be satisfied in its sole
discretion with its due diligence findings, and the contents of the Schedules;
if Buyer is not so satisfied in its sole discretion, it may terminate this
Agreement. The parties shall have drafted and agreed on any other agreement
required pursuant to this Agreement to be executed at Closing.
8.11. No Material Adverse Change. There shall have been no material adverse
--------------------------
change or development in the Company's business.
8.12. Other Transactions. The Related Purchase Transaction shall have been
------------------
consummated.
ARTICLE IX.
CONSENTS TO ASSIGNMENT
----------------------
9.1. Consents to Assignment. Anything in this Agreement to the contrary
----------------------
notwithstanding, this Agreement shall not constitute an agreement to assign or
to effect a change of control with respect to any Contract, lease, license,
sales order, purchase order or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment or change of
control thereof, without the consent of a third party thereto, would constitute
a breach thereof or in any way adversely affect the rights of Buyer thereunder.
If such consent is not obtained, or if an
36
<PAGE>
attempted assignment or change of control thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
the Company will cooperate with Buyer, in all reasonable respects, to provide to
Buyer the benefits under any such Contract, lease, license, sales order,
purchase order, claim or right including without limitation enforcement for the
benefit of Buyer of any and all rights of the Company against a third party
thereto arising out of the breach or cancellation by such third party or
otherwise.
ARTICLE X.
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
----------------------------------------------
10.1. Books and Records; Tax Examinations.
-----------------------------------
10.1.1. Books and Records. Each party agrees that it will cooperate
-----------------
with and make available to the other party, during normal business hours, all
Books and Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
10.1.2. Cooperation and Records Retention. Sellers and Buyer shall (i)
---------------------------------
each provide the other with such assistance as may reasonably be requested by
any of them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain for the period of all
applicable statues of limitation and provide the other with any records or other
information that may be relevant to such return, audit or examination,
proceeding or determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding, or determination
that affects any amount required to be shown on any tax return of the other for
any period. This covenant will survive the Closing.
10.2. Survival of Representations, Etc. All statements contained in any
--------------------------------
certificate, schedule, exhibit, instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations, warranties, covenants
and agreements of Sellers, the Company, Parent and Buyer contained herein shall
survive the consummation of the transactions contemplated hereby and the Closing
Date, without regard to any investigation made by any of the parties hereto. All
such representations and warranties and all claims and causes of action with
respect thereto (other than the provisions of Sections 4.4, 4.16, 4.18, 4.21 and
4.22, representations and warranties giving rise to Uncapped Claims and this
Section 10.2, and all claims and causes of action with respect thereto) shall
terminate upon expiration of three years after the Closing Date. The
representations and warranties in Sections 4.18, 4.21 and 4.22 shall survive
until the expiration of the applicable statute of limitations (with extensions)
with respect to the matters addressed in such sections. The termination of the
representations and warranties provided herein shall not affect the rights
37
<PAGE>
of a party in respect of any Claim made by such party in a writing received by
the other party prior to the expiration of the applicable survival period
provided herein.
10.3. Indemnifications
----------------
10.3.1. By Sellers. All Sellers, severally, including (i) NCCF (but
----------
only with respect to a breach of its own representations and warranties in
Article IV, notwithstanding anything to the contrary contained herein) and (ii)
the Excluded Stockholders, excluding NCCF for this purpose (but only as to the
Uncapped Items), shall indemnify, defend, save and hold harmless Buyer, its
Affiliates (including the Company from and after the Closing), and its and their
respective Representatives, from and against any and all uninsured claims,
damages, costs, losses (including without limitation diminution in value),
Taxes, liabilities, judgments, penalties, fines, obligations, lawsuits,
deficiencies, demands and expenses (whether or not arising out of third-party
claims), including without limitation interest, penalties, costs of mitigation,
losses in connection with any Environmental Law (including without limitation
any clean-up or remedial action), lost profits and other losses resulting from
any shutdown or curtailment of operations, damages to the environment,
attorneys' fees, experts' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing (herein, "Damages"), incurred in connection
with, arising out of, resulting from or incident to (i) any breach of any
representation or warranty, or the inaccuracy of any representation or warranty,
made by the Company or Sellers in or pursuant to this Agreement; (ii) any breach
of any covenant or agreement made by the Company or Sellers in or pursuant to
this Agreement; (iii) any liability arising under any Environmental Law on
account of the conduct of the Company or any Seller or prior owners or users of
the Facilities or other persons, or on account of the operation of the Business
or the Facilities, or related to any Environmental Condition existing, in each
case on or at any time prior to the Closing Date; (iv) any liability for Taxes
in respect of taxable periods ending on or before October 31, 1997; or (v) any
other liability arising out of events prior to the Closing Date which has not
been adequately reflected for, accounted for or reserved against on the
Effective Control Balance Sheet. The Excluded Stockholders, other than NCCF,
shall indemnify without limit as to time or amount and otherwise to the same
extent as Sellers with respect to the "Uncapped Items" set forth below. NCCF
shall indemnify without limit as to time or amount and otherwise to the same
extent as Sellers but only with respect to a breach of its representations and
warranties in Article IV. Without limiting the generality of the foregoing, the
indemnification provided herein, insofar as it relates to any Environmental Law
or Environmental Condition, shall specifically cover costs incurred in
connection with any investigation of site conditions (excepting the cost of the
Environmental Assessments) or any clean-up, remedial, removal or restoration
work required by any federal, state or local governmental agency or political
subdivision or by the provisions of Section 6.7 hereof. Damages (except under
Sections 4.4, 4.16, 4.18, 4.21 and 4.22 or caused by the fraud of Sellers)
(collectively the "Uncapped Items") are limited by the terms of Article XII of
this Agreement. Except with respect to the Uncapped Items for which there is no
time limit and no monetary limit, the time and maximum aggregate dollar amount
of any indemnity or other obligation of Sellers under both this Agreement and
all Related Purchase Agreements is limited to (and Sellers shall not be
responsible for damages in excess of) (i) for any claims made during the first
full year after the Closing, $10,000,000, (ii) for any claims made during the
second full year after the Closing, $8,000,000 and (iii) for any claims
38
<PAGE>
made during the third full year after the Closing, $5,000,000, except that
indemnification obligations related to Environmental Conditions which become
obligations of Buyer during the term of the lease of the applicable property (or
within 15 years of the Closing, if sooner) and are demonstrated by Buyer on the
basis of a preponderance of the evidence not to have been caused by Buyer shall
not be subject to such time or monetary limitations, but shall be subject to an
additional monetary limitation of $5,000,000 in excess of the amount initially
placed in escrow pursuant to the Escrow Agreement. This indemnification
obligation of up to $5,000,000 will continue to apply even after the three-year
period of the escrow has ended, but will terminate upon any actual assignment by
Buyer of the applicable lease to an unrelated third-party.
10.3.2. By Parent and Buyer. Parent and Buyer shall indemnify and save
-------------------
and hold harmless Sellers, their Affiliates and their Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty,
or the inaccuracy of any representation or warranty, made by Parent or Buyer in
or pursuant to this Agreement; or (ii) any breach of any covenant or agreement
made by Parent or Buyer in or pursuant to this Agreement, and (iii) any
liability arising after November 1, 1997 arising out of or related to the
Buyer's ownership or operation of the Company.
10.3.3. Cooperation. The indemnified party shall cooperate in all
-----------
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
10.3.4. Defense of Claims. If a claim for Damages (a "Claim") is to be
-----------------
made by a party entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall, subject to Section 10.2,
give written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.3. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the indemnified party)
to handle and defend the same, at the indemnifying party's cost, risk and
expense unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal
39
<PAGE>
defenses available to such indemnified party that are different from or
additional to those available to the indemnifying party, and (iii) to compromise
or settle such claim, which compromise or settlement shall be made only with the
written consent of both the indemnifying and the indemnified party, such consent
not to be unreasonably withheld; provided, however, if the remediation or
resolution of any such Claim will occur on or at any Facility or is reasonably
expected to have a material adverse effect on the indemnified party's business
operations, then, notwithstanding the foregoing, the indemnified party shall be
entitled to control such resolution, including without limitation to take
control of the defense and investigation of such lawsuit or action, to employ
and engage attorneys of its own choice to handle and defend the same, at the
indemnifying party's cost, risk and expense, and to compromise or settle such
Claim with the consent of the Indemnifying Party. If the indemnifying party
fails to assume the defense of such claim within fifteen (15) calendar days
after receipt of the Claim Notice, the indemnified party against which such
claim has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the defense, compromise or settlement of such claim on behalf
of and for the account and risk of the indemnifying party. In the event the
indemnified party assumes the defense of the claim, the indemnified party will
keep the indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected with its consent pursuant to and in
accordance with this Section 10.3 and for any final judgment (subject to any
right of appeal), and the indemnifying party agrees to indemnify and hold
harmless an indemnified party from and against any Damages by reason of such
settlement or judgment.
10.3.5. Buyer's Right to Distribution of Holdback Amount. Buyer and its
------------------------------------------------
Affiliates and Representatives may at their election collect any amount due from
Sellers (other than the Excluded Stockholders) pursuant to Sellers'
indemnification obligations under this Section 10.3 by distribution of an
applicable portion of the Holdback Amount in accordance with the terms of the
Escrow Agreement. Recovery against any of the Excluded Stockholders shall be
made by direct claim against each of them.
10.3.6. Limitations. Neither Buyer or Parent on the one hand, nor
-----------
Sellers on other hand, shall be liable to the other under this Section 10.3 for
any Damages until the amount otherwise due the party being indemnified,
including all amounts due under this Agreement and all Related Purchase
Agreements, exceeds $100,000 in the aggregate, in which case such indemnifying
party will be liable to the indemnified party for all such amounts in excess of
the first $100,000. Notwithstanding the preceding sentence, this limitation
shall not apply with respect to Damages arising out of a breach of a
representation or warranty contained in Sections 4.4, 4.16, 4.18, 4.21 or 4.22
or giving rise to an Uncapped Claim due to fraud on the part of a Seller.
10.3.7. Liability and Remedies, etc. Except as set forth below, no
---------------------------
individual Representative of any party (other than Mr. Lanoha) shall be
personally liable for any Damages under the provisions contained in this Section
10.3. Nothing herein shall relieve either party of any liability to make any
payment expressly required to be made by such party pursuant to this Agreement.
The term "Damages" as used in this Section 10.3 is not limited to matters
asserted
40
<PAGE>
by third parties against Sellers or Buyer, but includes Damages incurred or
sustained by an indemnified party in the absence of third party claims. Payments
by an indemnified party of amounts for which such party is indemnified hereunder
shall not be a condition precedent to recovery.
10.4. Further Action. At and after the Closing, Sellers shall take all actions
--------------
reasonably necessary to effect the conveyance of the Shares to Buyer free and
clear of all Encumbrances and otherwise required by Buyer's lenders.
ARTICLE XI.
MISCELLANEOUS
-------------
11.1. Termination.
-----------
11.1.1. Termination. This Agreement may be terminated at any time
-----------
prior to Closing:
11.1.1.1. By mutual written consent of Buyer and the Seller
Representative;
11.1.1.2. By Seller as provided in Section 7.4, and, except as is
provided in Section 7.4, by Buyer or Sellers if the Closing shall not have
occurred on or before January 31, 1998; provided, however, that this provision
shall not be available to Buyer if Sellers have the right to terminate this
Agreement under Section 11.1.1.4, and this provision shall not be available to
Sellers if Buyer has the right to terminate this Agreement under Section
11.1.1.3;
11.1.1.3. By Buyer if there is a material breach of any representation
or warranty set forth in Article IV hereof or any covenant or agreement to be
complied with or performed by Sellers or the Company pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VIII to be
satisfied (and such condition is not waived in writing by Buyer) on or prior to
the Closing Date, or the occurrence of any event which results or would result
in the failure of a condition set forth in Article VIII to be satisfied on or
prior to the Closing Date, provided that Buyer may not terminate this Agreement
prior to the Closing if Sellers or the Company have not had an adequate
opportunity to cure such failure; or
11.1.1.4. By Sellers if there is a material breach of any
representation or warranty set forth in Article V hereof or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VII to be
satisfied (and such condition is not waived in writing by Sellers) on or prior
to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition set forth in Article VII to be satisfied on
or prior to the Closing Date; provided that Sellers may not terminate this
--------
Agreement prior to the Closing Date if Buyer has not had an adequate opportunity
to cure such failure.
11.1.2. In the Event of Termination. In the event of termination of
---------------------------
this Agreement:
41
<PAGE>
11.1.2.1. Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same.
11.2. Assignment. Neither this Agreement nor any of the rights or obligations
----------
hereunder may be assigned by any party without the prior written consent of the
other parties; except that Parent or Buyer may, without such consent, assign all
such rights to any lender as collateral security, and Buyer may assign all such
rights and obligations to a wholly-owned subsidiary or subsidiaries of Parent or
Buyer (or a partnership controlled by Parent or Buyer) which shall assume all
obligations and liabilities of Buyer under this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, and no
other person shall have any right, benefit or obligation under this Agreement as
a third party beneficiary or otherwise.
11.3. Notices. All notices, requests, demands and other communications which are
-------
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when received if personally delivered; when
transmitted with electronic confirmation of receipt; if transmitted by telecopy,
electronic or digital transmission method; the day after it is sent, if sent for
next day delivery to a domestic address by recognized overnight delivery service
(e.g., Federal Express); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent to:
If to Sellers c/o the Seller Representative:
David P. Lanoha
5215 Linden Court
Littleton, CO 80121
FAX: 303-220-0914
with a copy to:
Robert Graft, Esq.
Graft, Thomson & Toedte, P.C.
7430 East Caley Avenue
Suite 300
Englewood, CO 80111
FAX: 303 773-9047
If to Parent or Buyer, addressed to:
Rental Service Corporation
14505 N. Hayden Road, Suite 322
Scottsdale, Arizona 85260
Attention: Chief Executive Officer
FAX: 602-905-3400
42
<PAGE>
With a copy to:
Elizabeth A. Blendell, Esq.
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
FAX: 213-891-8763
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4. Choice of Law. This Agreement shall be construed, interpreted and the
-------------
rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
11.5. Entire Agreement; Amendments and Waivers.
----------------------------------------
This Agreement, together with all exhibits and schedules hereto and
the Ancillary Agreements, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
11.6. Multiple Counterparts. This Agreement may be executed in one or more
---------------------
counterparts and by fax, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.7. Expenses. Except as otherwise specified in this Agreement, each party
--------
hereto shall pay its own legal, accounting, out of pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect (treating the Company as a Seller for
this purpose), except that the Company may pay all of its legal and accounting
expenses incurred prior to September 22, 1997.
11.8. Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
43
<PAGE>
11.9. Titles. The titles, captions or headings of the Articles, Sections
------
and subsections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.10. Publicity; Confidentiality. None of Parent, Buyer, Sellers, the Company
--------------------------
or their respective Affiliates or Representatives shall issue any press release
or make any public statement regarding, or disclose to any third party (except
as required by law or legal process, and except to each party's lenders if such
lenders so require) any of the terms of, the transactions contemplated hereby,
without prior written approval of the other party, provided that Parent, Buyers,
Sellers and the Company may, if they mutually agree, issue or make an
appropriate press release or public announcement after the Closing Date. Buyer
and Parent will use reasonable efforts, consistent with their legal obligations,
to consult with the Seller Representative regarding any proposed press release.
In the event that this Agreement is terminated prior to Closing, Buyer agrees to
return to Sellers and the Company all correspondence and documents furnished by
Sellers or the Company's Representatives, and agrees not to disclose or use for
its own purposes any confidential or proprietary information of Sellers that has
been furnished to it by Sellers or the Company's Representatives.
44
<PAGE>
11.11. Remedies. All rights and remedies of the parties hereto are set forth
--------
specifically in this Agreement and the attachments hereto.
11.12. Arbitration. Any controversy arising after the Closing out of or
-----------
relating to this Agreement (including, without limitation, pursuant to Section
10.3, but excluding for purposes of this Section 11.12, the employment and non-
competition agreements attached as Exhibits hereto), or relating to the breach
hereof, shall be settled by arbitration in Denver, Colorado, in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect (except as otherwise expressly provided in this Agreement), except that
disputes related to the preparation of financial statements shall be arbitrated
by a mutually agreeable Big 6 accounting firm. The award rendered by the
arbitrator(s) shall be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction thereof.
The arbitrator(s) shall possess the powers to issue mandatory orders and
restraining orders in connection with such arbitration. The expenses of the
arbitration shall be borne by the losing party unless otherwise allocated by the
arbitrator(s). The agreement to arbitrate shall be specifically enforceable
under the prevailing arbitration law. During the continuance of any arbitration
proceedings, the parties shall continue to perform their respective obligations
under this Agreement.
11.13. Seller Representative.
---------------------
11.13.1. The Sellers irrevocably make, constitute and appoint David
Lanoha as their agent (the "Seller Representative") and authorize and empower
him to fulfill the role of Seller Representative hereunder and under the Escrow
Agreement. In the event of the resignation, death or incapacity of a Seller
Representative, his successor shall be appointed within 14 days of his death or
incapacity by mutual agreement of the remaining Sellers, and such successor
either shall be a Seller or shall otherwise be acceptable to Buyer. If the
Sellers fail to appoint a successor within such 21-day period, then Buyer shall
have the right to appoint the successor from among the Sellers. The choice of a
successor Seller Representative appointed in any manner permitted above shall be
final and binding upon all of the Sellers. The decisions and actions of any
successor Seller Representative shall be, for all purposes, those of a Seller
Representative as if originally named herein.
11.13.2. Each Seller has made, constituted and appointed and by the
execution of this Agreement hereby irrevocably makes, constitutes and appoints
the Seller Representative as such person's true and lawful attorney in fact and
agent, for such person and in such person's name, (I) to execute and perform the
Escrow Agreement on behalf of each Seller, (ii) to receive all notices and
communications directed to such Seller under this Agreement or the Escrow
Agreement and to take any action (or to determine to take no action) with
respect thereto, as he may deem appropriate as effectively as such Seller could
act for himself or herself, including without limitation, the settlement or
compromise of any dispute or controversy, and (iii) to execute and deliver all
instruments and documents of every kind incident to the foregoing to all intents
and purposes and with the same effect as such Seller could do personally, and
each such Seller hereby ratifies and confirms as his or her own act, all that
the Seller Representative shall do or cause to be done pursuant to the
provisions hereof.
45
<PAGE>
11.13.3. The incapacity of any Seller shall not terminate the authority
and agency of the Seller Representative.
ARTICLE XIII.
SPECIAL PROVISIONS
------------------
12.1. These special provisions shall control where inconsistent with any other
term or provision of this Agreement and these special provisions are a material
inducement to Sellers to enter into this Contract.
12.2. The Buyer acknowledges that Sellers have made no representations,
warranties, covenants or agreements or provided other inducements that are not
specifically set forth in this Agreement or the Ancillary Agreements and the
documents related to the asset purchases from the Related Entities. The Buyer
has been provided open and complete access to all books, records, facilities,
equipment, rolling stock, furniture, fixtures, inventory, books, tax returns,
records, minute books, contracts and other data relating to the Company, its
facilities, assets, real property and other tangible and intangible assets.
12.2.1. For purposes of this Agreement, "fraud" shall mean (I) judicial
finding of fraud from which all appeals have been exhausted or have expired,
(ii) an arbitrator's finding of fraud from which all appeals have bee exhausted
or have expired, or (iii) the parties have mutually agreed in writing as to the
existence of fraud.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
RENT-IT-CENTER, INC. RSC ACQUISITION CORP.
(the "Company") ("Buyer")
By: /s/ David P. Lanoha By: /s/ Martin R. Reid
------------------------ ----------------------------
Name: David P. Lanoha Name: Martin R. Reid
Its: Chief Executive Officer Its: Chief Executive Officer
SELLER STOCKHOLDERS RENTAL SERVICE CORPORATION
("Sellers") ("Parent")
By: /s/ Martin R. Reid
---------------------------
/s/ David P. Lanoha Name: Martin R. Reid
- ---------------------------- Its: Chief Executive Officer
David P. Lanoha
THE RICHARD F. LANOHA FAMILY TRUST
By: /s/ David P. Lanoha
------------------------
David P. Lanoha, Trustee
THE LANOHA CHARITABLE REMAINDER TRUST
By: /s/ Michael L. Martin
---------------------------
Michael L. Martin, Trustee
NATIONAL CHRISTIAN CHARITABLE FOUNDATION
By: /s/ Merrill A. Parker
----------------------------
Merrill A. Parker, Officer/Director
47
<PAGE>
Exhibit 10.14
ASSET PURCHASE AGREEMENT
by and among
David P. Lanoha
as "Seller"
RSC Acquisition Corp.
as "Buyer"
Rental Service Corporation
as "Parent"
and
Lanoha Leasing Limited Liability Company
as the "Company"
October 6, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS................................................. 1
1.1. Defined Terms..................................................... 1
1.2. Other Defined Terms............................................... 6
ARTICLE II. PURCHASE AND SALE OF ASSETS................................ 7
2.1. Transfer of Assets................................................ 7
2.2. Assumption of Liabilities......................................... 7
2.3. Excluded Liabilities.............................................. 8
2.4. Purchase Price.................................................... 9
2.5. Holdback.......................................................... 10
2.6. Closing Costs; Transfer Taxes and Fees............................ 10
2.7. Closing of Books; Benefits and Risks of Ownership................. 10
2.8. Effective Control Balance Sheet; Dividends; Net Worth............. 11
ARTICLE III. CLOSING................................................... 11
3.1. Closing........................................................... 11
3.2. Conveyances at Closing............................................ 11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF DAVID P. LANOHA AND
THE COMPANY................................................ 12
4.1. Organization of the Company....................................... 12
4.2. Authorization..................................................... 13
4.3. No Violation...................................................... 13
4.4. Capitalization.................................................... 14
4.5. Related Entities.................................................. 14
4.6. Equipment and Other Assets; Absence of Encumbrances............... 14
4.7. Assets............................................................ 15
4.8. Facilities........................................................ 15
4.9. Contracts and Commitments......................................... 16
4.10. Permits.......................................................... 17
4.11. Financial Statements............................................. 17
4.12. Books and Records................................................ 17
4.13. Litigation....................................................... 17
4.14. Labor Matters.................................................... 18
4.15. Compliance with Law.............................................. 18
4.16. No Brokers....................................................... 18
4.17. No Other Agreements to Sell the Company.......................... 18
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
4.18. Proprietary Rights............................................... 19
4.19. Tax Matters...................................................... 19
4.20. Accounts Receivable.............................................. 20
4.21. Inventory........................................................ 21
4.22. Employees and Employee Benefits.................................. 21
4.23. Compliance With Environmental Laws............................... 25
4.24. Liabilities...................................................... 28
4.25. Insurance........................................................ 28
4.26. Conduct of the Business.......................................... 28
4.27. Knowledge........................................................ 28
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.......... 30
5.1. Organization of Buyer and Parent.................................. 30
5.2. Authorization..................................................... 30
5.3. No Conflict or Violation.......................................... 30
5.4. Consents and Approvals............................................ 30
ARTICLE VI. COVENANTS OF BUYER, THE COMPANY AND SELLER................. 31
6.1. Further Assurances................................................ 31
6.2. No Solicitation................................................... 31
6.3. Notification of Certain Matters................................... 32
6.4. Access to Information............................................. 32
6.5. Conduct of Business............................................... 32
6.6. Guarantee......................................................... 33
6.7. Employee Matters.................................................. 33
6.8. [RESERVED]........................................................ 33
6.9. Environmental Assessments and Remediation......................... 34
6.10. Registration Rights.............................................. 35
6.11. Cooperation Regarding Dealerships................................ 36
6.12. Use of Name and Telephone Numbers................................ 36
6.13. 1997 Tax Returns................................................. 36
ARTICLE VII. CONDITIONS TO COMPANY'S OBLIGATIONS....................... 36
7.1. Representations, Warranties and Covenants......................... 37
7.2. No Proceedings, Litigation or Laws................................ 37
7.3. Certificates...................................................... 37
7.4. Other Conditions.................................................. 37
7.5. Consents.......................................................... 37
7.6. Other Transactions................................................ 37
ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS........................ 38
8.1. Representations, Warranties and Covenants......................... 38
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
8.2. Consents.......................................................... 38
8.3. No Proceedings or Litigation...................................... 38
8.4. Opinion of Counsel................................................ 38
8.5. Certificates...................................................... 41
8.6. Conveyancing Documents; Release of Encumbrances................... 41
8.7. Completion of Environmental Remediation........................... 41
8.8. Tax Clearance Certificate......................................... 41
8.9. Employment and Non-Competition Agreements......................... 41
8.10. Release of Encumbrances.......................................... 41
8.11. Board Approval................................................... 41
8.12. Documents........................................................ 42
8.13. Schedules and Due Diligence Review............................... 42
8.14. No Material Adverse Change....................................... 42
8.15. Other Transactions............................................... 42
ARTICLE IX. CONSENTS TO ASSIGNMENT; RISK OF LOSS....................... 42
9.1. Consents to Assignment............................................ 42
9.2. Risk of Loss...................................................... 43
ARTICLE X. ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING.............. 43
10.1. Books and Records; Tax Examinations.............................. 43
10.2. Payment of Liabilities........................................... 44
10.3. Survival of Representations, Etc................................. 44
10.4. Indemnifications................................................. 44
10.5. Further Action................................................... 47
ARTICLE XI. MISCELLANEOUS.............................................. 48
11.1. Termination...................................................... 48
11.2. Assignment....................................................... 49
11.3. Notices.......................................................... 49
11.4. Choice of Law.................................................... 50
11.5. Entire Agreement; Amendments and Waivers......................... 50
11.6. Multiple Counterparts............................................ 50
11.7. Expenses......................................................... 51
11.8. Invalidity....................................................... 51
11.9. Titles........................................................... 51
11.10. Publicity; Confidentiality...................................... 51
11.11. Remedies........................................................ 51
11.12. Arbitration..................................................... 52
11.13. Seller Representative........................................... 52
ARTICLE XII. SPECIAL PROVISIONS........................................ 52
</TABLE>
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of October 6, 1997 (the
"Agreement"), is by and among RSC Acquisition Corp., a Delaware corporation,
("Buyer"), Rental Service Corporation, a Delaware corporation ("Parent"), David
P. Lanoha ("Seller") and Lanoha Leasing Limited Liability Company (herein the
"Company").
RECITALS
--------
A. The Company is engaged in the business of equipment rentals and
sales, operating under the Center Rental name.
B. Seller owns, of record and beneficially, a majority of the issued
and outstanding membership units of the Company ("Memberships").
C. The Company owns certain assets which it uses in its conduct of
the Business.
D. Buyer desires to purchase from the Company, and the Company
desires to sell to Buyer, such assets upon the terms and subject to the
conditions of this Agreement (the "Purchase").
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1 Defined Terms. As used herein, the terms below shall have the
-------------
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning set forth in the Exchange Act.
----------
"Agreement" shall have the meaning specified in the first paragraph of
----------
this Agreement.
"Ancillary Agreements" shall mean the Employment and Non-Competition
--------------------
Agreements to be entered into with David Lanoha, Jack Markle and Doug
Bonnettete, substantially in the forms attached as exhibits to the Related
Purchase Agreements and such other agreements mutually agreed to be necessary or
desirable to consummate the transactions contemplated hereby.
1
<PAGE>
"Assets" shall mean all of the right, title and interest of the
------
Company in and to the business, properties, assets and rights of any kind,
whether tangible or intangible, and constituting, or used or useful in
connection with, or related to, the Business, including without limitation all
of the Company's right, title and interest in the following:
1. all rights of the Company under the Assumed Contracts;
2. all rental and non-rental Equipment related to the Business;
3. all Inventory related to the Business;
4. all current and fixed assets;
5. all cash and cash equivalents (including short-term investments);
6. all Books and Records related to the Business;
7. all Proprietary Rights related to the Business;
8. to the extent transferable, all Permits related to the Business;
9. all computers and, to the extent transferable, software used in the
Business;
10. all utility deposits;
11. all available supplies, sales literature, promotional literature,
customer, supplier and distributor lists, display units, telephone and facsimile
numbers and purchasing records related to the Business;
12. all rights under or pursuant to all warranties, representations and
guarantees made by suppliers in connection with the Assets or services furnished
to the Company pertaining to the Business or affecting the Assets, to the extent
such warranties, representations and guarantees (i) are not required by the
Company to fulfill its obligations under this Agreement and (ii) are assignable;
13. all claims, causes of action, choses in action, rights of recovery
and rights of set-off of any kind, against any person or entity, including
without limitation any liens, security interests, pledges or other rights to
payment or to enforce payment in connection with products delivered by the
Company on or prior to the Closing Date;
14. all accounts receivable;
15. all Open Rental Contracts and customer deposits made in connection
therewith (including, without limitation, deposits made in the form of cash,
check, or a preliminary charge on a credit or debit card); and
16. the Company's prepayments and prepaid expenses.
2
<PAGE>
"Assumed Leases" shall mean the Leases of the Facilities listed on
--------------
Schedule 4.8.
"Balance Sheet" shall mean the balance sheet of the Company as of the
-------------
Balance Sheet Date.
"Balance Sheet Date" shall mean August 31, 1997.
------------------
"Books and Records" shall mean (a) all records and lists pertaining to
-----------------
the Business, customers, suppliers or personnel of the Company, (b) all product,
business and marketing plans of the Company and (c) all books, ledgers,
subledgers, trial balances, files, reports, plans, drawings and operating
records of every kind maintained by the Company.
"Business" shall mean the Company's equipment rental and sales
--------
business.
"Buyer" shall have the meaning specified in the first paragraph of
-----
this Agreement.
"Closing Date" shall mean November 28, 1997, or such later date before
------------
January 31, 1998 on which the parties otherwise agree.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Company" shall have the meaning specified in the first paragraph of
-------
this Agreement.
"Contract" shall mean any agreement, contract, note, factoring
--------
agreement, loan, evidence of indebtedness, purchase order, letter of credit,
franchise agreement, lease, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation or commitment to which the Company is
a party or is bound and which relates to the Business or Assets, whether oral or
written.
"Effective Control Balance Sheet" shall mean the balance sheet of the
-------------------------------
Company at October 31, 1997.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
-----------
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Equipment" shall mean all of the rental and non-rental furniture,
---------
fixtures, furnishings, machinery, automobiles, trucks, spare parts, tools,
supplies, shop equipment, equipment and other tangible personal property owned
by the Company.
3
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"Escrow Agent" shall mean the Chase/Mellon Trust Company or another
------------
entity designated by Buyer and the Seller Representative to act as escrow agent
under the Escrow Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement dated as
----------------
of the Closing Date by and among Buyer, Seller Representative and the Escrow
Agent, substantially in the form attached hereto as an Exhibit.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"Facilities" shall mean the rental yards, stores, offices, maintenance
----------
and storage facilities, shops, warehouses, improvements and other structures,
together with all related fixtures and improvements, which are used (or will be
used) in the conduct of the Business, located at or on the Leased Real Property.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended.
"Financial Statements" shall mean the Balance Sheet and the related
--------------------
statement of operations of the Company for the 10 month period ended on the
Balance Sheet Date.
"Inventory" shall mean all of the Company's inventory held for resale
---------
and all of the Company's new repair or replacement parts, supplies and packaging
items and similar items with respect to the Business, in each case wherever the
same may be located.
"Leased Real Property" shall mean all real property leased by the
--------------------
Company, including without limitation, all rights, easements and privileges
appertaining or relating thereto, all buildings, fixtures, and improvements
located thereon and all Facilities thereon, if any.
"Material Adverse Effect" or "Material Adverse Change" shall mean with
----------------------- -----------------------
respect to the Business or the Assets any significant and substantial adverse
effect or change in the condition (financial or other), business, results of
operations, prospects, assets, liabilities or operations of the Business or the
Assets or on the ability of the Seller or the Company to consummate the
transactions contemplated hereby, or any event or condition which would, with
the passage of time, constitute a "Material Adverse Effect" or "Material Adverse
----------------------- ----------------
Change." "Material", when used as an adjective, refers to something the
- -------
existence or absence of which, as the context requires, would have a Material
Adverse Effect.
"Memberships" shall mean all of the issued and outstanding membership
-----------
units of the Company.
"New Leases" shall mean the leases of the Omaha and Olathe facilities.
----------
4
<PAGE>
"Open Rental Contracts" shall mean (i) all Contracts pursuant to which
---------------------
the Company has rented Equipment and, as of the Closing Date, the rentee under
each such Contract is still in possession of such Equipment and (ii) all
Contracts under which the rentee has returned the Equipment but has not yet been
invoiced.
"Owned Real Property" shall mean all real property owned in fee by the
-------------------
Company which is used in the conduct of the Business.
"Parent" shall mean Rental Service Corporation, a Delaware
------
corporation.
"Permits" shall mean all licenses, permits, franchises, approvals,
-------
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.
"Related Entity" shall mean any corporation, partnership, trust or
--------------
other organization in which the Company or any of its Affiliates has a material
interest, including, without limitation, Rent-It-Center, Inc. d/b/a Center
Rental and Sales, Inc., Center Rental & Sales/Omaha, LLC and Zuni Rental
Enterprises L.L.C..
"Related Purchase Agreements" shall mean the two other asset purchase
---------------------------
agreements with Center Rental & Sales/Omaha, LLC and Zuni Rental Enterprises
L.L.C. and the stock purchase agreement pursuant to which the Related Purchase
Transactions are consummated.
"Related Purchase Transactions" shall mean the purchases by the Buyer
-----------------------------
of (i) all of the assets of Center Rental & Sales/Omaha, LLC and Zuni Rental
Enterprises L.L.C. pursuant to the two asset purchase agreements with Center
Rental & Sales/Omaha, LLC and Zuni Rental Enterprises L.L.C. and (ii) all of the
issued and outstanding shares of capital stock of Rent-It-Center, Inc. d/b/a
Center Rental and Sales, Inc.
"Rental and Non-Rental Asset Listing" shall mean the assets reflected
-----------------------------------
on the Balance Sheet and rental items that exist in the equipment inventory as
of August 31, 1997.
"Rental Ready" shall mean that all required maintenance has been
------------
performed and that the equipment does not require any repairs in excess of
$100,000 in the aggregate for the Company and all Related Entities.
"Representative" shall mean any officer, director, principal,
--------------
attorney, agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder.
"Seller" shall have the meaning specified in the first paragraph of
------
this Agreement.
5
<PAGE>
"Seller Representative" shall mean David Lanoha, whom Seller has
---------------------
irrevocably made, constituted and appointed their agent pursuant to Section
11.13 hereof.
"Tax" shall mean any federal, state, local, foreign or other tax,
---
levy, impost, fee, assessment or other government charge, including without
limitation income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation interest, penalties and additions in connection therewith.
"Year-End Balance Sheets" shall mean the balance sheet of the Company
-----------------------
at each of October 31, 1994, 1995 and 1996.
"Year-End Financial Statements" shall mean the Year End Balance Sheet
-----------------------------
dated as of October 31, 1994, 1995 and 1996, and the related statements of
operations of the Company for the fiscal years then ended.
1.2. Other Defined Terms. The following terms shall have the meanings
--------------------
defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Actions 4.13
Assumed Contracts 4.9
Assumed Liabilities 2.2
Assumption Document 3.2.2.2
Benefit Arrangement 4.22.1
Cash Purchase Price 2.4
Claim 10.4.4
Claim Notice 10.4.4
Closing 3.1
Consultant 6.9.1
Damages 10.4.1
Employee Plans 4.22.1
Environmental Laws 4.23.2
Environmental Assessments 6.9.1
ERISA Affiliate 4.22.1
Excluded Liabilities 2.3
GAAP 4.11
Hazardous Substance 4.23.1.3
Holdback Amount 2.5.1
Missing Inventory 2.4.3
Multiemployer Plan 4.22.1
PBGC 4.22.1
Pension Plan 4.22.1
Parent Common Stock 2.4
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Proposed Acquisition Transaction 6.2
Proprietary Rights 4.18.1
Purchase Price 2.4
Release 4.23.1.2
Remediation Standard 6.9.2
Required Remediation 6.9.2
Retained Employees 6.7
Seller Representative 11.13.1
Welfare Plan 4.22.1
</TABLE>
ARTICLE II.
-----------
PURCHASE AND SALE OF ASSETS
---------------------------
2.1 Transfer of Assets. Upon the terms and subject to the conditions
-------------------
contained herein, at the Closing, the Company will sell, convey, transfer,
assign and deliver to Buyer, and Buyer will acquire from the Company, the
Assets.
2.2 Assumption of Liabilities. Upon the terms and subject to the
--------------------------
conditions contained herein, at the Closing, Buyer shall assume (i) all accounts
payable, current notes payable, customer rental deposits, accrued expenses,
taxes payable, other current liabilities, and long-term debt reflected on the
Effective Control Balance Sheet and (ii) all obligations and liabilities
accruing, arising out of, or relating to events or occurrences happening after
October 31, 1997 under, and only under, the Assumed Contracts listed on Schedule
4.9 and the Assumed Leases listed on Schedule 4.8, but not including any
obligation or liability for any breach of any Contract or Lease occurring on or
prior to October 31, 1997 ((i) and (ii) together, the "Assumed Liabilities").
7
<PAGE>
2.3. Excluded Liabilities. Notwithstanding any other provision of this
---------------------
Agreement, except for the Assumed Liabilities expressly specified in Section
2.2, Buyer shall not assume, or otherwise be responsible for, any of the
Company's liabilities or obligations, whether actual or contingent, matured or
unmatured, liquidated or unliquidated, known or unknown, or related or unrelated
to the Business or the Assets, arising out of occurrences on or prior to, the
Closing Date (collectively, "Excluded Liabilities"), which Excluded Liabilities
include, without limitation:
2.3.1. Except as provided in Section 6.9, any liability or obligation to
or in respect of any employees or former employees of the Company including
without limitation (i) any employment agreement, whether or not written, between
the Company and any person, (ii) any liability under any Employee Plan at any
time maintained, contributed to or required to be contributed to by or with
respect to the Company or under which the Company may incur liability, or any
contributions, benefits or liabilities therefor, or any liability with respect
to the Company's withdrawal or partial withdrawal from or termination of any
Employee Plan and (iii) any claim of an unfair labor practice, or any claim
under any state unemployment compensation or worker's compensation law or
regulation or under any federal or state employment discrimination law or
regulation, which shall have been asserted on or prior to the Closing Date or is
based on acts or omissions which occurred on or prior to the Closing Date;
2.3.2. Any liability or obligation of the Company in respect of any
Tax which is not adequately reflected for on the Effective Control Balance
Sheet;
2.3.3. Any liability arising from any injury to or death of any person
or damage to or destruction of any property, whether based on negligence, breach
of warranty, strict liability, enterprise liability or any other legal or
equitable theory arising from defects in products sold or services performed by
or on behalf of the Company or any other person or entity on or prior to the
Closing Date, or arising from any other cause, including without limitation any
liabilities arising (on a date of occurrence basis or otherwise) on or prior to
the Closing Date relating to the use or misuse of Equipment or to traffic
accidents;
2.3.4. Any liability or obligation of the Company arising out of or
related to any Action against the Company or any Action which adversely affects
the Assets and which shall have been asserted on or prior to the Closing Date or
to the extent the basis of which shall have arisen on or prior to the Closing
Date;
2.3.5. Any liability or obligation of the Company resulting from
entering into, performing its obligations pursuant to or consummating the
transactions contemplated by, this Agreement (including without limitation any
liability or obligation of the Company pursuant to Article X hereof);
2.3.6. Any liability or obligation related to the Facilities, except
for those expressly set forth in the Assumed Leases; and
8
<PAGE>
2.3.7. Any liability or obligation arising out of CERCLA, any
equivalent state statute, or any other Environmental Law arising out of
occurrences on or prior to the Closing Date, except as otherwise provided
herein.
2.4. Purchase Price. At the Closing, upon the terms and subject to the
--------------
conditions set forth herein, Buyer shall pay to the Company in consideration for
the Assets, the aggregate amount of (i) Twenty-Six Million Twenty-Two Thousand
and Five Hundred Dollars ($26,022,500), subject to adjustment as set forth in
Section 2.4.3 below (the "Cash Purchase Price") payable by wire transfer of
immediately available funds to accounts designated by the Company in the amounts
as set forth on Schedule 2.4 and (ii) Eighty-Six Thousand and Fifty-Eight
(86,058) shares of Common Stock, par value $.01 per share, of Parent (the
"Parent Common Stock"). The cash and shares referred to in clauses (i) and (ii)
are collectively called the "Purchase Price". Any shares of Parent Common Stock
paid to the Company will be contributed by Parent to Buyer in a transaction
intended to qualify under Section 351 of the Code immediately prior to delivery
of such Parent Common Stock to the Company. The Purchase Price shall be
allocated among the Assets in the manner required by Section 1060 of the Code
and regulations thereunder. Exhibit 2.4 attached hereto sets forth the amount of
the Purchase Price allocable to the various Assets; provided that such
allocation shall be subject to necessary adjustments, to be completed and
reflected in such allocation within 30 days following the Closing Date, on
account of the final Inventory and Equipment valuations under Section 2.4.3.
Buyer and the Company agree to each prepare and file on a timely basis with the
Internal Revenue Service substantially identical initial and supplemental
Internal Revenue Service Forms 8594 "Asset Acquisition Statements Under Section
1060" consistent with Exhibit 2.4 and which give effect to any adjustment to the
Cash Purchase Price determined in accordance with Section 2.4.3 hereof.
2.4.1. If between the date of this Agreement and the Closing Date, the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock dividend, stock combination,
exchange of shares or readjustment, the number of shares of Parent Common Stock
issued to the Company pursuant to Section 2.4 shall be proportionately adjusted.
2.4.2. No fractional shares of Parent Common Stock shall be issued, but
in lieu thereof, the Company shall receive from Buyer an amount of cash equal to
the product of the fraction of a share of Parent Common Stock to which the
Company would otherwise be entitled, multiplied by $23.24.
2.4.3. On October 25, 1997 (or such other date as the parties
agree), the Company will conduct, and Buyer shall observe, a physical inventory
of the Company's merchandise inventory, supplies inventory and rental inventory.
The Company may participate in or have their representatives participate in or
observe such inventory. To the extent that the net book value of any Missing
Inventory is greater than $150,000, the Cash Purchase Price will be reduced
dollar for dollar by the amount of such shortfall applicable to Inventory owned
by the Company. "Missing Inventory" means Inventory shown on the combined
perpetual inventory listing of the Company and the Related Entities at October
25, 1997 (or such other date on which
9
<PAGE>
the applicable inventory is taken), which is missing or not accounted for in the
physical inventory.
2.5. Holdback
--------
2.5.1. The "Holdback Amount" shall be (subject to increase pursuant
to Section 6.9.3) Ten Million Dollars ($10,000,000) (which shall also serve as
the Holdback Amount in the Related Purchase Transaction) in cash which, at
Closing, shall be placed in escrow pursuant to the Escrow Agreement pending the
Company's indemnification obligations, if any, as set forth in Section 10.4, and
any remediation required under Section 6.9 hereof which is not resolved by the
Closing Date. The Escrow Agent will remit to the Company the entire Holdback
Amount, net of any amount which Buyer is entitled under the provisions of
Sections 6.9 and 10.4 hereof, when such amounts have been determined, all in
accordance with the provisions of the Escrow Agreement. In the event of any
disagreement between Buyer and the Company regarding the dollar amount of any
such indemnification or remediation obligation, Buyer and the Company shall
submit such dispute to a third-party arbitrator for binding arbitration pursuant
to Section 11.12 of this Agreement. The Company will pay all costs of the
escrow.
2.6. Closing Costs; Transfer Taxes and Fees The Company shall be
--------------------------------------
responsible for any documentary and transfer taxes and any sales or other taxes
(excluding use taxes on equipment constituting registered motor vehicles, which
use taxes will be paid one-half by each of the Company and Buyer) imposed by
reason of the transfers of Assets provided hereunder and any deficiency,
interest or penalty asserted with respect thereto. Buyer will pay any licensing
fees associated with re-registering motor vehicles. The Company shall pay all
costs of obtaining the transfer of existing Permits which may be lawfully
transferred. The Company shall pay the fees and costs of recording or filing all
applicable conveyancing instruments described in Section 3.2.1, and shall pay
the fees and costs of recording or filing all UCC termination statements and
other releases of Encumbrances.
2.7. Closing of Books; Benefits and Risks of Ownership The transactions
-------------------------------------------------
contemplated by this Agreement shall be deemed effective as of November 1, 1997,
and all profits and losses of the Company from and after November 1, 1997, shall
be solely for the account of, and inure solely to the benefit or detriment of,
Buyer, except as otherwise set forth in this Agreement. The accounting books and
records of the Company will be closed as of the close of business on October 31,
1997. Seller shall operate the Company subject to and pursuant to the
requirements of this Agreement by, from and after November 1, 1997, until such
time as this Agreement is terminated or closed. If this transaction does not
close for any reason on or prior to January 31, 1998, and is not extended by
agreement of the parties, then the Company shall pay within ten days to the
Buyer profits accumulated during the period from November 1, 1997, to the date
that the closing is deemed not to occur, but not later than January 31, 1998. If
this transaction does not close for any reason on or prior to January 31, 1998
and is not extended by agreement of the parties, then the Buyer shall within ten
days pay to the Company all losses accumulated by the Company during the period
from November 1, 1997, to the date that the closing is deemed not to occur, but
not later than January 31, 1998.
10
<PAGE>
2.8. Effective Control Balance Sheet; Dividends; Net Worth.
------------------------------------------------------
2.8.1. The Company will prepare the Effective Control Balance Sheet
in accordance with GAAP, which Effective Control Balance Sheet will fairly and
accurately reflect the assets and liabilities of the Company as of October 31,
1997.
2.8.2. Without the consent of Buyer, until the Closing Date, the
Company or Seller shall not repurchase, sell or transfer any Memberships, make
or declare any dividends or make other distributions to members or otherwise
take any action restricted under this Agreement.
2.8.3. The Cash Purchase Price will be reduced dollar for dollar to
the extent the aggregate net worths of the Company and other LLC's, the assets
of which are being acquired incident to the Related Purchase Transactions, at
October 31, 1997 is less than $928,164 in the aggregate.
ARTICLE III.
CLOSING
-------
3.1. Closing The Closing of the transactions contemplated herein (the
-------
"Closing") shall be held on the Closing Date at a time and place as the parties
shall mutually agree.
3.2. Conveyances at Closing
----------------------
3.2.1. Company's and Seller's Delivery Obligations. To effect the
--------------------------------------------
sale and transfer referred to in Section 2.1 hereof, the Company will, at the
Closing, execute and deliver to Buyer:
3.2.1.1. one or more bills of sale, each in the form of Exhibit
3.2.1.1 attached hereto, conveying in the aggregate all of the Company's owned
personal property included in the Assets, free and clear of all Encumbrances;
3.2.1.2. subject to Section 9.1, Assignments of Contract Rights,
each in the form of Exhibit 3.2.1.2 attached hereto, with respect to the Assumed
Contracts;
3.2.1.3. assignments of Trademarks, Service Marks and other
Proprietary Rights, each in the form of Exhibit 3.2.1.3 attached hereto, in
recordable form to the extent necessary to assign such rights; and
3.2.1.4. such other instruments as shall be requested by Buyer to
vest in Buyer title in and to the Assets in accordance with the provisions
hereof.
3.2.1.5. all Ancillary Agreements required to be executed by the
Seller;
3.2.1.6. all certificates, opinions of counsel and other documents
described in Article VIII; and
11
<PAGE>
3.2.1.7. all Permits and any other third party consents required for
the valid transfer of the Assets as contemplated by this Agreement, or for the
continued operation of the Business following such transfer.
3.2.2. Buyer's Delivery Obligations To effect the sale and transfer
----------------------------
referred to in Section 2.1 hereof, Buyer will, at the Closing, execute and
deliver to the Company:
3.2.2.1. all Ancillary Agreements required to be executed by Buyer;
and
3.2.2.2. Upon the terms and subject to the conditions contained
herein, an instrument of assumption substantially in the form attached hereto as
Exhibit 3.2.2, evidencing Buyer's assumption, pursuant to Section 2.2, of the
Assumed Liabilities (the "Assumption Document").
3.2.2.3. all certificates, opinions of counsel and other documents
described in Article VII.
3.2.2.4. the payment of the Purchase Price and repayment of the
Company's outstanding loan to Colorado National Bank.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF DAVID P. LANOHA AND THE COMPANY
-----------------------------------------------------------------
David P. Lanoha and the Company hereby jointly and severally represent and
warrant to Buyer and Parent as follows, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.1. Organization of the Company The Company is a limited liability
---------------------------
company duly organized, validly existing and in good standing under the laws of
the State of Wyoming. Copies of the organizational documents of the Company, and
all amendments thereto, heretofore or hereafter delivered to Buyer are accurate
and complete as of the date hereof. The Company is duly qualified or licensed to
do business as a foreign corporation in good standing in the states where
Facilities are located and in other states where this is legally required,
except where the failure to be so qualified would not have a Material Adverse
Effect.
4.2. Authorization The Seller and the Company each has full power and
-------------
authority (corporate or other) to enter into this Agreement and the Ancillary
Agreements, as the case may be, and to carry out the transactions contemplated
hereby and thereby, and the Company and Seller has taken all action required by
law, its charter documents, as the case may be, or otherwise to be taken by it
to authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements, as the case may be, and the consummation of the
transactions contemplated hereby and thereby. This Agreement and the Ancillary
Agreements, as the case may be, are the legal, valid and binding obligations of
Seller and the Company, enforceable against each of them in accordance with
their respective terms, subject to bankruptcy, insolvency, moratorium and
creditors' rights generally. A copy of the resolutions of
12
<PAGE>
the Company's manager and members authorizing this Agreement and the related
transactions is attached hereto as Schedule 4.2.
4.3. No Violation None of the execution, delivery and performance of
------------
this Agreement and the Ancillary Agreements nor the consummation of the
transactions contemplated hereby and thereby will (i) violate any provision of
the organizational documents of the Company, (ii) violate, result in a breach
of, conflict with, or constitute a default (or an event which, with the giving
of notice or lapse of time or both, would constitute a default) under, require
any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of any note, bond,
mortgage, or indenture, contract, agreement, lease, sublease, license, permit,
franchise, distributorship agreement or other instrument or arrangement to which
Seller or the Company is a party or by which any of the Memberships or any of
the assets or properties of the Company or Seller is bound or affected, which
violation, breach, conflict or default will have a Material Adverse Effect,
(iii) result in the creation or imposition of any Encumbrance upon any of the
Memberships or any property or Assets of the Company or Seller under any
agreement or commitment to which the Company or Seller is a party or by which
the Company or Seller is bound or affected, or to which the property of the
Company or Seller is subject, or (iv) violate, conflict with or result in the
breach of (or cause an event which could have a Material Adverse Effect as a
result of) any statute or law or any judgment, decree, order, regulation or rule
of any court or governmental authority to which Seller, the Company, the
Business or any of the properties or Assets of any of the foregoing is subject,
which violation, breach or conflict would have a Material Adverse Effect. Except
as set forth on Schedule 4.3 or as required by the HSR Act, no action, consent,
approval or authorization by or filing with any person or entity, including,
without limitation, any governmental authority, is required in connection with
the execution, delivery and performance by Seller and the Company of this
Agreement and the Ancillary Agreements, as the case may be, or the consummation
by Seller and the Company of the transactions respectively contemplated by each
of them herein and therein, except consents, the failure of which to obtain
would not have a Material Adverse Effect.
4.4. Capitalization
--------------
4.4.1. The authorized and the issued membership units of the Company
are as set forth on Schedule 4.4. Seller is and will be on the Closing Date the
record and beneficial owners and holders of the Memberships as set forth on
Schedule 4.4, free and clear of all Encumbrances.
4.4.2. There are no other membership units of the Company issued and
outstanding other than those listed on Schedule 4.4. None of the membership
units was issued in violation of any preemptive rights. There are no
outstanding (i) securities convertible into or exchangeable or exercisable for
any of the Company's membership units; (ii) options, warrants, calls or other
rights, including, without limitation, rights to demand registration or to sell
in connection with any registration by the Company under the Securities Act,
with respect to the issued membership units of the Company, or to purchase or
subscribe to membership units of the Company or securities convertible into or
exchangeable or exercisable for membership units of the Company; (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance, sale, transfer, and/or assignment of any membership
units of the Company, any such convertible or exchangeable securities or any
such options, warrants or
13
<PAGE>
rights; or (iv) membership units pledged as collateral to secure any agreement
or obligation. There are no voting trust agreements or other contracts,
agreements, arrangements, commitments, plans, proxies or understandings
restricting or otherwise relating to any conveyance, voting or dividend rights
with respect to the membership units.
4.5 Related Entities 4.5.1. Schedule 4.5(a) sets forth a complete and
----------------
accurate list of all of the Related Entities, all of which are, directly or
indirectly, wholly-owned by Seller or the Company. Schedule 4.5(a) also sets
forth the jurisdiction of incorporation of each of the Related Entities, each
jurisdiction in which each such Related Entity is qualified to do business, and
the ownership interests thereof.
4.5.2. Schedule 4.5(b) sets forth a list of all agreements among the
Company, any of the Seller and the Related Entities.
4.6 Equipment and Other Assets; Absence of Encumbrances The Asset
---------------------------------------------------
listing attached as Schedule 4.6 sets forth the asset description and original
cost of all Equipment. Buyer shall have the right, prior to Closing, to inspect
all of the Assets (wherever located) that are reflected on the Balance Sheet.
All rental equipment is Rental Ready.
14
<PAGE>
4.7 Assets The Company has and will transfer good and marketable fee
------
simple title to the Assets and upon the consummation of the transactions
contemplated hereby, Buyer will acquire good title to all of the Assets, free
and clear of any Encumbrances, except for any Encumbrance that Buyer, in its
sole discretion, specifically accepts in writing. The Assets reflected in the
1996 Year End Balance Sheet and all of the Assets acquired after such date are
or will be valued at the lower of actual cost or market less an adequate and
proper depreciation charge. The Assets include without limitation all assets
necessary for the conduct of the Business as presently conducted.
4.8. Facilities
----------
4.8.1. Real Property. The Company has no Owned Real Property.
-------------
All of the Leased Real Property is listed on Schedule 4.8. The Company has
delivered to Buyer an accurate copy of its existing leases. The Company enjoys
peaceful and undisturbed possession of the Leased Real Property. Other than the
leases provided, there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting to any person the right to purchase, use or occupy the Facilities
or any portion thereof. The Facilities are supplied with utilities and other
services necessary for the operation of the Business. Neither the Company nor,
to its knowledge, any lessor under the Leases, is in breach or default of its
obligations thereunder.
4.8.2. Improvements, Fixtures and Equipment. The Facilities and
-------------------------------------
the improvements thereon, including without limitation all Equipment (including
all fixtures) and other tangible assets owned, leased or used by the Company at
the Facilities are insured to the extent and in a manner customary in the
industry, are in the reasonable business judgment of the Company sufficient for
the operation of the Business as presently conducted and are in conformity, in
all material respects, with all applicable laws, ordinances, orders, regulations
and other requirements currently in effect. None of the improvements is subject
to any commitment or other arrangement for their sale or use by any Affiliate of
the Company or third parties other than purchase options set forth in leases
identified on Schedule 4.8. Buyer shall have the right, prior to Closing, to
inspect all of the Facilities.
4.8.3. Conformity. All Facilities have received all material
-----------
required approvals of governmental authorities (including without limitation
Permits and a certificate of occupancy or other similar certificate permitting
lawful occupancy of the Facilities) required in connection with the operation
thereof.
15
<PAGE>
4.9 Contracts and Commitments
-------------------------
4.9.1. Contracts. Schedule 4.9 sets forth a complete and accurate
---------
list of all material Contracts of the following categories:
4.9.1.1. Contracts not made in the ordinary course of the
Company's conduct of the Business;
4.9.1.2. Employment contracts and severance agreements;
4.9.1.3. Supply, purchase, distribution, franchise, license,
sales or commission agreements related to the Business;
4.9.1.4. Contracts involving expenditures or liabilities,
actual or potential, in excess of $5,000 or otherwise material to the Business,
and not cancelable (without liability) within 30 calendar days;
4.9.1.5. Contracts or commitments relating to commission
arrangements with others;
4.9.1.6. Factoring agreements, promissory notes, loans,
agreements, evidences of indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, whether the Company shall be
the borrower, lender or guarantor thereunder or whereby any Equipment or
Inventory are pledged (excluding credit provided by the Company in the ordinary
course of the Business to its customers);
4.9.1.7. Leases of personal property not cancelable (without
liability) within 30 calendar days; and
4.9.1.8. Contracts containing covenants limiting the freedom of
the Company or any officer, director or shareholder of the Company to engage in
any line of business or compete with any person.
For purposes of this Agreement, the "Assumed Contracts" are the
Contracts listed as such on Schedule 4.9. The Company has made available to
Buyer true, correct and complete copies of all of the Contracts listed on
Schedule 4.9, including all amendments and supplements thereto, whether or not
such Contracts are Assumed Contracts.
4.9.2. Absence of Breaches or Defaults. All of the material
-------------------------------
Contracts are valid and in full force and effect, subject to any repudiation
claims of other parties not known to Seller. The Company has duly performed all
of its material obligations under the Contracts to the extent those obligations
to perform have accrued, and no material violation of, or material default or
breach under any Contracts by the Company or, to the best of Seller's knowledge,
any other party has occurred and neither the Company nor, to Seller's knowledge,
any other party has repudiated any provisions thereof. All of the material
Contracts will be enforceable by the Company after the Closing to the same
extent as if the transactions contemplated by this
16
<PAGE>
Agreement had not been consummated, subject to compliance with applicable change
of control provisions, all of which are identified on Schedule 4.3.
4.10. Permits The Company has all material Permits required to conduct
-------
the Business, except where the failure to obtain such Permits would not have a
Material Adverse Effect. All material Permits of the Company related to the
Business are valid and in full force and effect, and are listed on Schedule
4.10.
4.11. Financial Statements The Company has heretofore delivered to
--------------------
Buyer the Financial Statements and Year-End Financial Statements. Except as set
forth on Schedule 4.11, the Financial Statements and Year-End Financial
Statements (a) are in accordance with the underlying books and records of the
Company, (b) have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods covered thereby,
excluding any footnotes which may be required by GAAP, and (c) fairly and
accurately present the assets, liabilities (including all reserves) and
financial position of the Business as of the respective dates thereof and the
results of operations and changes in cash flows for the periods then ended
(subject to normal year-end adjustments). Except as set forth on Schedule 4.11,
at the Balance Sheet Date there were no liabilities of the Company, which, in
accordance with GAAP, should have been shown or reflected in the Financial
Statements or the notes thereto, which are not shown or reflected in the
Financial Statements or the notes thereto.
4.12. Books and Records The Company has made and kept (and given
-----------------
Buyer access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of the Company. The books and
records of the Company made available to Buyer accurately and adequately reflect
all action previously taken by managers and members of the Company. The
ownership records of the Company made available to Buyer are true, correct and
complete, and accurately reflect all transactions effected with respect to
Company's membership interests through and including the date hereof.
4.13. Litigation Except as set forth on Schedule 4.13, there is no
----------
action, order, writ, injunction, judgment or decree outstanding or any claim,
suit, litigation, proceeding, labor dispute, arbitral action, governmental audit
or investigation (collectively, "Actions") pending, or to the best of the
Seller's or Company's knowledge, threatened or anticipated (a) against, related
to or affecting the Company or the Business or (b) seeking to delay, limit or
enjoin the transactions contemplated by this Agreement. The Company is not in
default with respect to or subject to any judgment, order, writ, injunction or
decree of any court or governmental agency, and there are no unsatisfied
judgments against the Company or the Business.
4.14. Labor Matters The Company is not a party to any labor agreement
-------------
with respect to its employees with any labor organization, union, group or
association and none of the Company's employees are represented by employee
unions (or any other similar labor or employee organizations). The Company has
not experienced within the past five (5) years any attempt by organized labor or
its representatives to make the Company conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company.
17
<PAGE>
4.15. Compliance with Law The Company, the conduct of the Business
-------------------
and the operation of the Facilities have not materially violated and are in
material compliance with all laws, statutes, ordinances, regulations, rules and
orders of any foreign, federal, state or local government and any other
governmental department or agency, and any judgment, decision, decree or order
of any court or governmental agency, department or authority, including without
limitation Environmental Laws (as defined in Section 4.23.2), relating to the
Assets, Facilities or Business or operations of the Company, except where the
violation or failure to comply, individually or in the aggregate would not have
a Material Adverse Effect on the Facilities, Assets or Business. The Company and
the conduct of the Business and the operation of the Facilities are in material
conformity with all energy, public utility, zoning, building and health codes,
regulations and ordinances, the Americans with Disabilities Act, ERISA, OSHA and
Environmental Laws and all other foreign, federal, state, and local governmental
and regulatory requirements. The Company has not received any notice to the
effect that, or otherwise been advised that, it is not in compliance with any
such statutes, regulations, rules, judgments, decrees, orders, ordinances or
other laws, and the Company has no reason to anticipate that any existing
circumstances are likely to result in violations of any of the foregoing.
4.16. No Brokers Except as set forth on Schedule 4.16, neither the
----------
Seller, the Company nor any of the Company's managers or Affiliates has employed
or made any agreement with any broker, finder or similar agent or any person or
firm which will result in an obligation on the part of the Company or Buyer to
pay any finder's fee, brokerage fees or commission or similar payment in
connection with the transactions contemplated hereby.
4.17. No Other Agreements to Sell the Company Neither the Seller nor
---------------------------------------
the Company has any commitment or legal obligation, absolute or contingent, to
any other person or firm other than the Buyer to sell, assign, transfer or
effect a sale of any of the Memberships or the Assets or to effect any merger,
consolidation, liquidation, dissolution or other reorganization of the Company,
and no person or entity has notified Seller or the Company that it believes such
a commitment or legal obligation exists.
18
<PAGE>
4.18. Proprietary Rights.
-------------------
4.18.1. Proprietary Rights. Schedule 4.18 lists all of the
-------------------
Company's material federal, state and foreign registrations of trademarks,
service marks and other marks, trade names or other trade rights, and all
pending applications for any such registrations, all other trademarks and other
marks, trade names and other trade rights or in which the Company has any
interest whatsoever, and all other trade secrets, if any, and other proprietary
rights, whether or not registered, and all computer software (including without
limitation the tool rental control software used by the Company) other than
software generally available to the public, created or used by or on behalf of
the Company, in each case relating to the Business (collectively, "Proprietary
Rights"). The Proprietary Rights listed in Schedule 4.18 are all those used by
the Company in connection with the Business other than software generally
available to the public.
4.18.2. Royalties and Licenses. No person has a right to receive
-----------------------
a royalty or similar payment in respect of any material Proprietary Rights.
Except as set forth on Schedule 4.18.2 the Company has no licenses granted, sold
or otherwise transferred by or to it or other agreements to which it is a party,
relating in whole or in part to any of the material Proprietary Rights.
4.18.3. Ownership and Protection of Proprietary Rights. Except as
-----------------------------------------------
set forth on Schedule 4.18.3, the Company owns or licenses, and has the sole
right to use or (as it so elects) to sublicense, each of the Proprietary Rights,
and the Company is not a party to any litigation with respect to any of the
Proprietary Rights. The Company has not received any notice of invalidity or
infringement of any rights of others with respect to such Proprietary Rights.
The Company has taken all reasonable and prudent steps in the reasonable
business judgment of the Company to protect the Proprietary Rights from
infringement by any other firm, corporation, association or person. The
Company's use of the Proprietary Rights is not, to Seller's knowledge,
infringing upon or otherwise violating the rights of any third party in or to
such Proprietary Rights, nor has such infringement been alleged by any third
party. All of the material Proprietary Rights are valid and enforceable rights
of the Company and will not cease to be valid and in full force and effect by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated by this Agreement.
4.19. Tax Matters
-----------
4.19.1. Filing of Tax Returns. The Company has timely filed with
----------------------
the appropriate taxing authorities all returns (including without limitation
information returns and other material information) in respect of Taxes required
to be filed through the date hereof and will timely file any such returns
required. The returns and other information filed are complete and accurate in
all material respects. Except as specified in Schedule 4.19, since October 31,
1990, neither the Company, nor any group of which the Company now or was a
member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any taxes. The
Company has made available to Buyer complete and accurate copies of the
Company's federal, state and local income tax returns for its fiscal years ended
October 31, 1994, 1995 and 1996, and will deliver to Buyer copies of the
19
<PAGE>
Company's federal, state and local tax returns for the twelve months ended
October 31, 1997 when completed and will deliver, upon Buyer's request, any
other Tax returns.
4.19.2. Payment of Taxes. All Taxes, in respect of taxable
-----------------
periods ending on or before the date of the Effective Control Balance Sheet,
have been timely paid, or will be timely paid prior to such date, or will be
fully accrued for on the Effective Control Balance Sheet. Any unpaid Taxes
relating to periods ending on or before the date of the Effective Control
Balance Sheet (whether full or partial periods) that are not fully accrued for
on the Effective Control Balance Sheet will be subject to full indemnification
by Seller in accordance with Section 10.3 hereof (without being limited as to
amount).
4.19.3. Audits, Investigations or Claims. Except as set forth in
---------------------------------
Schedule 4.19, the federal income tax returns and any required state tax returns
of the Company have been examined by the Internal Revenue Service and any
applicable state taxing authority for all periods from November 1, 1990, to and
including the Closing, and except to the extent shown therein, no deficiencies
for Taxes, have been assessed by any taxing or other governmental authority
against the Company. Except as set forth in Schedule 4.19, there are no pending
or, to the best of the Seller's or Company's knowledge, threatened audits,
investigations or claims for or relating to any material additional liability in
respect of Taxes, and there are no matters under discussion with any
governmental authorities with respect to Taxes that in the reasonable judgment
of the Company, or its counsel, is likely to result in a material additional
liability for Taxes. Audits of federal, state, and local returns for Taxes by
the relevant taxing authorities have been completed for each period subsequent
to October 31, 1990 except as set forth in Schedule 4.19 and, except as set
forth therein, the Company has not been notified that any taxing authority
intends to audit a return for any period. Except as set forth in Schedule 4.19,
no extension of a statute of limitations relating to Taxes is in effect with
respect to the Company.
4.19.4. Lien. There are no liens for Taxes (other than as could
-----
be asserted for current Taxes not yet due and payable) on the Assets.
4.19.5. No Withholding. The transaction contemplated herein is
---------------
not subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
4.19.6. Tax-Exempt Use Property. None of the Assets is a "tax-
------------------------
exempt use property" within the meaning of Section 168(h) of the Code.
4.20. Accounts Receivable. The accounts receivable reflected in the
--------------------
Balance Sheet represent bona fide claims of the Company against debtors for
sales, services performed or other charges arising on or before the date hereof,
and all the goods delivered and services performed which gave rise to said
accounts were delivered or performed in accordance with the applicable orders,
Contracts or customer requirements. All of such accounts receivable are
collectible in the ordinary course of business except to the extent of a bad
debt reserve representing the same percentage of accounts receivable of the
Company at the Closing Date as were reserved against on the Balance Sheet. The
Company owns, or contemporaneously with the conveyances to be
20
<PAGE>
consumated at the Closing, will own all such accounts receivable, free and clear
of all Encumbrances.
4.21. Inventory. All the Inventory (both rental and non-rental, supplies
----------
inventory and merchandise inventory) is located at the Facilities, except items
of rental equipment on lease to customers. There has been no material decrease
in the book value or fair value of the Inventory since the Balance Sheet Date,
except for sales of Inventory in the ordinary course of business. The values at
which the Inventory is shown on the Balance Sheet have been determined on the
average cost method in accordance with Federal tax regulations, consistently
applied throughout the periods covered by the Financial Statements. The
inventory is salable or rentable, as the case may be, in the ordinary course of
business consistent with past practice.
4.22. Employees and Employee Benefits
-------------------------------
4.22.1. As used in this Section 4.22, the following terms have
the meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting, severance
-------------------
or other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit-sharing bonuses, stock options,
stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (A) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into,
maintained, contributed to or required to be contributed to, as the case may be,
by the Company or an ERISA Affiliate or under which the Company or any ERISA
Affiliate may incur any liability, and (C) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
--------------
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant
---------------
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, the Company as
defined in Section 414(b), (c), (m) or (o) of the Code, or under "common
control" with the Company, within the meaning of Section 4001(b)(1) of ERISA.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined
------------------
in Section 4001(a)(3) of ERISA, (A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability and (B) which covers any employee or
21
<PAGE>
former employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Pension Plan" shall mean any "employee pension benefit plan" as
------------
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the five years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability; (B)
covers any employee or former employee of the Company or any ERISA Affiliate
(with respect to their relationship with such entities); and (C) is not a
Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
------------
defined in Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability; (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities); and (C) is not a Multiemployer Plan.
4.22.2 Schedule 4.22: (i) contains a list of all current
employees of the Company, and their wage rates or salaries, as of the date of
this Agreement, and (ii) sets forth the dates of employment for such employees.
4.22.3. Disclosure; Delivery of Copies of Relevant Documents and
--------------------------------------------------------
Other Information. Schedule 4.22 contains a complete list of Employee Plans.
- -----------------
True and complete copies of each of the following documents have been made
available by the Company to Buyer: (i) each Welfare Plan, Pension Plan and
Multiemployer Plan (and, if applicable, related trust agreements) and all
amendments thereto, all written interpretations thereof and written descriptions
thereof which have been distributed to the Company's employees and all annuity
contracts or other funding instruments; (ii) each Benefit Arrangement including
written interpretations thereof and written descriptions thereof which have been
distributed to the Company's employees (including descriptions of the number and
level of employees covered thereby) and a complete description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan; (iv) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and each Welfare Plan; (v) all actuarial reports
prepared for the last three plan years for each Pension Plan; (vi) a description
of complete age, salary, service and related data as of the last day of the last
plan year for employees and former employees of the Company; and (vii) a
description setting forth the amount of any liability of the company as of the
Closing Date for payments more than thirty (30) calendar days past due with
respect to each Welfare Plan.
22
<PAGE>
4.22.4. Representations.
----------------
4.22.4.1. Pension Plans. Neither the Company nor any ERISA
-------------
Affiliate has or contributes to or maintains or has any obligation to make
payments to any Pension Plan. No Pension Plan is subject to the minimum funding
requirements of Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any ERISA Affiliate is required to provide security to a Pension
Plan under Section 401(a)(29) of the Code. Each Pension Plan which is intended
to be qualified (and each related trust agreement, annuity contract or other
funding instrument) is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and has been so qualified
during the period from its adoption to date. Neither the Company nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an entity
that has engaged in, a transaction described in Section 4069 of ERISA. There
has been no "reportable event" (as defined in Section 4043(c) of ERISA and the
PBGC regulations under such Section) with respect to any Pension Plan and
neither the Company nor any ERISA Affiliate is subject to Section 4043(b) of
ERISA.
4.22.4.2. Multiemployer Plans. Neither the Company nor any ERISA
-------------------
Affiliate has any Multiemployer Plans.
4.22.4.3. Welfare Plans. Except as disclosed on Schedule 4.22,
-------------
none of the Company, any ERISA Affiliate or any Welfare Plan has any present or
future obligation to make any payment to, or with respect to any present or
former employee of the Company or any ERISA Affiliate pursuant to, any retiree
medical benefit plan, or other retiree Welfare Plan, and no condition exists
which would prevent the Company from amending or terminating any such benefit
plan or Welfare Plan. To the best of Seller's and Company's knowledge, each
Welfare Plan which is a "group health plan," as defined in Section 607(1) of
ERISA, has been operated in compliance with provisions of Part 6 of Title I,
Subtitle B of ERISA and Section 4980B of the Code at all times.
4.22.4.4. Compliance with Law. Each Employee Plan has been
-------------------
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Employee Plan, including without limitation ERISA
and the Code.
4.22.4.5. Employment at Will. The employment of all persons
------------------
presently employed or retained by the Company is terminable at will.
4.22.4.6. Unrelated Business Taxable Income. No Employee Plan (or
---------------------------------
trust or other funding vehicle pursuant thereto) is subject to any tax under
Code Section 511.
4.22.4.7. Deductibility of Payments. There is no contract,
-------------------------
agreement, plan or arrangement covering any employee or former employee of the
Company (with respect to its relationship with such entities) that, individually
or collectively, provides for the payment by the Company of any amount (i) that
is not deductible by the Company under Section 162(a)(1) or 404 of the Code,
whichever is applicable, (ii) for which the deduction by the Company would be
23
<PAGE>
disallowed under Section 162(m) of the Code, or (iii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
4.22.4.8. Fiduciary Duties and Prohibited Transactions. Neither the
--------------------------------------------
Company nor any plan fiduciary of any Welfare Plan or Pension Plan has engaged
in any transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code, or has otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA, except for any such violation which would not have a
Material Adverse Effect. To the best of Seller's and Company's knowledge, the
Company has not knowingly participated in a violation of Part 4 of Title I,
Subtitle B of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan
(or other employee benefit plan subject to ERISA) and has not been assessed any
civil penalty under Section 502(l) of ERISA.
4.22.4.9. Validity and Enforceability. Each Welfare Plan, Pension
---------------------------
Plan, related trust agreement, annuity contract or other funding instrument and
Benefit Arrangement is legally valid and binding and in full force and effect.
4.22.4.10. Litigation. There is no action, order, writ, injunction,
----------
judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral
action, governmental audit or investigation relating to or seeking benefits
under any Employee Plan that is pending, or, to Seller's knowledge, threatened
or anticipated against the Company, any ERISA Affiliate or any Employee Plan.
4.22.4.11. No Amendments. Neither the Company nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create any
additional Employee Plans or to amend or modify any existing Employee Plan other
than required by the Code or ERISA.
4.22.4.12. No Other Material Liability. No event has occurred in
---------------------------
connection with which the Company or any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating to any Employee Plans or (B)
pursuant to any obligation of the Company to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
4.22.4.13. Unpaid Contributions. Neither the Company nor any ERISA
--------------------
Affiliate has any liability for unpaid contributions under Section 515 of ERISA
with respect to any Pension Plan or Welfare Plan. The Company has paid or will
pay by October 31, 1997, all employer matching contributions to its 401(k) Plan
through October 31, 1997.
4.22.4.14. Insurance Contracts. To the Seller's knowledge, neither
-------------------
the Company nor any Employee Plan holds as an asset of any Employee Plan any
interest in any annuity contract, guaranteed investment contract or any other
investment or insurance contract issued by an insurance company that is the
subject of bankruptcy, conservatorship or rehabilitation proceedings.
24
<PAGE>
4.22.4.15. No Acceleration or Creation of Rights. Neither the
-------------------------------------
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will result in the acceleration or creation
of any rights of any person to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting except by plan termination
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan except by plan termination or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
4.23. Compliance With Environmental Laws
----------------------------------
4.23.1. Definitions. The following terms, when used in this
------------
Section 4.23, shall have the following meanings. Unless the context otherwise
requires, any of these terms may be used in the singular or the plural depending
on the reference.
4.23.1.1. "Company". For purposes of this Section 4.23
----------
only, the term "Company" shall include (i) all Related Entities of the Company,
including, without limitation the Seller, (ii) all partnerships, joint ventures
and other entities or organizations in which the Company was at any time or is a
partner, joint venturer, member or participant and (iii) all predecessor or
former corporations, partnerships, joint ventures, organizations, businesses or
other entities, whether in existence as of the date hereof or at any time prior
to the date hereof, the assets or obligations of which have been acquired or
assumed by the Company or to which the Company has succeeded.
4.23.1.2. "Release" shall mean and include any
---------
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, migrating, leaching, dumping or disposing into the environment or the
work place of any Hazardous Substance, and otherwise as defined in any
Environmental Law.
4.23.1.3. "Hazardous Substance" shall mean any
---------------------
quantity of asbestos in any form, urea formaldehyde, PCBs, radon gas, crude oil
or any fraction thereof, all forms of natural gas, petroleum products or by-
products, any radioactive substance, any toxic, infectious, reactive, corrosive,
ignitable or flammable chemical or chemical compound and any other hazardous
substance, material or waste (as defined in or for purposes of any Environmental
Law), whether solid, liquid or gas.
4.23.2. Compliance With Environmental and Zoning Law.
--------------------------------------------
Except as set forth on Schedule 4.23 and except as set forth in the
environmental assessments referred to in Section 6.9, the Facilities have been
owned, leased, operated and maintained in material compliance with all
environmental laws, regulations and requirements (collectively, "Environmental
Laws"). There is no present or past Environmental Condition in any way relating
to the Business or Facilities. "Environmental Condition" means the introduction
into the soil, groundwater or environment of the Facilities (through leak,
spill, release, discharge, escape, emission, dumping disposal or otherwise) of
any pollution, including without limitation any contaminant, irritant or
pollutant or Hazardous Substance (whether or not upon the property of the
Business and whether or not such pollution constituted at the time thereof a
violation of any Environmental Law) as a
25
<PAGE>
result of which either Seller, the Company or Buyer has or may become liable in
any material respect to any person or federal, state or local government or
agency or by reason of which any of the Assets may suffer or be subjected to any
lien.
4.23.3. Facilities. Except as set forth in the
----------
environmental assessments referred to in Section 6.9 and in Schedule 4.23, the
Facilities are, and at all times have been, owned, leased and operated in
material compliance with all Environmental Laws and in a manner that will not
give rise to any liability under any Environmental Laws.
4.23.4. Permits. The Company has, and at all times has
-------
had, all material Permits required under any Environmental Law and the
Facilities are, and at all times have been, in material compliance with all such
Permits subject to the environmental assessments referred to in Section 6.9.
4.23.5. Permits Required. The consummation of any of the
----------------
transactions contemplated by this Agreement will not require an application for
issuance, renewal, transfer or extension of, or any other administrative action
regarding, any Permit required under any Environmental Law subject to the
environmental assessments referred to in Section 6.9.
4.23.6. Notice of Violation. Except as set forth on
-------------------
Schedule 4.23.6, the Company has not received any notice at any time since
January 1, 1992 (or, if the notice alleged material non-compliance, at any time
whatsoever) that it or the Facilities is or were claimed to be in violation of
the provisions of any Environmental Law or in non-compliance with the conditions
of any Permit, and there is no pending or, to Seller's knowledge, threatened
lawsuit, governmental or other legal action to that effect.
4.23.7. Pending Actions. There is not now pending or, to
---------------
Seller's best knowledge, threatened, nor has there ever been, any Action against
the Company, nor, to the best of Seller's knowledge, is there any basis for any
Action, under any Environmental Law or otherwise with respect to any Release or
mishandling of any Hazardous Substance.
4.23.8. Judgments. There are no consent decrees,
---------
judgments, judicial or administrative orders or agreements with, or liens by,
any governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate, bind or in any way materially affect
the Company or the Facilities.
4.23.9. Hazardous Substances. Except as set forth on
--------------------
Schedule 4.23.9, there is not and has not been any Hazardous Substance used,
generated, treated, stored, transported, disposed of, handled or other placement
of Hazardous Substances on, under, about or from any Facility, except for
quantities of any such Hazardous Substances stored or otherwise held on, under
or about any such Facility in material compliance with all Environmental Laws
and necessary for the operation of the Business.
4.23.10. Handling of Hazardous Substances. The Company has
--------------------------------
at all times used, generated, treated, stored, transported, disposed of or
otherwise handled its Hazardous
26
<PAGE>
Substances in compliance in all material respects with all Environmental Laws
and in a manner that will not result in material liability of the Company or
Buyer under any Environmental Law.
4.23.11. Since August 31, 1997, (i) there has been no
actual or threatened Material Adverse Change or event that would result in a
Material Adverse Change, including without limitation the loss of any material
customers; (ii) there has not been any sale or other disposition of any of the
Assets, or any Encumbrance placed on the Assets, except in the ordinary course
of business; the Company has been operated in the ordinary course consistent
with past practice so as to preserve the Business intact, to keep available to
the business the service of Company's employees and to preserve the Business and
the goodwill of the Company's suppliers, customers, distributors and others
having business relations with it; and (iv) except as set forth on Schedule
4.23.11, Seller has not purchased or entered into any agreement to purchase any
item, other than in the ordinary course of business consistent with past
practices, having a cost in excess of $5,000.
4.23.12. Except as set forth on Schedule 4.23.12 and except
for compliance with HSR Act, no notice to, declaration, filing or registration
with, or authorization or consent or approval of, or Permit from, any
governmental or regulatory body or authority or any other person or entity is
required to be made or obtained by Seller or the Company in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
4.23.13. Storage Tank. To Seller's knowledge, Schedule
------------
4.23, together with the Environmental Assessments to be delivered, sets out the
past and present underground and above ground tanks at the Facilities.
4.23.14. Environmental Audits or Assessments. True,
-----------------------------------
complete and correct copies of the written reports, if any, and all parts
thereof, including any drafts of such reports if such drafts are in the
possession or control of the Company, of all environmental audits or assessments
(including tank closure reports) which have been conducted at any Facility
within the past five years, either by the Company or any attorney, environmental
consultant or engineer engaged by the Company or Seller for such purpose, will
be delivered to Buyer and a list of all such reports, audits and assessments and
any other similar report, audit or assessment not in the possession or control
of the Company and of which the Company or Seller has knowledge is included on
Schedule 4.23.
4.23.15. Indemnification Agreements. Except for all
--------------------------
Facility leases and facility access agreements and Contracts, the Company is not
a party, whether as a direct signatory or as successor, assign or third party
beneficiary, or otherwise bound, to any Contract under which the Company is
obligated by or entitled to the benefits of, directly or indirectly, any
representation, warranty, indemnification, covenant, restriction or other
undertaking concerning Environmental Conditions.
4.23.16. Releases or Waivers. The Company has not released
-------------------
any other person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
27
<PAGE>
4.23.17. Notices, Warnings and Records. The Company has
-----------------------------
given all notices and warnings, made all reports, and has kept and maintained
all records required by and in compliance with all Environmental Laws, except
where the failure to do so would not have a Material Adverse Effect.
4.24. Liabilities Except as set forth on Schedule 4.24, the Company
-----------
has no material liabilities or obligations (absolute, accrued, contingent or
otherwise) except (i) liabilities which are reflected on the Balance Sheet, (ii)
liabilities incurred in the ordinary course of the Business and consistent with
past practice since the Balance Sheet Date, and (iii) liabilities arising under
Contracts identified in Schedule 4.8 to which the Company is a party.
4.25. Insurance
---------
4.25.1 Schedule 4.25 describes all currently in force
policies of insurance and all policies for the year ended October 31, 1996
(including the insurer, type of insurance and period of coverage) to which the
Company or any Related Entity is a party or under which the Company, any Related
Entity or any employee, officer or director of the Company or any Related Entity
(in his or her capacity as such) is or has been insured. All such policies will
continue in full force and effect following the Closing. Incurrence policies
shall be deemed to be in force regardless of when they were issued.
4.25.2. [RESERVED.]
4.25.3. The Company and any Related Entity have paid all
accumulated premiums due, or have accrued same as a liability and has otherwise
performed substantially all of its material respective obligations, under each
such current insurance policy.
4.26. Conduct of the Business Except as set forth in Schedule
-----------------------
4.26, since the Balance Sheet Date, the Company has conducted its operations in
the ordinary course of the Business and substantially in accordance with past
practice, and has not taken any action that, if taken after the date hereof,
would violate Section 6.5.
4.27. Knowledge Seller's "knowledge" or "best knowledge" or
---------
similar words includes the actual knowledge of David P. Lanoha, Jack Markle,
Doug Bonnette and such knowledge that such individuals obtained or would have
obtained after inquiry to determine the relevant fact at the branch manager
level, after a review of the Company files maintained at or above the branch
manager level and after inquiry of personnel responsible for inputting
information into those files.
4.28. The Company is acquiring the Parent Common Stock for its own
account as principal, for investment purposes only, and not with a view to, or
for, resale or distribution thereof, and no other person has or will have a
direct or indirect beneficial interest in such Parent Common Stock.
4.29. The Company understands that the offering and sale of the Parent
Common Stock is intended to be a transaction by an issuer not involving any
public offering exempt from
28
<PAGE>
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the rules and regulations of the Commission thereunder.
4.30. The Company is an "accredited investor" as such term is defined
in Rule 501 under the Securities Act.
4.31. The Company understands and acknowledges that there are
substantial risks of loss of investment involved in an investment in the Parent
Common Stock, and that the investment in the Parent Common Stock is an illiquid
investment subject to transfer restrictions, and Seller and the Company
represent and warrant that the Company has the financial ability to bear the
economic risk of such investment.
4.32. Seller has such knowledge and experience in financial and
business matters, including investments of the type represented by the Parent
Common Stock, as to be capable of evaluating the merits of the Company's
investment therein.
4.33. The Company has been furnished with a copy of the recent
periodic reports filed by Parent with the Commission and any documents that may
have been made available otherwise or upon its request, has carefully read and
understands such materials and has evaluated the risks of the Company's
acquisition of the Parent Common Stock and the parties acknowledge that each
Seller is relying upon the fact that all such information is true and correct in
all material respects and does not contain any omissions of material facts
necessary to make the facts stated therein, as of their dates, not misleading.
4.34. The Company has been given the opportunity to ask questions of,
and receive answers from, representatives of Parent in order for it to evaluate
the merits and risks of the Company's investment in the Parent Common Stock.
4.35. The Company has not been furnished with and has not relied upon
any oral or written representation, warranty or information in connection with
the offering of the Parent Common Stock except for that set forth in this
Agreement and in Parent's Prospectus, 10K and Parent's Annual Report.
4.36. The stock certificates evidencing the Parent Common Stock to be
delivered pursuant to this Agreement will bear a legend indicating that the
securities have not been registered and are subject to restrictions on transfer
and the holdback and registration rights set forth herein.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
Buyer and Parent hereby represent and warrant to Seller and the
Company as follows, which representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct:
29
<PAGE>
5.1. Organization of Buyer and Parent Buyer is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
5.2. Authorization Except as provided in Section 8.11, each of Buyer
-------------
and Parent has all requisite corporate power and authority, and has taken all
corporate action necessary, to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its respective obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
Buyer and Parent and is, and (following their execution and delivery by Buyer,
Parent, the Company, the Seller Representative or the Seller, as applicable,
each of the Ancillary Agreements will be) a legal, valid and binding obligation
of Buyer or Parent, as applicable, enforceable against Buyer or Parent, as
applicable, in accordance with its terms.
5.3. No Conflict or Violation Neither the execution, delivery or
------------------------
performance of this Agreement or the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby, nor compliance by Buyer or
Parent with any of the provisions hereof or thereof, will (a) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws of
Buyer or Parent, or (b) violate any statute, rule, regulation, ordinance, code,
order, judgment, ruling, writ, injunction, decree, award or agreement binding
upon Buyer or Parent.
5.4. Consents and Approvals No notice to, declaration, filing or
----------------------
registration with, or authorization, consent or approval of, or permit from, any
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by Buyer or Parent in connection with the
execution, delivery and performance of this Agreement or the Ancillary
Agreements and the consummation of the transactions contemplated hereby or
thereby, except (a) as may be required by Buyer to operate the Business after
the Closing, (b) as has been obtained on or prior to the date hereof or (c) as
set forth in Schedule 5.4.
ARTICLE VI.
COVENANTS OF BUYER, THE COMPANY AND SELLER
------------------------------------------
Buyer, the Company and Seller each covenant with the others as
follows:
6.1. Further Assurances Upon the terms and subject to the conditions
------------------
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from third parties;
provided, however, that neither party shall be required to make any payments,
commence litigation or agree to modifications of the terms of Contracts or
Leases in order to obtain any such waivers, consents or approvals, (B) to obtain
all necessary Permits as are
30
<PAGE>
required to be obtained under any federal, state, local or foreign law or
regulations, (C) to effect all necessary registrations and filings, including
without limitation required filings under the HSR Act and all other submissions
of information requested by governmental authorities, and (D) to fulfill all
conditions to this Agreement.
6.2. No Solicitation From the date hereof through the Closing or the
---------------
earlier termination of this Agreement, each of the Company and the Seller shall
not, and shall cause their Representatives (including without limitation
investment bankers, attorneys and accountants) not to, directly or indirectly,
enter into, solicit, initiate or continue any discussions or negotiations with,
or encourage or respond to any inquiries or proposals by, or participate in any
negotiations with, or provide any information to, or otherwise cooperate in any
other way with, any corporation, partnership, person or other entity or group,
other than Buyer and its Representatives, concerning any sale of all or a
portion of the Assets, the Memberships or the Business, or any merger,
consolidation, liquidation, dissolution or similar transaction involving the
Company (each such transaction collectively being referred to herein as a
"Proposed Acquisition Transaction"). The Company and the Seller shall not,
directly or indirectly, through any Representative or otherwise, solicit,
initiate or encourage the submission of any proposal or offer from any person or
entity relating to any Proposed Acquisition Transaction or participate in any
negotiations regarding, or furnish to any other person any information with
respect to the other party for the purposes of, or otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to seek or effect a Proposed Acquisition
Transaction. The Company and the Seller each hereby severally represent that it
is not now engaged in discussions or negotiations with any party (other than
Buyer) with respect to any of the foregoing. The Company or Seller shall
promptly notify Buyer (orally and in writing) of any offer, inquiry or contact
with any person with respect to a Proposed Acquisition Transaction, including
the terms thereof and the identity of the prospective purchaser or soliciting
party.
6.3. Notification of Certain Matters From the date hereof through the
-------------------------------
Closing, Buyer or Parent shall give prompt notice to Seller and the Company of
(a) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of the Buyer or
Parent contained in this Agreement or in any exhibit or schedule hereto to be
untrue or inaccurate in any material respect and (b) any failure of Buyer or
Parent to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or any exhibit or schedule
hereto; provided, however, that such disclosure shall not be deemed to cure any
breach of a representation, warranty, covenant or agreement or to satisfy any
condition.
From the date hereof through the Closing, Seller and the Company shall
give prompt notice to Buyer or Parent of (a) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
representation or warranty of the Seller or Company contained in this Agreement
or in any exhibit or schedule hereto to be untrue or inaccurate in any material
respect and (b) any failure of Seller or Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or schedule hereto; provided, however, that such
disclosure shall not be
31
<PAGE>
deemed to cure any breach of a representation, warranty, covenant or agreement
or to satisfy any condition.
6.4. Access to Information From the date hereof through the Closing,
---------------------
the Company shall, and shall cause its Representatives to, afford the
Representatives of Buyer and its Affiliates complete access at all reasonable
times to the Assets and the Facilities for the purpose of inspecting and
conducting appropriate tests upon the same, and to the officers, employees,
agents, attorneys, accountants, properties, Books and Records and Contracts of
the Company, and shall furnish Buyer and its Representatives all financial,
operating and other data and information as Buyer or its Affiliates, through
their respective Representatives, may reasonably request, including but not
limited to data relating to operating procedures, workers' compensation history,
legal, tax and environmental, zoning and other legal compliance.
6.5. Conduct of Business From the date hereof through the Closing, the
-------------------
Seller shall, except as contemplated by this Agreement or as consented to by
Buyer in writing, operate the Business in the ordinary course of the Business
and substantially in accordance with past practice and will not take any action
inconsistent with this Agreement or with the consummation of the Closing.
Without limiting the generality of the foregoing, the Company shall not, except
as specifically contemplated by this Agreement or as consented to in writing by
Buyer:
6.5.1. issue or repurchase any units, options or other rights to
acquire any such units;
6.5.2. enter into, extend, materially modify, terminate or renew any
Contract;
6.5.3. purchase or enter into any agreement to purchase any item of
Inventory or Equipment;
6.5.4. make any material increase in compensation or benefits
payable to any employee of the Company, or adopt any new employee benefit plan
or policy;
6.5.5. sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets, or any interests therein;
6.5.6. accelerate the collection of accounts receivable, extend the
payment of accounts payable, or reduce inventories in a manner inconsistent with
the ordinary course of the Business's operation; or
6.5.7. fail to pay its accounts payable and any debts owed or
obligations due by it, or pay or discharge when due any liabilities.
6.6. Guarantee
---------
Through but not after the Closing, Parent hereby guarantees the
covenants and obligations of Buyer required to be performed by it hereunder.
32
<PAGE>
6.7. Employee Matters Buyer shall hire all employees of the Business
----------------
who pass a physical examination and drug and alcohol abuse screening by a
licensed laboratory chosen by Buyer, and who otherwise meet Buyer's customary
criteria for employment, and the Company shall reasonably cooperate with Buyer
in retaining all such employees (the "Retained Employees"). Buyer agrees to give
Retained Employees credit for their time of employment with the Company with
respect to their seniority as an employee of Buyer. The Company shall be and
remain solely responsible for the payment of all benefits due to its employees
at any time under its Employee Plans, including without limitation all
severance, accrued vacation, health care continuation coverage and other
benefits to which its employees may be entitled as a result of the transactions
contemplated hereby, whether or not such employees are hired by Buyer. All
Retained Employees will be at-will employees of Buyer and may be terminated by
Buyer in its sole discretion, subject to the requirements of applicable laws
governing employers and employees, and will receive substantially the same total
compensation as they did when employed by the Company.
6.8 [RESERVED]
----------
6.9. Environmental Assessments and Remediation
-----------------------------------------
6.9.1. Buyer will retain an environmental consultant (the
"Consultant") to perform Phase 1 (and, at Buyer's option Phase 2) environmental
assessments with respect to each of the Facilities. Upon its availability,
Consultant will deliver such assessments to Buyer and the Company. In the event
any such assessment recommends the performance of additional investigation
(including, without limitation, Phase 2 environmental assessments), such
additional investigation shall, if requested by Buyer, be undertaken promptly
and delivered to each of the Company and Buyer. The environmental assessments
and investigations undertaken pursuant to this Section 6.9.1 are collectively
referred to herein as the "Environmental Assessments." Buyer shall be solely
responsible for the cost of the Environmental Assessments.
6.9.2. In the event any of the Environmental Assessments
reveals any remediation work which must be completed in order to bring the
Facilities into compliance with applicable Environmental Laws or eliminate any
potential environmental liability, the Consultant shall be directed to prepare
and to deliver to each of the Company and Buyer a written report setting forth
in reasonable detail the scope of required remediation and an estimate of the
cost of completing such remediation. For the purposes of Section 6.9, "required
remediation" shall mean any action necessary to (i) comply with any governmental
order, (ii) comply with any Environmental Law effective at the Closing or (iii)
eliminate a potential environmental liability which has the reasonable
probability of ripening into with the passage of time the violation of any
Environmental Law (the "Remediation Standard"), as applicable to the Facilities
or the operation thereof by the Company as of the Closing Date.
6.9.3. Within 60 days of completion of the Consultant's report
referred to in Section 6.9.2, the Company shall engage a reliable environmental
engineering firm reasonably acceptable to Buyer to perform any required
remediation, as well as to remove any underground storage tanks on the
properties which are leased from Related Entities and perform all required
33
<PAGE>
remediation in connection therewith. The Company and the Seller Representative
shall use their respective best efforts to cause such required remediation to be
completed on or before the Closing Date, and the Company shall bear all costs of
such required remediation; Buyer may, in its sole discretion, authorize the
Company to defer any portion of the required remediation which the Company and
its contractors are unable to complete prior to Closing, in which case Seller
shall cause the portion of the required remediation so deferred to be completed
as promptly as practicable, but in no event later than 180 days following
Closing, at the Company's sole expense (which may be satisfied from the Holdback
Amount pursuant to the Escrow Agreement or from the funds held back by Buyer as
set forth in Section 6.9.4). In the event of such deferral, Buyer will provide
reasonable access to the Company and its agents to complete such remediation and
shall otherwise reasonably cooperate at the Company's expense in such
remediation. Buyer may monitor the performance of the required remediation and
application of the Remediation Standard, and at its election may cause the
Consultant to review the performance of the required remediation. If Buyer
directs the Consultant to undertake such review, the required remediation shall
be deemed completed only upon certification of its completion by the Consultant.
If, however, there is a dispute as to the performance of the required
remediation or the application of the Remediation Standard, any such dispute
shall be settled by a mutually agreed-upon environmental expert not otherwise
involved in the required remediation, whose determination shall be final and
binding on the parties. The estimated costs of the required remediation not
completed by Closing will be withheld and retained by Buyer outside of escrow.
Notwithstanding the foregoing, by December 31, 1997, the Company will begin to
cause the underground storage tanks located on property leased by the Company
from Related Entities to be removed and any required remediation to be completed
in connection therewith.
6.9.4. The Holdback Amount shall secure, among other things,
the completion by the Company of any required remediation which has not been
resolved by the Closing Date pursuant to this Section 6.9. Upon the completion
of the required remediation, certification of such completion by the Consultant
or mutually agreed-upon third party expert, and payment by the Company of all
expenses of such remediation and certification, all in accordance with the
standards set forth in this Section 6.9, no further claims may be made against
the Holdback Amount on account of the Company's obligations under this Section
6.9. However, if such required remediation has not been completed by the Company
due to their failure to timely perform and to continue performance of required
remediation, and so certified on or prior to the date which is no later than 180
days following the Closing Date, Buyer shall be entitled to engage its own
environmental engineering firm to complete such required remediation, and to
distribute such portion of the Holdback Amount as is necessary to pay the fees
and costs of such firm, or other costs incurred, in completing such required
remediation.
6.10. Registration Rights.
-------------------
6.10.1. In the event that, at any time prior to the first
anniversary of the Closing Date, Parent files a registration statement under the
Securities Act covering shares of Parent Common Stock, other than a registration
statement on Form S-4 or Form S-8, or a registration statement filed pursuant to
"demand" or similar contractual registration rights of any other
34
<PAGE>
stockholders of Parent, then Company shall have the right to include in such
registration statement (on a "piggyback" basis) any or all of its shares of
Parent Common Stock on the same terms and conditions (including pro rata
cutbacks) as all other selling stockholders in such registration, and to receive
the benefit of any representations, indemnities, opinions or comfort letters
given by the Parent (or its counsel or underwriters) to any underwriter in
connection with such registration, provided, however, that if the managing
underwriter or underwriters in the registered offering advise the Parent that
the inclusion in the offering of shares of Parent Common Stock owned by the
Company would have a Material Adverse Effect on the marketability or price of
the offering, then the number of shares of Parent Common Stock to be included by
the Company shall be reduced.
6.10.2. Anything herein to the contrary notwithstanding, in
the event that the Parent files a registration statement with respect to an
underwritten public offering under the Securities Act in which any class of
Parent Common Stock is offered, no Seller shall effect any public sale or
distribution (except pursuant to said registration statement) of any of the
shares of Parent Common Stock (which shares, for purposes of this Section
6.10.2, shall include any and all voting securities received by such Seller as a
stock dividend, stock split or other recapitalization or similar distribution on
or in respect of the shares of Parent Common Stock) or any of Parent's other
equity securities, or of any securities convertible into or exchangeable for
such securities, during the period following delivery of notice to Sellers which
begins ten (10) days before the filing of such registration statement with the
Securities and Exchange Commission and ending ninety (90) days after such
registration statement has become effective or ten (10) days after it has been
withdrawn. After January 4, 2001, this Section 6.10.2 shall cease to apply.
6.11. Cooperation Regarding Dealerships Seller and the Company will
---------------------------------
cooperate with Buyer and use their reasonable best efforts to assist Buyer in
obtaining the transfer of all dealerships and dealership agreements of the
Company and each Related Entity, including any required due to change of control
provisions.
6.12. Use of Name and Telephone Numbers From and after Closing, upon
---------------------------------
filing of appropriate assumed name affidavits, Buyer will have the right to use
all of the names used by the Company or variations thereof in its operation of
the Business. Upon Closing, the Company shall assign to Buyer all of the
telephone and facsimile numbers currently used in the Business.
6.13. 1997 Tax Returns Seller will prepare or cause to be prepared,
----------------
executed and timely filed all income tax returns for the Company's fiscal year
ended October 31, 1997. Buyer will provide access to books and records acquired
from the Company to facilitate such preparation. In addition, as set forth
elsewhere herein, David P. Lanoha will be responsible for any additional income
taxes or assessments or claims asserted by any Tax authority and will fully
indemnify the Company with respect thereto.
35
<PAGE>
ARTICLE VII.
CONDITIONS TO COMPANY'S OBLIGATIONS
-----------------------------------
Except as otherwise provided herein, the obligations of the Company to
consummate the transactions provided for hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by the Company.
36
<PAGE>
7.1. Representations, Warranties and Covenants All representations and
-----------------------------------------
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Buyer and
Parent shall have performed and satisfied all agreements and covenants required
hereby to be performed by them prior to or on the Closing Date.
7.2. No Proceedings, Litigation or Laws No Action by any governmental
----------------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Seller if the
transactions contemplated hereunder are consummated. The waiting period under
the HSR Act shall have expired or been terminated, and there shall not be any
statute, rule or regulation that makes the purchase and sale of the Memberships,
Business or the Assets contemplated hereby illegal or otherwise prohibited.
7.3. Certificates Buyer and Parent shall furnish the Company with such
------------
certificates of their officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by the
Company. The Company shall have received an opinion of Latham & Watkins in form
reasonably satisfactory to Seller Representative.
7.4. Other Conditions By October 31, 1997, (i) Jack Markle and Buyer
----------------
shall have both approved the form of his employment agreement in writing and
(ii) Buyer's board of directors shall have approved the transactions
contemplated by this Agreement; Buyer shall have delivered a letter from the
agent bank for its revolving credit facility indicating that the transaction has
been approved; and Buyer shall have completed its due diligence review and
delivered notice to Seller that it is satisfied with its due diligence review of
the Company. If the above conditions are not timely satisfied, then Seller shall
have the option to terminate this Agreement.
7.5. Consents All Permits and waivers necessary for the consummation by
--------
Seller of the transactions contemplated hereby and required to be obtained by
Buyer or Parent shall have been obtained.
7.6. Other Transactions The Related Purchase Transactions shall have
------------------
been consummated.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for hereby
are subject, to the satisfaction, on or prior to the Closing Date, of each of
the following conditions, any of which may be waived by Buyer:
37
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8.1. Representations, Warranties and Covenants All representations and
-----------------------------------------
warranties of Seller and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Seller
and the Company shall have performed and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
8.2. Consents All Permits and waivers necessary for the consummation by
--------
Buyer and Parent of the transactions contemplated hereby and for the continued
operation of the Business after the Closing (including, without limitation, all
required waivers of Parent's lenders and all required waivers of the Company's
vendors under supplier agreements other than as set forth on Schedule 8.2) shall
have been obtained. Company will use its reasonable best efforts to obtain oral
or written consents from customers as may be reasonably requested by Buyer to
continue doing business with the Company from and after the date of this
Agreement.
8.3. No Proceedings or Litigation No Action by any governmental authority
----------------------------
or other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer materially if the transactions
contemplated hereby are consummated, including without limitation any Material
Adverse Effect on the right or ability of the Company to own, operate, possess
or transfer the Assets after the Closing. The waiting period under the HSR Act
shall have expired or been terminated, and there shall not be any statute, rule
or regulation that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.4. Opinion of Counsel The Company shall have delivered to Buyer an
opinion of Graft, Thomson and Toedte, P.C., counsel to the Company and the
Seller, dated as of the Closing Date, in form and substance reasonably
satisfactory to Buyer, to the effect that:
8.4.1. Incorporation Company has been duly formed and is validly
-------------
existing and in good standing under the laws of the State of Wyoming and is in
good standing as a foreign corporation in each state in which it owns or leases
property or operates a Facility;
8.4.2. Corporate Power and Authority The Company has the
-----------------------------
necessary corporate power and authority to enter into this Agreement and the
Ancillary Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and to own, lease and operate the Assets and its
other properties and to conduct the Business as presently conducted;
8.4.3. Action The execution, delivery and performance of this
------
Agreement and the Ancillary Agreements to which the Company is a party have been
duly authorized by all necessary action of the Company, and this Agreement and
the Ancillary Agreements have been duly executed and delivered by the Company or
the Seller, as applicable;
8.4.4. Obligation of the Company or Seller This Agreement and
-----------------------------------
each Ancillary Agreement constitutes a legally valid and binding obligation of
the Company or the Seller, as applicable, enforceable against the Company or the
Seller in accordance with its terms, except as
38
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limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally or by equitable principles
(whether considered in an action at law or in equity), (ii) limitations imposed
by federal or applicable state law or equitable principles upon the availability
of specific performance, injunctive relief or other equitable remedies, or (iii)
other customary limitations reasonably satisfactory to Buyer's counsel;
8.4.5. No Breach Neither the execution and delivery of this
---------
Agreement or the Ancillary Agreements by the Company or the Seller, as
applicable, nor the consummation of the transactions contemplated hereby or
thereby will (i) violate or conflict with any provision of the organizational
documents of the Company, or of the charter documents or other organizational
instrument of Seller that is not a natural person, (ii) breach, or cause a
default under, any term or provision of any material contract listed on a
schedule to such opinion to which contract the Company or the Seller is a party
or by which the Assets are bound, or (iii) violate any judgment, decree,
injunction, writ or order applicable to the Company or the Seller;
8.4.6. No Permits Required No Permit of, or filing with, any
-------------------
governmental authority or, to the best knowledge of such counsel, any other
person, is required for the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or the Seller, as applicable, or the
consummation by the Company or the Seller of the transactions contemplated
hereby or thereby, except as set forth in this Agreement or the schedules or
exhibits hereto;
8.4.7. No Actions Pending Except as set forth in this Agreement
------------------
or the schedules hereto, to the best knowledge of such counsel, no Action is
pending or threatened (i) against the Company or the Business, (ii) against any
of the officers or directors of the Company as such, (iii) in which the Company
is a plaintiff, or (iv) which questions the validity or legality of the
transactions contemplated hereby;
8.4.8. No Violation of Law to the best knowledge of such counsel,
-------------------
neither the execution and delivery of this Agreement or the Ancillary Agreements
by the Company or the Seller, as applicable, nor the consummation of the
transactions contemplated hereby or thereby will violate or result in a failure
to comply with any statute, law, ordinance, regulation, rule or order of any
federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to the
Company, the Seller or the Business; and, to the best knowledge of such counsel,
the Company has all licenses, franchises and other authority required to conduct
the Business as it is now being conducted;
8.4.9. Title to Memberships The issued and outstanding units of
--------------------
the Company consists solely of the Memberships, all of which are owned of record
and beneficially by the persons identified on a schedule attached to such
opinion, free and clear of all Encumbrances. To the knowledge of such counsel,
there are no outstanding warrants, options or other rights to acquire, or
securities convertible into or exercisable or exchangeable for, units of the
Company, nor any commitments or agreements by the Company to issue any such
rights or securities or units.
39
<PAGE>
8.4.10. Other Opinions Such other opinions as any lender to Buyer
--------------
may reasonably request. In rendering such opinions, such counsel may rely as to
factual matters upon certificates and assurances of public officials, Seller,
and officers of the Company. In addition, such opinions may be subject to such
additional qualifications and exceptions as are reasonably acceptable to counsel
to Buyer.
8.4.11. Schedules At or prior to Closing, the Company shall attach
---------
all Schedules to this Agreement and the Buyer shall have the opportunity to
review and approve such Schedules, such approval to not be unreasonably
withheld. The Company will deliver all schedules within ten days after execution
of this Agreement, and Buyer will have five days to disapprove such schedules,
failing which they will be deemed a part of this Agreement.
8.5. Certificates Seller and the Company shall furnish Buyer with such
------------
certificates of Seller, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.6. Conveyancing Documents; Release of Encumbrances The Company shall
-----------------------------------------------
have executed and delivered each of documents described in Section 3.2 hereof so
as to effect the transfer and assignment to Buyer of all right, title and
interest in and to the Assets and the Company shall have filed (where necessary)
and delivered to Buyer all documents necessary to release the Assets from all
Encumbrances which documents shall be in a form reasonably satisfactory to
Buyer's counsel.
8.7. Completion of Environmental Remediation The Company or its agents
---------------------------------------
shall have completed any "required remediation" or shall have approved any plan
of remediation within the meaning of Section 6.9, subject to the procedures set
forth in Section 6.9 with respect to the certification of such completion and
the resolution of any disputes relating thereto.
8.8. Tax Clearance Certificate The Company shall provide to Buyer with
-------------------------
a clearance certificate or similar document(s) that may be required by any state
taxing authority in order to relieve Buyer of any obligation to withhold any
portion of the Purchase Price.
8.9. Employment and Non-Competition Agreements Buyer or a subsidiary
-----------------------------------------
of Buyer shall have entered into an Employment and Non-Competition Agreement
with Mr. Lanoha, Mr. Markle and Mr. Bonnette in the forms attached.
8.10. Release of Encumbrances The Company shall have filed (where
-----------------------
necessary) and delivered to Buyer all documents necessary to release the Assets
from all Encumbrances which documents shall be in a form reasonably satisfactory
to Buyer's counsel.
8.11. Board Approval The Board of Directors of Parent shall have
--------------
approved the execution, delivery and performance of this Agreement.
40
<PAGE>
8.12. Documents Buyer shall have received from the Company
---------
resolutions adopted by its manager approving this Agreement and the Ancillary
Agreements to which it will be a party, and the transactions contemplated hereby
and thereby.
8.13. Schedules and Due Diligence Review Buyer and its
----------------------------------
Representatives shall be provided the opportunity to have conducted a due
diligence review of the Company's Books and Records, Financial Statements, and
other records and accounts of the Business, and Seller shall have delivered to
Buyer all Schedules required by this Agreement. Buyer shall be satisfied in its
sole discretion with its due diligence findings, and the contents of the
Schedules; if Buyer is not so satisfied in its sole discretion, it may terminate
this Agreement. The parties shall have drafted and agreed on any other agreement
required pursuant to this Agreement to be executed at Closing.
8.14. No Material Adverse Change There shall have been no material
--------------------------
adverse change or development in the Company's business.
8.15. Other Transactions The Related Purchase Transactions shall have
------------------
been consummated.
ARTICLE IX
CONSENTS TO ASSIGNMENT; RISK OF LOSS
------------------------------------
9.1. Consents to Assignment Anything in this Agreement to the
----------------------
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign or to effect a change of control with respect to any Contract, lease,
license, sales order, purchase order or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment or change
of control thereof, without the consent of a third party thereto, would
constitute a breach thereof or in any way adversely affect the rights of Buyer
thereunder. If such consent is not obtained, or if an attempted assignment or
change of control thereof would be ineffective or would affect the rights
thereunder so that Buyer would not receive all such rights, the Company will
cooperate with Buyer, in all reasonable respects, to provide to Buyer the
benefits under any such Contract, lease, license, sales order, purchase order,
claim or right including without limitation enforcement for the benefit of Buyer
of any and all rights of the Company against a third party thereto arising out
of the breach or cancellation by such third party or otherwise.
41
<PAGE>
9.2 Risk of Loss From the date hereof through the Closing, all risk
------------
of loss or damage to the property included in the Assets shall be borne by the
Company, and thereafter shall be borne by Buyer. If any portion of the Assets is
destroyed or damaged by fire or any other cause on or prior to the Closing,
other than use, wear or loss in the ordinary course of the Business, the Company
shall give written notice to Buyer as soon as practicable after discovery of
such damage or destruction, the amount of insurance, if any, covering such
Assets and the amount, if any, which the Company is otherwise entitled to
receive as a consequence. Prior to the Closing, Buyer shall have the option,
which shall be exercised by written notice to the Company within ten (10)
calendar days after receipt of the Company's notice or if there is not ten (10)
calendar days prior to the Closing, as soon as practicable prior to the Closing,
of (a) accepting such Assets in their destroyed or damaged condition in which
event Buyer shall be entitled to the proceeds of any insurance or other proceeds
payable with respect to such loss and to such indemnification for any uninsured
portion of such loss pursuant to Section 10.4, and the full Purchase Price shall
be paid for such Assets, (b) excluding such Assets from this Agreement, in which
event the Purchase Price shall be reduced by the amount allocated to such
Assets, as mutually agreed between the parties or (c) terminating this Agreement
in accordance with Section 11.1. If Buyer accepts such Assets, then after the
Closing, any insurance or other proceeds shall belong, and shall be assigned to,
Buyer without any reduction in the Purchase Price; otherwise, such insurance
proceeds shall belong to the Company.
ARTICLE X
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
----------------------------------------------
10.1. Books and Records; Tax Examinations
-----------------------------------
10.1.1. Books and Records Each party agrees that it will
-----------------
cooperate with and make available to the other party, during normal business
hours, all Books and Records, information and employees (without substantial
disruption of employment) retained and remaining in existence after the Closing
which are necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such Books and Records, information or employees for any
reasonable business purpose.
10.1.2. Cooperation and Records Retention The Company and Buyer
---------------------------------
shall (i) each provide the other with such assistance as may reasonably be
requested by any of them in connection with the preparation of any return,
audit, or other examination by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes, (ii) each retain for
the period of all applicable statutes of limitation and provide the other with
any records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the other for any period. This covenant will survive the Closing.
42
<PAGE>
10.2. Payment of Liabilities Following the Closing Date, the Company
----------------------
shall pay promptly when due all of the debts and liabilities of the Company
relating to the Business, other than Assumed Liabilities, including without
limitation any accounts payable not assumed by Buyer and any liability of the
Company for Taxes.
10.3 Survival of Representations, Etc All statements contained in any
--------------------------------
certificate, schedule, exhibit, instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations, warranties, covenants
and agreements of Seller, the Company, Parent and Buyer contained herein shall
survive the consummation of the transactions contemplated hereby and the Closing
Date, without regard to any investigation made by any of the parties hereto. All
such representations and warranties and all claims and causes of action with
respect thereto (other than the provisions of Sections 4.4, 4.17, 4.19, 4.22,
and 4.23, representations and warranties giving rise to Uncapped Claims and this
Section 10.3, and all claims and causes of action with respect thereto) shall
terminate upon expiration of three years after the Closing Date. The
representations and warranties in Sections 4.4, 4.17, 4.19, 4.22, and 4.23 shall
survive until the expiration of the applicable statute of limitations (with
extensions) with respect to the matters addressed in such sections. The
termination of the representations and warranties provided herein shall not
affect the rights of a party in respect of any Claim made by such party in a
writing received by the other party prior to the expiration of the applicable
survival period provided herein.
10.4. Indemnifications
----------------
10.4.1. By the Company and Seller. The Company and Seller,
--------------------------
jointly and severally, shall indemnify, defend, save and hold harmless Buyer,
its Affiliates, and its and their respective Representatives, from and against
any and all uninsured claims, damages, costs, losses (including without
limitation diminution in value), Taxes, liabilities, judgments, penalties,
fines, obligations, lawsuits, deficiencies, demands and expenses (whether or not
arising out of third-party claims), including without limitation interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including without limitation any clean-up or remedial action), lost profits and
other losses resulting from any shutdown or curtailment of operations, damages
to the environment, attorneys' fees, experts' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any representation or warranty, or the inaccuracy
of any representation or warranty, made by the Company or Seller in or pursuant
to this Agreement; (ii) any breach of any covenant or agreement made by the
Company or Seller in or pursuant to this Agreement; (iii) any liability arising
under any Environmental Law on account of the conduct of the Company or Seller
or prior owners or users of the Facilities or other persons, or on account of
the operation of the Business or the Facilities, or related to any Environmental
Condition existing, in each case on or at any time prior to the Closing Date;
(iv) any liability for Taxes in respect of taxable periods ending on or before
October 31, 1997; (v) any Excluded Liability, or (vi) any other liability
arising out of events prior to the Closing Date which has not been adequately
reflected on the Effective Control Balance Sheet. Without limiting the
generality of the foregoing, the indemnification provided herein, insofar as it
relates
43
<PAGE>
to any Environmental Law or Environmental Condition, shall specifically
cover costs incurred in connection with any investigation of site conditions
(excepting the cost of the Environmental Assessments) or any clean-up, remedial,
removal or restoration work required by any federal, state or local governmental
agency or political subdivision or by the provisions of Section 6.9 hereof.
Damages (except under Sections 4.4, 4.17, 4.19, 4.22, and 4.23 or caused by the
fraud of Seller or the Company) (collectively the "Uncapped Items") are limited
by the terms of Article XII of this Agreement. Except with respect to the
Uncapped Items for which there is no time limit and no monetary limit, the time
and maximum aggregate dollar amount of any indemnity or other obligation of
Seller or the Company under both this Agreement and all Related Purchase
Agreements is limited to (and Seller shall not be responsible for damages in
excess of) (i) for any claims made during the first full year after the Closing,
$10,000,000, (ii) for any claims made during the second full year after the
Closing, $8,000,000 and (iii) for any claims made during the third full year
after the Closing, $5,000,000, except that indemnification obligations related
to Environmental Conditions which become obligations of Buyer during the term of
the lease of the applicable property or within fifteen years of the Closing, if
sooner, and are demonstrated by Buyer on the basis of a preponderance of the
evidence not to have been caused by Buyer shall not be subject to such time or
monetary limitations, but shall be subject to an additional monetary limitation
of $5,000,000 in excess of the amount initially placed in escrow pursuant to the
Escrow Agreement. This indemnification obligation of up to $5,000,000 will
continue to apply even after the three-year period of the escrow has ended, but
will terminate upon any actual assignment by Buyer of the applicable lease to an
unrelated third-party.
10.4.2. By Parent and Buyer Parent and Buyer shall indemnify and save
-------------------
and hold harmless Seller, their Affiliates and their Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty,
or the inaccuracy of any representation or warranty, made by Parent or Buyer in
or pursuant to this Agreement; or (ii) any breach of any covenant or agreement
made by Parent or Buyer in or pursuant to this Agreement, and (iii) any
liability arising after November 1, 1997 arising out of or related to the
Buyer's ownership or operation of the Business.
44
<PAGE>
10.4.3. Cooperation The indemnified party shall cooperate in all
-----------
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
10.4.4. Defense of Claims If a claim for Damages (a "Claim") is to be
-----------------
made by a party entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall, subject to Section 10.4,
give written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.4. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the indemnified party)
to handle and defend the same, at the indemnifying party's cost, risk and
expense unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party, and (iii) to compromise or settle
such claim, which compromise or settlement shall be made only with the written
consent of both the indemnifying and the indemnified party, such consent not to
be unreasonably withheld; provided, however, if the remediation or resolution of
any such Claim will occur on or at any Facility or is reasonably expected to
have a material adverse effect on the indemnified party's business operations,
then, notwithstanding the foregoing, the indemnified party shall be entitled to
control such resolution, including without limitation to take control of the
defense and investigation of such lawsuit or action, to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense, and to compromise or settle such Claim with the
consent of the Indemnifying Party. If the indemnifying party fails to assume the
defense of such claim within fifteen (15) calendar days after receipt of the
Claim Notice, the indemnified party against which such claim has been asserted
will (upon delivering notice to such effect to the indemnifying party) have the
right to undertake, at the indemnifying party's cost and expense, the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the indemnifying party. In the event the indemnified party assumes the
defense of the claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
action effected with its consent pursuant to and in accordance with this Section
45
<PAGE>
10.4 and for any final judgment (subject to any right of appeal), and the
indemnifying party agrees to indemnify and hold harmless an indemnified party
from and against any Damages by reason of such settlement or judgment.
10.4.5. Buyer's Right to Distribution of Holdback Amount Buyer and its
------------------------------------------------
Affiliates and Representatives may at their election collect any amount due from
the Company pursuant to Seller's indemnification obligations under this Section
10.4 by distribution of an applicable portion of the Holdback Amount in
accordance with the terms of the Escrow Agreement.
10.4.6. Limitations Neither Buyer or Parent on the one hand, nor
-----------
Seller on other hand, shall be liable to the other under this Section 10.4 for
any Damages until the amount otherwise due the party, including amounts due
under this Agreement and all Related Purchase Agreements, being indemnified,
including all amounts due under this Agreement and all Ancillary Agreements,
exceeds $100,000 in the aggregate, in which case such indemnifying party will be
liable to the indemnified party for all such amounts in excess of the first
$100,000. Notwithstanding the preceding sentence, this limitation shall not
apply with respect to Damages arising out of a breach of a representation or
warranty contained in Sections 4.4, 4.17, 4.19, 4.22, or 4.23 or giving rise to
an Uncapped Claim due to fraud on the part of Seller.
10.4.7. Liability and Remedies, etc Except as set forth below, no
---------------------------
individual Representative of any party (other than Mr. Lanoha) shall be
personally liable for any Damages under the provisions contained in this Section
10.4. Nothing herein shall relieve either party of any liability to make any
payment expressly required to be made by such party pursuant to this Agreement.
The term "Damages" as used in this Section 10.4 is not limited to matters
asserted by third parties against Seller or Buyer, but includes Damages incurred
or sustained by an indemnified party in the absence of third party claims.
Payments by an indemnified party of amounts for which such party is indemnified
hereunder shall not be a condition precedent to recovery.
10.5. Further Action At and after the Closing, Seller shall take all
--------------
actions reasonably necessary to effect the conveyance of the Memberships to
Buyer free and clear of all Encumbrances and otherwise required by Buyer's
lenders.
ARTICLE XI.
MISCELLANEOUS
-------------
11.1. Termination
-----------
11.1.1. Termination. This Agreement may be terminated at any
-----------
time prior to Closing:
11.1.1.1. By mutual written consent of Buyer and the Seller
Representative;
46
<PAGE>
11.1.1.2. By Seller as provided in Section 7.4, and, except as
is provided in Section 7.4, by Buyer or the Company if the Closing shall not
have occurred on or before January 31, 1998; provided, however, that this
provision shall not be available to Buyer if the Company has the right to
terminate this Agreement under Section 11.1.1.4, and this provision shall not be
available to the Company if Buyer has the right to terminate this Agreement
under Section 11.1.1.3;
11.1.1.3. By Buyer if there is a material breach of any
representation or warranty set forth in Article IV hereof or any covenant or
agreement to be complied with or performed by Seller or the Company pursuant to
the terms of this Agreement or the failure of a condition set forth in Article
VIII to be satisfied (and such condition is not waived in writing by Buyer) on
or prior to the Closing Date, or the occurrence of any event which results or
would result in the failure of a condition set forth in Article VIII to be
satisfied on or prior to the Closing Date, provided that Buyer may not terminate
this Agreement prior to the Closing if Seller or the Company have not had an
adequate opportunity to cure such failure; or
11.1.1.4. By the Company if there is a material breach of any
representation or warranty set forth in Article V hereof or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VII to be
satisfied (and such condition is not waived in writing by the Company) on or
prior to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition set forth in Article VII to be satisfied on
or prior to the Closing Date; provided that the Company may not terminate this
Agreement prior to the Closing Date if Buyer has not had an adequate opportunity
to cure such failure.
11.1.2. In the Event of Termination In the event of
---------------------------
termination of this Agreement:
11.1.2.1. Each party will redeliver all documents, work papers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same.
11.2. Assignment Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Parent or Buyer may, without such
consent, assign all such rights to any lender as collateral security, and Buyer
may assign all such rights and obligations to a wholly-owned subsidiary or
subsidiaries of Parent or Buyer (or a partnership controlled by Parent or Buyer)
which shall assume all obligations and liabilities of Buyer under this
Agreement. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, and no other person shall have any right, benefit or
obligation under this Agreement as a third party beneficiary or otherwise.
11.3. Notices All notices, requests, demands and other communications
-------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted with electronic confirmation of receipt; if transmitted by
telecopy, electronic or digital transmission method; the
47
<PAGE>
day after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g., Federal Express); and upon receipt,
if sent by certified or registered mail, return receipt requested. In each case
notice shall be sent to:
If to Seller, Seller Representative, or to the Company:
David P. Lanoha
5215 Linden Court
Littleton, CO 80121
FAX: 303-220-0914
with a copy to:
Robert Graft, Esq.
Graft, Thomson & Toedte, P.C.
7430 East Caley Avenue
Suite 300
Englewood, CO 80111
FAX: 303 773-9047
If to Parent or Buyer, addressed to:
Rental Service Corporation
14505 N. Hayden Road, Suite 322
Scottsdale, Arizona 85260
Attention: Chief Executive Officer
FAX: 602-905-3400
With a copy to:
Elizabeth A. Blendell, Esq.
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
FAX: 213-891-8763
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4. Choice of Law This Agreement shall be construed, interpreted and
-------------
the rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
48
<PAGE>
11.5. Entire Agreement; Amendments and Waivers This Agreement, together
----------------------------------------
with all exhibits and schedules hereto and the Ancillary Agreements, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
11.6. Multiple Counterparts This Agreement may be executed in one or more
---------------------
counterparts and by fax, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.7. Expenses Except as otherwise specified in this Agreement, each
--------
party hereto shall pay its own legal, accounting, out of pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect (treating the Company as
Seller for this purpose), except that the Company may pay all of its legal and
accounting expenses incurred prior to September 22, 1997.
11.8. Invalidity In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9. Titles The titles, captions or headings of the Articles, Sections
------
and subsections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.10. Publicity; Confidentiality None of Parent, Buyer, Seller, the
--------------------------
Company or their respective Affiliates or Representatives shall issue any press
release or make any public statement regarding, or disclose to any third party
(except as required by law or legal process, and except to each party's lenders
if such lenders so require) any of the terms of, the transactions contemplated
hereby, without prior written approval of the other party, provided that Parent,
Buyers, Seller and the Company may, if they mutually agree, issue or make an
appropriate press release or public announcement after the Closing Date. Buyer
and Parent will use reasonable efforts, consistent with their legal obligations,
to consult with the Seller Representative regarding any proposed press release.
In the event that this Agreement is terminated prior to Closing, Buyer agrees to
return to Seller and the Company all correspondence and documents furnished by
Seller or the Company's Representatives, and agrees not to disclose or use for
its own purposes any confidential or proprietary information of the Company that
has been furnished to it by Seller or the Company's Representatives.
49
<PAGE>
11.11. Remedies All rights and remedies of the parties hereto are set
--------
forth specifically in this Agreement and the attachments hereto.
50
<PAGE>
11.12. Arbitration Any controversy arising after the Closing out of or
-----------
relating to this Agreement (including, without limitation, pursuant to Section
10.4, but excluding for purposes of this Section 11.12, the employment and non-
competition agreements attached as Exhibits hereto), or relating to the breach
hereof, shall be settled by arbitration in Denver, Colorado, in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect (except as otherwise expressly provided in this Agreement), except that
disputes related to the preparation of financial statements shall be arbitrated
by a mutually agreeable Big 6 accounting firm. The award rendered by the
arbitrator(s) shall be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction thereof.
The arbitrator(s) shall possess the powers to issue mandatory orders and
restraining orders in connection with such arbitration. The expenses of the
arbitration shall be borne by the losing party unless otherwise allocated by the
arbitrator(s). The agreement to arbitrate shall be specifically enforceable
under the prevailing arbitration law. During the continuance of any arbitration
proceedings, the parties shall continue to perform their respective obligations
under this Agreement.
11.13. Seller Representative
---------------------
11.13.1. David P. Lanoha shall also perform the role of "Seller
Representative" hereunder and of Representative under the Escrow Agreement. In
the event of the resignation, death or incapacity of Seller Representative, his
successor shall be appointed within 14 days of his death or incapacity by the
Company, and such successor must be acceptable to Buyer. If the Seller fail to
appoint a successor within such 21-day period, then Buyer shall have the right
to appoint the successor from among the Seller. The choice of a successor
Seller Representative appointed in any manner permitted above shall be final and
binding. The decisions and actions of any successor Seller Representative shall
be, for all purposes, those of Seller Representative as if originally named
herein.
11.13.2. The incapacity of Seller shall not terminate the authority
and agency of the Seller Representative.
ARTICLE XII.
SPECIAL PROVISIONS
------------------
12.1. These special provisions shall control where inconsistent with
any other term or provision of this Agreement and these special provisions are a
material inducement to Seller to enter into this Contract.
51
<PAGE>
12.2. The Buyer acknowledges that the Company has made no
representations, warranties, covenants or agreements or provided other
inducements that are not specifically set forth in this Agreement or the
Ancillary Agreements and the documents related to the asset purchases from the
Related Entities. The Buyer has been provided open and complete access to all
books, records, facilities, equipment, rolling stock, furniture, fixtures,
inventory, books, tax returns, records, minute books, contracts and other data
relating to the Company, its facilities, assets, real property and other
tangible and intangible assets.
12.2.1. For purposes of this Agreement, "fraud" shall mean (i)
judicial finding of fraud from which all appeals have been exhausted or have
expired, (ii) an arbitrator's finding of fraud from which all appeals have bee
exhausted or have expired, or (iii) the parties have mutually agreed in writing
as to the existence of fraud.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
LANOHA LEASING LIMITED LIABILITY RSC ACQUISITION CORP.
COMPANY ("Company") ("Buyer")
By: /s/ David P. Lanoha By: /s/ Martin R. Reid
------------------------ ------------------------------
Name: David P. Lanoha Name: Martin R. Reid
Its: Managing Member Its: Chief Executive Officer
DAVID P. LANOHA RENTAL SERVICE CORPORATION
("Seller") ("Parent")
By: /s/ Martin R. Reid
--------------------------
/s/ David P. Lanoha Name: Martin R. Reid
- ------------------------- Its: Chief Executive Officer
David P. Lanoha
53
<PAGE>
Exhibit 10.15
ASSET PURCHASE AGREEMENT
by and among
David P. Lanoha
as "Seller"
RSC Acquisition Corp.
as "Buyer"
Rental Service Corporation
as "Parent"
and
Zuni Rental Enterprises L.L.C.
as the "Company"
October 6, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS.......................................................... 1
1.1. Defined Terms.............................................................. 1
1.2. Other Defined Terms........................................................ 6
ARTICLE II. PURCHASE AND SALE OF ASSETS......................................... 7
2.1. Transfer of Assets......................................................... 7
2.2. Assumption of Liabilities.................................................. 7
2.3. Excluded Liabilities....................................................... 7
2.4. Purchase Price............................................................. 8
2.5. Holdback................................................................... 9
2.6. Closing Costs; Transfer Taxes and Fees..................................... 10
2.7. Closing of Books; Benefits and Risks of Ownership.......................... 10
2.8. Effective Control Balance Sheet; Dividends; Net Worth...................... 10
ARTICLE III. CLOSING............................................................ 11
3.1. Closing.................................................................... 11
3.2. Conveyances at Closing..................................................... 11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF DAVID P. LANOHA AND THE COMPANY... 12
4.1. Organization of the Company................................................ 12
4.2. Authorization.............................................................. 12
4.3. No Violation............................................................... 12
4.4. Capitalization............................................................. 13
4.5. Related Entities........................................................... 13
4.6. Equipment and Other Assets; Absence of Encumbrances........................ 14
4.7. Assets..................................................................... 14
4.8. Facilities................................................................. 14
4.9. Contracts and Commitments.................................................. 14
4.10. Permits................................................................... 15
4.11. Financial Statements...................................................... 16
4.12. Books and Records......................................................... 16
4.13. Litigation................................................................ 16
4.14. Labor Matters............................................................. 16
4.15. Compliance with Law....................................................... 16
4.16. No Brokers................................................................ 17
4.17. No Other Agreements to Sell the Company................................... 18
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
4.18. Proprietary Rights........................................................ 17
4.19. Tax Matters............................................................... 18
4.20. Accounts Receivable....................................................... 19
4.21. Inventory................................................................. 19
4.22. Employees and Employee Benefits........................................... 19
4.23. Compliance With Environmental Laws........................................ 23
4.24. Liabilities............................................................... 26
4.25. Insurance................................................................. 26
4.26. Conduct of the Business................................................... 27
4.27. Knowledge................................................................. 27
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT................... 28
5.1. Organization of Buyer and Parent........................................... 28
5.2. Authorization.............................................................. 28
5.3. No Conflict or Violation................................................... 28
5.4. Consents and Approvals..................................................... 29
ARTICLE VI. COVENANTS OF BUYER, THE COMPANY AND SELLER.......................... 29
6.1. Further Assurances......................................................... 29
6.2. No Solicitation............................................................ 29
6.3. Notification of Certain Matters............................................ 30
6.4. Access to Information...................................................... 30
6.5. Conduct of Business........................................................ 30
6.6. Guarantee.................................................................. 31
6.7. Employee Matters........................................................... 31
6.8. [RESERVED]................................................................. 31
6.9. Environmental Assessments and Remediation.................................. 31
6.10. Registration Rights....................................................... 33
6.11. Cooperation Regarding Dealerships......................................... 34
6.12. Use of Name and Telephone Numbers......................................... 34
6.13. 1997 Tax Returns.......................................................... 34
ARTICLE VII. CONDITIONS TO COMPANY'S OBLIGATIONS................................ 34
7.1. Representations, Warranties and Covenants.................................. 34
7.2. No Proceedings, Litigation or Laws......................................... 34
7.3. Certificates............................................................... 35
7.4. Other Conditions........................................................... 35
7.5. Consents................................................................... 35
7.6. Other Transactions......................................................... 35
ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS................................. 35
8.1. Representations, Warranties and Covenants.................................. 35
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
8.2. Consents................................................................... 35
8.3. No Proceedings or Litigation............................................... 36
8.4. Opinion of Counsel......................................................... 36
8.5. Certificates............................................................... 38
8.6. Conveyancing Documents; Release of Encumbrances............................ 38
8.7. Completion of Environmental Remediation.................................... 38
8.8. Tax Clearance Certificate.................................................. 38
8.9. Employment and Non-Competition Agreements.................................. 38
8.10. Release of Encumbrances................................................... 38
8.11. Board Approval............................................................ 38
8.12. Documents................................................................. 38
8.13. Schedules and Due Diligence Review........................................ 38
8.14. No Material Adverse Change................................................ 39
8.15. Other Transactions........................................................ 39
ARTICLE IX. CONSENTS TO ASSIGNMENT; RISK OF LOSS................................ 39
9.1. Consents to Assignment..................................................... 39
9.2. Risk of Loss............................................................... 39
ARTICLE X. ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING....................... 40
10.1. Books and Records; Tax Examinations....................................... 40
10.2. Payment of Liabilities.................................................... 40
10.3. Survival of Representations, Etc.......................................... 40
10.4. Indemnifications.......................................................... 41
10.5. Further Action............................................................ 43
ARTICLE XI. MISCELLANEOUS....................................................... 44
11.1. Termination............................................................... 44
11.2. Assignment................................................................ 44
11.3. Notices................................................................... 45
11.4. Choice of Law............................................................. 46
11.5. Entire Agreement; Amendments and Waivers.................................. 46
11.6. Multiple Counterparts..................................................... 46
11.7. Expenses.................................................................. 46
11.8. Invalidity................................................................ 46
11.9. Titles.................................................................... 46
11.10. Publicity; Confidentiality............................................... 46
11.11. Remedies................................................................. 47
11.12. Arbitration.............................................................. 47
11.13. Seller Representative.................................................... 47
ARTICLE XII. SPECIAL PROVISIONS................................................. 47
</TABLE>
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of October 6, 1997 (the
"Agreement"), is by and among RSC Acquisition Corp., a Delaware corporation,
("Buyer"), Rental Service Corporation, a Delaware corporation ("Parent"), David
P. Lanoha ("Seller") and Zuni Rental Enterprises L.L.C. (herein the "Company").
RECITALS
--------
A. The Company is engaged in the business of equipment rentals and
sales, operating under the Center Rental name .
B. Seller owns, of record and beneficially, a majority of the issued
and outstanding membership units of the Company ("Memberships").
C. The Company owns certain assets which it uses in its conduct of
the Business.
D. Buyer desires to purchase from the Company, and the Company
desires to sell to Buyer, such assets upon the terms and subject to the
conditions of this Agreement (the "Purchase").
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1 Defined Terms. As used herein, the terms below shall have the
-------------
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning set forth in the Exchange Act.
---------
"Agreement" shall have the meaning specified in the first paragraph of
---------
this Agreement.
"Ancillary Agreements" shall mean the Employment and Non-Competition
--------------------
Agreements to be entered into with David Lanoha, Jack Markle and Doug
Bonnettete, substantially in the forms attached as exhibits to the Related
Purchase Agreements and such other agreements mutually agreed to be necessary or
desirable to consummate the transactions contemplated hereby.
1
<PAGE>
"Assets" shall mean all of the right, title and interest of the
------
Company in and to the business, properties, assets and rights of any kind,
whether tangible or intangible, and constituting, or used or useful in
connection with, or related to, the Business, including without limitation all
of the Company's right, title and interest in the following:
1. all rights of the Company under the Assumed Contracts;
2. all rental and non-rental Equipment related to the Business;
3. all Inventory related to the Business;
4. all current and fixed assets;
5. all cash and cash equivalents (including short-term investments);
6. all Books and Records related to the Business;
7. all Proprietary Rights related to the Business;
8. to the extent transferable, all Permits related to the Business;
9. all computers and, to the extent transferable, software used in the
Business;
10. all utility deposits;
11. all available supplies, sales literature, promotional literature,
customer, supplier and distributor lists, display units, telephone and facsimile
numbers and purchasing records related to the Business;
12. all rights under or pursuant to all warranties, representations
and guarantees made by suppliers in connection with the Assets or services
furnished to the Company pertaining to the Business or affecting the Assets, to
the extent such warranties, representations and guarantees (i) are not required
by the Company to fulfill its obligations under this Agreement and (ii) are
assignable;
13. all claims, causes of action, choses in action, rights of recovery
and rights of set-off of any kind, against any person or entity, including
without limitation any liens, security interests, pledges or other rights to
payment or to enforce payment in connection with products delivered by the
Company on or prior to the Closing Date;
14. all accounts receivable;
15. all Open Rental Contracts and customer deposits made in connection
therewith (including, without limitation, deposits made in the form of cash,
check, or a preliminary charge on a credit or debit card); and
16. the Company's prepayments and prepaid expenses.
2
<PAGE>
"Assumed Leases" shall mean the Leases of the Facilities listed on
--------------
Schedule 4.8.
"Balance Sheet" shall mean the balance sheet of the Company as of the
-------------
Balance Sheet Date.
"Balance Sheet Date" shall mean August 31, 1997.
------------------
"Books and Records" shall mean (a) all records and lists pertaining to
-----------------
the Business, customers, suppliers or personnel of the Company, (b) all product,
business and marketing plans of the Company and (c) all books, ledgers,
subledgers, trial balances, files, reports, plans, drawings and operating
records of every kind maintained by the Company.
"Business" shall mean the Company's equipment rental and sales
--------
business.
"Buyer" shall have the meaning specified in the first paragraph of
-----
this Agreement.
"Closing Date" shall mean November 28, 1997, or such later date before
------------
January 31, 1998 on which the parties otherwise agree.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Company" shall have the meaning specified in the first paragraph of
-------
this Agreement.
"Contract" shall mean any agreement, contract, note, factoring
--------
agreement, loan, evidence of indebtedness, purchase order, letter of credit,
franchise agreement, lease, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation or commitment to which the Company is
a party or is bound and which relates to the Business or Assets, whether oral or
written.
"Effective Control Balance Sheet" shall mean the balance sheet of the
-------------------------------
Company at October 31, 1997.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
-----------
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Equipment" shall mean all of the rental and non-rental furniture,
---------
fixtures, furnishings, machinery, automobiles, trucks, spare parts, tools,
supplies, shop equipment, equipment and other tangible personal property owned
by the Company.
3
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"Escrow Agent" shall mean the Chase/Mellon Trust Company or another
------------
entity designated by Buyer and the Seller Representative to act as escrow agent
under the Escrow Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement dated as
----------------
of the Closing Date by and among Buyer, Seller Representative and the Escrow
Agent, substantially in the form attached hereto as an Exhibit.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"Facilities" shall mean the rental yards, stores, offices, maintenance
----------
and storage facilities, shops, warehouses, improvements and other structures,
together with all related fixtures and improvements, which are used (or will be
used) in the conduct of the Business, located at or on the Leased Real Property.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended.
"Financial Statements" shall mean the Balance Sheet and the related
--------------------
statement of operations of the Company for the 10 month period ended on the
Balance Sheet Date.
"Inventory" shall mean all of the Company's inventory held for resale
---------
and all of the Company's new repair or replacement parts, supplies and packaging
items and similar items with respect to the Business, in each case wherever the
same may be located.
"Leased Real Property" shall mean all real property leased by the
--------------------
Company, including without limitation, all rights, easements and privileges
appertaining or relating thereto, all buildings, fixtures, and improvements
located thereon and all Facilities thereon, if any.
"Material Adverse Effect" or "Material Adverse Change" shall mean with
----------------------- -----------------------
respect to the Business or the Assets any significant and substantial adverse
effect or change in the condition (financial or other), business, results of
operations, prospects, assets, liabilities or operations of the Business or the
Assets or on the ability of the Seller or the Company to consummate the
transactions contemplated hereby, or any event or condition which would, with
the passage of time, constitute a "Material Adverse Effect" or "Material Adverse
----------------------- ----------------
Change." "Material", when used as an adjective, refers to something the
- -------
existence or absence of which, as the context requires, would have a Material
Adverse Effect.
"Memberships" shall mean all of the issued and outstanding membership
-----------
units of the Company.
"New Leases" shall mean the leases of the Omaha and Olathe facilities.
----------
4
<PAGE>
"Open Rental Contracts" shall mean (i) all Contracts pursuant to which
---------------------
the Company has rented Equipment and, as of the Closing Date, the rentee under
each such Contract is still in possession of such Equipment and (ii) all
Contracts under which the rentee has returned the Equipment but has not yet been
invoiced.
"Owned Real Property" shall mean all real property owned in fee by the
-------------------
Company which is used in the conduct of the Business.
"Parent" shall mean Rental Service Corporation, a Delaware
------
corporation.
"Permits" shall mean all licenses, permits, franchises, approvals,
-------
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.
"Related Entity" shall mean any corporation, partnership, trust or
--------------
other organization in which the Company or any of its Affiliates has a material
interest, including, without limitation, Rent-It-Center, Inc. d/b/a Center
Rental and Sales, Inc., Center Rental & Sales/Omaha, LLC and Lanoha Leasing
Limited Liability Company.
"Related Purchase Agreements" shall mean the two other asset purchase
---------------------------
agreements with Center Rental & Sales/Omaha, LLC and Lanoha Leasing Limited
Liability Company and the stock purchase agreement pursuant to which the Related
Purchase Transactions are consummated.
"Related Purchase Transactions" shall mean the purchases by the Buyer
-----------------------------
of (i) all of the assets of Center Rental & Sales/Omaha, LLC and Lanoha Leasing
Limited Liability Company pursuant to the two asset purchase agreements with
Center Rental & Sales/Omaha, LLC and Lanoha Leasing Limited Liability Company
and (ii) all of the issued and outstanding shares of capital stock of Rent-It-
Center, Inc. d/b/a Center Rental and Sales, Inc.
"Rental and Non-Rental Asset Listing" shall mean the assets reflected
-----------------------------------
on the Balance Sheet and rental items that exist in the equipment inventory as
of August 31, 1997.
"Rental Ready" shall mean that all required maintenance has been
------------
performed and that the equipment does not require any repairs in excess of
$100,000 in the aggregate for the Company and all Related Entities.
"Representative" shall mean any officer, director, principal,
--------------
attorney, agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder.
"Seller" shall have the meaning specified in the first paragraph of
------
this Agreement.
5
<PAGE>
"Seller Representative" shall mean David Lanoha, whom Seller has
---------------------
irrevocably made, constituted and appointed their agent pursuant to Section
11.13 hereof.
"Tax" shall mean any federal, state, local, foreign or other tax,
---
levy, impost, fee, assessment or other government charge, including without
limitation income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation interest, penalties and additions in connection therewith.
"Year-End Balance Sheets" shall mean the balance sheet of the Company
-----------------------
at each of October 31, 1994, 1995 and 1996.
"Year-End Financial Statements" shall mean the Year End Balance Sheet
-----------------------------
dated as of October 31, 1994, 1995 and 1996, and the related statements of
operations of the Company for the fiscal years then ended.
1.2. Other Defined Terms. The following terms shall have the meanings
-------------------
defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Actions 4.13
Assumed Contracts 4.9
Assumed Liabilities 2.2
Assumption Document 3.2.2.2
Benefit Arrangement 4.22.1
Cash Purchase Price 2.4
Claim 10.4.4
Claim Notice 10.4.4
Closing 3.1
Consultant 6.9.1
Damages 10.4.1
Employee Plans 4.22.1
Environmental Laws 4.23.2
Environmental Assessments 6.9.1
ERISA Affiliate 4.22.1
Excluded Liabilities 2.3
GAAP 4.11
Hazardous Substance 4.23.1.3
Holdback Amount 2.5.1
Missing Inventory 2.4.3
Multiemployer Plan 4.22.1
PBGC 4.22.1
Pension Plan 4.22.1
Parent Common Stock 2.4
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Proposed Acquisition Transaction 6.2
Proprietary Rights 4.18.1
Purchase Price 2.4
Release 4.23.1.2
Remediation Standard 6.9.2
Required Remediation 6.9.2
Retained Employees 6.7
Seller Representative 11.13.1
Welfare Plan 4.22.1
</TABLE>
ARTICLE II.
PURCHASE AND SALE OF ASSETS
---------------------------
2.1. Transfer of Assets. Upon the terms and subject to the conditions
-------------------
contained herein, at the Closing, the Company will sell, convey, transfer,
assign and deliver to Buyer, and Buyer will acquire from the Company, the
Assets.
2.2. Assumption of Liabilities. Upon the terms and subject to the
--------------------------
conditions contained herein, at the Closing, Buyer shall assume (i) all accounts
payable, current notes payable, customer rental deposits, accrued expenses,
taxes payable, other current liabilities, and long-term debt reflected on the
Effective Control Balance Sheet and (ii) all obligations and liabilities
accruing, arising out of, or relating to events or occurrences happening after
October 31, 1997 under, and only under, the Assumed Contracts listed on Schedule
4.9 and the Assumed Leases listed on Schedule 4.8, but not including any
obligation or liability for any breach of any Contract or Lease occurring on or
prior to October 31, 1997 ((i) and (ii) together, the "Assumed Liabilities").
7
<PAGE>
2.3. Excluded Liabilities. Notwithstanding any other provision of this
---------------------
Agreement, except for the Assumed Liabilities expressly specified in Section
2.2, Buyer shall not assume, or otherwise be responsible for, any of the
Company's liabilities or obligations, whether actual or contingent, matured or
unmatured, liquidated or unliquidated, known or unknown, or related or unrelated
to the Business or the Assets, arising out of occurrences on or prior to, the
Closing Date (collectively, "Excluded Liabilities"), which Excluded Liabilities
include, without limitation:
2.3.1. Except as provided in Section 6.9, any liability or
obligation to or in respect of any employees or former employees of the Company
including without limitation (i) any employment agreement, whether or not
written, between the Company and any person, (ii) any liability under any
Employee Plan at any time maintained, contributed to or required to be
contributed to by or with respect to the Company or under which the Company may
incur liability, or any contributions, benefits or liabilities therefor, or any
liability with respect to the Company's withdrawal or partial withdrawal from or
termination of any Employee Plan and (iii) any claim of an unfair labor
practice, or any claim under any state unemployment compensation or worker's
compensation law or regulation or under any federal or state employment
discrimination law or regulation, which shall have been asserted on or prior to
the Closing Date or is based on acts or omissions which occurred on or prior to
the Closing Date;
2.3.2. Any liability or obligation of the Company in respect of any
Tax which is not adequately reflected for on the Effective Control Balance
Sheet;
2.3.3. Any liability arising from any injury to or death of any
person or damage to or destruction of any property, whether based on negligence,
breach of warranty, strict liability, enterprise liability or any other legal or
equitable theory arising from defects in products sold or services performed by
or on behalf of the Company or any other person or entity on or prior to the
Closing Date, or arising from any other cause, including without limitation any
liabilities arising (on a date of occurrence basis or otherwise) on or prior to
the Closing Date relating to the use or misuse of Equipment or to traffic
accidents;
2.3.4. Any liability or obligation of the Company arising out of or
related to any Action against the Company or any Action which adversely affects
the Assets and which shall have been asserted on or prior to the Closing Date or
to the extent the basis of which shall have arisen on or prior to the Closing
Date;
2.3.5. Any liability or obligation of the Company resulting from
entering into, performing its obligations pursuant to or consummating the
transactions contemplated by, this Agreement (including without limitation any
liability or obligation of the Company pursuant to Article X hereof);
2.3.6. Any liability or obligation related to the Facilities, except
for those expressly set forth in the Assumed Leases; and
8
<PAGE>
2.3.7. Any liability or obligation arising out of CERCLA, any
equivalent state statute, or any other Environmental Law arising out of
occurrences on or prior to the Closing Date, except as otherwise provided
herein.
2.4. Purchase Price. At the Closing, upon the terms and subject to the
---------------
conditions set forth herein, Buyer shall pay to the Company in consideration for
the Assets, the aggregate amount of (i) Fifteen Million Six Hundred Thirteen
Thousand and Five Hundred Dollars ($15,613,500), subject to adjustment as set
forth in Section 2.4.3 below (the "Cash Purchase Price") payable by wire
transfer of immediately available funds to accounts designated by the Company in
the amounts as set forth on Schedule 2.4 and (ii) Fifty-One Thousand Six Hundred
and Thirty-Six (51,636) shares of Common Stock, par value $.01 per share, of
Parent (the "Parent Common Stock"). The cash and shares referred to in clauses
(i) and (ii) are collectively called the "Purchase Price". Any shares of Parent
Common Stock paid to the Company will be contributed by Parent to Buyer in a
transaction intended to qualify under Section 351 of the Code immediately prior
to delivery of such Parent Common Stock to the Company. The Purchase Price shall
be allocated among the Assets in the manner required by Section 1060 of the Code
and regulations thereunder. Exhibit 2.4 attached hereto sets forth the amount of
the Purchase Price allocable to the various Assets; provided that such
allocation shall be subject to necessary adjustments, to be completed and
reflected in such allocation within 30 days following the Closing Date, on
account of the final Inventory and Equipment valuations under Section 2.4.3.
Buyer and the Company agree to each prepare and file on a timely basis with the
Internal Revenue Service substantially identical initial and supplemental
Internal Revenue Service Forms 8594 "Asset Acquisition Statements Under Section
1060" consistent with Exhibit 2.4 and which give effect to any adjustment to the
Cash Purchase Price determined in accordance with Section 2.4.3 hereof.
2.4.1. If between the date of this Agreement and the Closing Date,
the outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock dividend, stock combination,
exchange of shares or readjustment, the number of shares of Parent Common Stock
issued to the Company pursuant to Section 2.4 shall be proportionately adjusted.
2.4.2. No fractional shares of Parent Common Stock shall be issued,
but in lieu thereof, the Company shall receive from Buyer an amount of cash
equal to the product of the fraction of a share of Parent Common Stock to which
the Company would otherwise be entitled, multiplied by $23.24.
2.4.3. On October 25, 1997 (or such other date as the parties
agree), the Company will conduct, and Buyer shall observe, a physical inventory
of the Company's merchandise inventory, supplies inventory and rental inventory.
The Company may participate in or have their representatives participate in or
observe such inventory. To the extent that the net book value of any Missing
Inventory is greater than $150,000, the Cash Purchase Price will be reduced
dollar for dollar by the amount of such shortfall applicable to Inventory owned
by the Company. "Missing Inventory" means Inventory shown on the combined
perpetual inventory listing of the Company and the Related Entities at October
25, 1997 (or such other date on which
9
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the applicable inventory is taken), which is missing or not accounted for in the
physical inventory.
2.5. Holdback
--------
2.5.1. The "Holdback Amount" shall be (subject to increase pursuant
to Section 6.9.3) Ten Million Dollars ($10,000,000) (which shall also serve as
the Holdback Amount in the Related Purchase Transaction) in cash which, at
Closing, shall be placed in escrow pursuant to the Escrow Agreement pending the
Company's indemnification obligations, if any, as set forth in Section 10.4, and
any remediation required under Section 6.9 hereof which is not resolved by the
Closing Date. The Escrow Agent will remit to the Company the entire Holdback
Amount, net of any amount which Buyer is entitled under the provisions of
Sections 6.9 and 10.4 hereof, when such amounts have been determined, all in
accordance with the provisions of the Escrow Agreement. In the event of any
disagreement between Buyer and the Company regarding the dollar amount of any
such indemnification or remediation obligation, Buyer and the Company shall
submit such dispute to a third-party arbitrator for binding arbitration pursuant
to Section 11.12 of this Agreement. The Company will pay all costs of the
escrow.
2.6. Closing Costs; Transfer Taxes and Fees The Company shall be
--------------------------------------
responsible for any documentary and transfer taxes and any sales or other taxes
(excluding use taxes on equipment constituting registered motor vehicles, which
use taxes will be paid one-half by each of the Company and Buyer) imposed by
reason of the transfers of Assets provided hereunder and any deficiency,
interest or penalty asserted with respect thereto. Buyer will pay any licensing
fees associated with re-registering motor vehicles. The Company shall pay all
costs of obtaining the transfer of existing Permits which may be lawfully
transferred. The Company shall pay the fees and costs of recording or filing all
applicable conveyancing instruments described in Section 3.2.1, and shall pay
the fees and costs of recording or filing all UCC termination statements and
other releases of Encumbrances.
2.7. Closing of Books; Benefits and Risks of Ownership The transactions
-------------------------------------------------
contemplated by this Agreement shall be deemed effective as of November 1, 1997,
and all profits and losses of the Company from and after November 1, 1997, shall
be solely for the account of, and inure solely to the benefit or detriment of,
Buyer, except as otherwise set forth in this Agreement. The accounting books and
records of the Company will be closed as of the close of business on October 31,
1997. Seller shall operate the Company subject to and pursuant to the
requirements of this Agreement by, from and after November 1, 1997, until such
time as this Agreement is terminated or closed. If this transaction does not
close for any reason on or prior to January 31, 1998, and is not extended by
agreement of the parties, then the Company shall pay within ten days to the
Buyer profits accumulated during the period from November 1, 1997, to the date
that the closing is deemed not to occur, but not later than January 31, 1998. If
this transaction does not close for any reason on or prior to January 31, 1998
and is not extended by agreement of the parties, then the Buyer shall within ten
days pay to the Company all losses accumulated by the Company during the period
from November 1, 1997, to the date that the closing is deemed not to occur, but
not later than January 31, 1998.
10
<PAGE>
2.8. Effective Control Balance Sheet; Dividends; Net Worth.
------------------------------------------------------
2.8.1. The Company will prepare the Effective Control Balance Sheet
in accordance with GAAP, which Effective Control Balance Sheet will fairly and
accurately reflect the assets and liabilities of the Company as of October 31,
1997.
2.8.2. Without the consent of Buyer, until the Closing Date, the
Company or Seller shall not repurchase, sell or transfer any Memberships, make
or declare any dividends or make other distributions to members or otherwise
take any action restricted under this Agreement.
2.8.3. The Cash Purchase Price will be reduced dollar for dollar to
the extent the aggregate net worths of the Company and other LLC's, the assets
of which are being acquired incident to the Related Purchase Transactions, at
October 31, 1997 is less than $928,164 in the aggregate.
ARTICLE III.
CLOSING
-------
3.1. Closing The Closing of the transactions contemplated herein (the
-------
"Closing") shall be held on the Closing Date at a time and place as the parties
shall mutually agree.
3.2. Conveyances at Closing
----------------------
3.2.1. Company's and Seller's Delivery Obligations. To effect the sale
and transfer referred to in Section 2.1 hereof, the Company will, at the
Closing, execute and deliver to Buyer:
3.2.1.1. one or more bills of sale, each in the form of Exhibit
3.2.1.1 attached hereto, conveying in the aggregate all of the Company's owned
personal property included in the Assets, free and clear of all Encumbrances;
3.2.1.2. subject to Section 9.1, Assignments of Contract Rights,
each in the form of Exhibit 3.2.1.2 attached hereto, with respect to the Assumed
Contracts;
3.2.1.3. assignments of Trademarks, Service Marks and other
Proprietary Rights, each in the form of Exhibit 3.2.1.3 attached hereto, in
recordable form to the extent necessary to assign such rights; and
3.2.1.4. such other instruments as shall be requested by Buyer to
vest in Buyer title in and to the Assets in accordance with the provisions
hereof.
3.2.1.5. all Ancillary Agreements required to be executed by the
Seller;
3.2.1.6. all certificates, opinions of counsel and other documents
described in Article VIII; and
11
<PAGE>
3.2.1.7. all Permits and any other third party consents required
for the valid transfer of the Assets as contemplated by this Agreement, or for
the continued operation of the Business following such transfer.
3.2.2. Buyer's Delivery Obligations To effect the sale and transfer
----------------------------
referred to in Section 2.1 hereof, Buyer will, at the Closing, execute and
deliver to the Company:
3.2.2.1. all Ancillary Agreements required to be executed by
Buyer; and
3.2.2.2. Upon the terms and subject to the conditions contained
herein, an instrument of assumption substantially in the form attached hereto as
Exhibit 3.2.2, evidencing Buyer's assumption, pursuant to Section 2.2, of the
Assumed Liabilities (the "Assumption Document").
3.2.2.3. all certificates, opinions of counsel and other documents
described in Article VII.
3.2.2.4. the payment of the Purchase Price and repayment of the
Company's outstanding loan to Colorado National Bank.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF DAVID P. LANOHA AND THE COMPANY
-----------------------------------------------------------------
David P. Lanoha and the Company hereby jointly and severally represent and
warrant to Buyer and Parent as follows, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.1. Organization of the Company The Company is a limited liability company
---------------------------
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Copies of the organizational documents of the Company, and
all amendments thereto, heretofore or hereafter delivered to Buyer are accurate
and complete as of the date hereof. The Company is duly qualified or licensed to
do business as a foreign corporation in good standing in the states where
Facilities are located and in other states where this is legally required,
except where the failure to be so qualified would not have a Material Adverse
Effect.
4.2. Authorization The Seller and the Company each has full power and
-------------
authority (corporate or other) to enter into this Agreement and the Ancillary
Agreements, as the case may be, and to carry out the transactions contemplated
hereby and thereby, and the Company and Seller has taken all action required by
law, its charter documents, as the case may be, or otherwise to be taken by it
to authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements, as the case may be, and the consummation of the
transactions contemplated hereby and thereby. This Agreement and the Ancillary
Agreements, as the case may be, are the legal, valid and binding obligations of
Seller and the Company, enforceable against each of them in accordance with
their respective terms, subject to bankruptcy, insolvency, moratorium and
creditors' rights generally. A copy of the resolutions of
12
<PAGE>
the Company's manager and members authorizing this Agreement and the related
transactions is attached hereto as Schedule 4.2.
4.3. No Violation None of the execution, delivery and performance of this
------------
Agreement and the Ancillary Agreements nor the consummation of the transactions
contemplated hereby and thereby will (i) violate any provision of the
organizational documents of the Company, (ii) violate, result in a breach of,
conflict with, or constitute a default (or an event which, with the giving of
notice or lapse of time or both, would constitute a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of any note, bond,
mortgage, or indenture, contract, agreement, lease, sublease, license, permit,
franchise, distributorship agreement or other instrument or arrangement to which
Seller or the Company is a party or by which any of the Memberships or any of
the assets or properties of the Company or Seller is bound or affected, which
violation, breach, conflict or default will have a Material Adverse Effect,
(iii) result in the creation or imposition of any Encumbrance upon any of the
Memberships or any property or Assets of the Company or Seller under any
agreement or commitment to which the Company or Seller is a party or by which
the Company or Seller is bound or affected, or to which the property of the
Company or Seller is subject, or (iv) violate, conflict with or result in the
breach of (or cause an event which could have a Material Adverse Effect as a
result of) any statute or law or any judgment, decree, order, regulation or rule
of any court or governmental authority to which Seller, the Company, the
Business or any of the properties or Assets of any of the foregoing is subject,
which violation, breach or conflict would have a Material Adverse Effect. Except
as set forth on Schedule 4.3 or as required by the HSR Act, no action, consent,
approval or authorization by or filing with any person or entity, including,
without limitation, any governmental authority, is required in connection with
the execution, delivery and performance by Seller and the Company of this
Agreement and the Ancillary Agreements, as the case may be, or the consummation
by Seller and the Company of the transactions respectively contemplated by each
of them herein and therein, except consents, the failure of which to obtain
would not have a Material Adverse Effect.
4.4. Capitalization
--------------
4.4.1. The authorized and the issued membership units of the Company
are as set forth on Schedule 4.4. Seller is and will be on the Closing Date the
record and beneficial owners and holders of the Memberships as set forth on
Schedule 4.4, free and clear of all Encumbrances.
4.4.2. There are no other membership units of the Company issued and
outstanding other than those listed on Schedule 4.4. None of the membership
units was issued in violation of any preemptive rights. There are no
outstanding (i) securities convertible into or exchangeable or exercisable for
any of the Company's membership units; (ii) options, warrants, calls or other
rights, including, without limitation, rights to demand registration or to sell
in connection with any registration by the Company under the Securities Act,
with respect to the issued membership units of the Company, or to purchase or
subscribe to membership units of the Company or securities convertible into or
exchangeable or exercisable for membership units of the Company; (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance, sale, transfer, and/or assignment of any membership
units of the Company, any such convertible or exchangeable securities or any
such options, warrants or
13
<PAGE>
rights; or (iv) membership units pledged as collateral to secure any agreement
or obligation. There are no voting trust agreements or other contracts,
agreements, arrangements, commitments, plans, proxies or understandings
restricting or otherwise relating to any conveyance, voting or dividend rights
with respect to the membership units.
4.5. Related Entities
----------------
4.5.1. Schedule 4.5(a) sets forth a complete and accurate list of all
of the Related Entities, all of which are, directly or indirectly, wholly-owned
by Seller or the Company. Schedule 4.5(a) also sets forth the jurisdiction of
incorporation of each of the Related Entities, each jurisdiction in which each
such Related Entity is qualified to do business, and the ownership interests
thereof.
4.5.2. Schedule 4.5(b) sets forth a list of all agreements among the
Company, any of the Seller and the Related Entities.
4.6. Equipment and Other Assets; Absence of Encumbrances The Asset listing
---------------------------------------------------
attached as Schedule 4.6 sets forth the asset description and original cost of
all Equipment. Buyer shall have the right, prior to Closing, to inspect all of
the Assets (wherever located) that are reflected on the Balance Sheet. All
rental equipment is Rental Ready.
14
<PAGE>
4.7. Assets The Company has and will transfer good and marketable fee
------
simple title to the Assets and upon the consummation of the transactions
contemplated hereby, Buyer will acquire good title to all of the Assets, free
and clear of any Encumbrances, except for any Encumbrance that Buyer, in its
sole discretion, specifically accepts in writing. The Assets reflected in the
1996 Year End Balance Sheet and all of the Assets acquired after such date are
or will be valued at the lower of actual cost or market less an adequate and
proper depreciation charge. The Assets include without limitation all assets
necessary for the conduct of the Business as presently conducted.
4.8. Facilities
----------
4.8.1. Real Property. The Company has no Owned Real Property. All of
--------------
the Leased Real Property is listed on Schedule 4.8. The Company has delivered to
Buyer an accurate copy of its existing leases. The Company enjoys peaceful and
undisturbed possession of the Leased Real Property. Other than the leases
provided, there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting to any person the right to purchase, use or occupy the Facilities
or any portion thereof. The Facilities are supplied with utilities and other
services necessary for the operation of the Business. Neither the Company nor,
to its knowledge, any lessor under the Leases, is in breach or default of its
obligations thereunder.
4.8.2. Improvements, Fixtures and Equipment. The Facilities and the
-------------------------------------
improvements thereon, including without limitation all Equipment (including all
fixtures) and other tangible assets owned, leased or used by the Company at the
Facilities are insured to the extent and in a manner customary in the industry,
are in the reasonable business judgment of the Company sufficient for the
operation of the Business as presently conducted and are in conformity, in all
material respects, with all applicable laws, ordinances, orders, regulations and
other requirements currently in effect. None of the improvements is subject to
any commitment or other arrangement for their sale or use by any Affiliate of
the Company or third parties other than purchase options set forth in leases
identified on Schedule 4.8. Buyer shall have the right, prior to Closing, to
inspect all of the Facilities.
4.8.3. Conformity. All Facilities have received all material required
-----------
approvals of governmental authorities (including without limitation Permits and
a certificate of occupancy or other similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof.
4.9. Contracts and Commitments
-------------------------
4.9.1. Contracts. Schedule 4.9 sets forth a complete and accurate list
---------
of all material Contracts of the following categories:
4.9.1.1. Contracts not made in the ordinary course of the
Company's conduct of the Business;
4.9.1.2. Employment contracts and severance agreements;
15
<PAGE>
4.9.1.3. Supply, purchase, distribution, franchise, license, sales
or commission agreements related to the Business;
4.9.1.4. Contracts involving expenditures or liabilities, actual
or potential, in excess of $5,000 or otherwise material to the Business, and not
cancelable (without liability) within 30 calendar days;
4.9.1.5. Contracts or commitments relating to commission
arrangements with others;
4.9.1.6. Factoring agreements, promissory notes, loans,
agreements, evidences of indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, whether the Company shall be
the borrower, lender or guarantor thereunder or whereby any Equipment or
Inventory are pledged (excluding credit provided by the Company in the ordinary
course of the Business to its customers);
4.9.1.7. Leases of personal property not cancelable (without
liability) within 30 calendar days; and
4.9.1.8. Contracts containing covenants limiting the freedom of
the Company or any officer, director or shareholder of the Company to engage in
any line of business or compete with any person.
For purposes of this Agreement, the "Assumed Contracts" are the
Contracts listed as such on Schedule 4.9. The Company has made available to
Buyer true, correct and complete copies of all of the Contracts listed on
Schedule 4.9, including all amendments and supplements thereto, whether or not
such Contracts are Assumed Contracts.
4.9.2. Absence of Breaches or Defaults. All of the material Contracts
-------------------------------
are valid and in full force and effect, subject to any repudiation claims of
other parties not known to Seller. The Company has duly performed all of its
material obligations under the Contracts to the extent those obligations to
perform have accrued, and no material violation of, or material default or
breach under any Contracts by the Company or, to the best of Seller's knowledge,
any other party has occurred and neither the Company nor, to Seller's knowledge,
any other party has repudiated any provisions thereof. All of the material
Contracts will be enforceable by the Company after the Closing to the same
extent as if the transactions contemplated by this Agreement had not been
consummated, subject to compliance with applicable change of control provisions,
all of which are identified on Schedule 4.3.
4.10. Permits The Company has all material Permits required to conduct the
-------
Business, except where the failure to obtain such Permits would not have a
Material Adverse Effect. All material Permits of the Company related to the
Business are valid and in full force and effect, and are listed on Schedule
4.10.
4.11. Financial Statements The Company has heretofore delivered to Buyer
--------------------
the Financial Statements and Year-End Financial Statements. Except as set forth
on Schedule 4.11,
16
<PAGE>
the Financial Statements and Year-End Financial Statements (a) are in accordance
with the underlying books and records of the Company, (b) have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods covered thereby, excluding any footnotes which
may be required by GAAP, and (c) fairly and accurately present the assets,
liabilities (including all reserves) and financial position of the Business as
of the respective dates thereof and the results of operations and changes in
cash flows for the periods then ended (subject to normal year-end adjustments).
Except as set forth on Schedule 4.11, at the Balance Sheet Date there were no
liabilities of the Company, which, in accordance with GAAP, should have been
shown or reflected in the Financial Statements or the notes thereto, which are
not shown or reflected in the Financial Statements or the notes thereto.
4.12. Books and Records The Company has made and kept (and given Buyer
-----------------
access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of the Company. The books and
records of the Company made available to Buyer accurately and adequately reflect
all action previously taken by managers and members of the Company. The
ownership records of the Company made available to Buyer are true, correct and
complete, and accurately reflect all transactions effected with respect to
Company's membership interests through and including the date hereof.
4.13. Litigation Except as set forth on Schedule 4.13, there is no action,
----------
order, writ, injunction, judgment or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, arbitral action, governmental audit or
investigation (collectively, "Actions") pending, or to the best of the Seller's
or Company's knowledge, threatened or anticipated (a) against, related to or
affecting the Company or the Business or (b) seeking to delay, limit or enjoin
the transactions contemplated by this Agreement. The Company is not in default
with respect to or subject to any judgment, order, writ, injunction or decree of
any court or governmental agency, and there are no unsatisfied judgments against
the Company or the Business.
17
<PAGE>
4.14. Labor Matters The Company is not a party to any labor agreement with
-------------
respect to its employees with any labor organization, union, group or
association and none of the Company's employees are represented by employee
unions (or any other similar labor or employee organizations). The Company has
not experienced within the past five (5) years any attempt by organized labor or
its representatives to make the Company conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company.
4.15. Compliance with Law The Company, the conduct of the Business and the
-------------------
operation of the Facilities have not materially violated and are in material
compliance with all laws, statutes, ordinances, regulations, rules and orders of
any foreign, federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree or order of any court
or governmental agency, department or authority, including without limitation
Environmental Laws (as defined in Section 4.23.2), relating to the Assets,
Facilities or Business or operations of the Company, except where the violation
or failure to comply, individually or in the aggregate would not have a Material
Adverse Effect on the Facilities, Assets or Business. The Company and the
conduct of the Business and the operation of the Facilities are in material
conformity with all energy, public utility, zoning, building and health codes,
regulations and ordinances, the Americans with Disabilities Act, ERISA, OSHA and
Environmental Laws and all other foreign, federal, state, and local governmental
and regulatory requirements. The Company has not received any notice to the
effect that, or otherwise been advised that, it is not in compliance with any
such statutes, regulations, rules, judgments, decrees, orders, ordinances or
other laws, and the Company has no reason to anticipate that any existing
circumstances are likely to result in violations of any of the foregoing.
4.16. No Brokers Except as set forth on Schedule 4.16, neither the Seller,
----------
the Company nor any of the Company's managers or Affiliates has employed or made
any agreement with any broker, finder or similar agent or any person or firm
which will result in an obligation on the part of the Company or Buyer to pay
any finder's fee, brokerage fees or commission or similar payment in connection
with the transactions contemplated hereby.
4.17 No Other Agreements to Sell the Company Neither the Seller nor the
---------------------------------------
Company has any commitment or legal obligation, absolute or contingent, to any
other person or firm other than the Buyer to sell, assign, transfer or effect a
sale of any of the Memberships or the Assets or to effect any merger,
consolidation, liquidation, dissolution or other reorganization of the Company,
and no person or entity has notified Seller or the Company that it believes such
a commitment or legal obligation exists.
18
<PAGE>
4.18. Proprietary Rights.
------------------
4.18.1. Proprietary Rights. Schedule 4.18 lists all of the Company's
------------------
material federal, state and foreign registrations of trademarks, service marks
and other marks, trade names or other trade rights, and all pending applications
for any such registrations, all other trademarks and other marks, trade names
and other trade rights or in which the Company has any interest whatsoever, and
all other trade secrets, if any, and other proprietary rights, whether or not
registered, and all computer software (including without limitation the tool
rental control software used by the Company) other than software generally
available to the public, created or used by or on behalf of the Company, in each
case relating to the Business (collectively, "Proprietary Rights"). The
Proprietary Rights listed in Schedule 4.18 are all those used by the Company in
connection with the Business other than software generally available to the
public.
4.18.2. Royalties and Licenses. No person has a right to receive
-----------------------
a royalty or similar payment in respect of any material Proprietary Rights.
Except as set forth on Schedule 4.18.2 the Company has no licenses granted, sold
or otherwise transferred by or to it or other agreements to which it is a party,
relating in whole or in part to any of the material Proprietary Rights.
4.18.3. Ownership and Protection of Proprietary Rights. Except as
-----------------------------------------------
set forth on Schedule 4.18.3, the Company owns or licenses, and has the sole
right to use or (as it so elects) to sublicense, each of the Proprietary Rights,
and the Company is not a party to any litigation with respect to any of the
Proprietary Rights. The Company has not received any notice of invalidity or
infringement of any rights of others with respect to such Proprietary Rights.
The Company has taken all reasonable and prudent steps in the reasonable
business judgment of the Company to protect the Proprietary Rights from
infringement by any other firm, corporation, association or person. The
Company's use of the Proprietary Rights is not, to Seller's knowledge,
infringing upon or otherwise violating the rights of any third party in or to
such Proprietary Rights, nor has such infringement been alleged by any third
party. All of the material Proprietary Rights are valid and enforceable rights
of the Company and will not cease to be valid and in full force and effect by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated by this Agreement.
4.19. Tax Matters
-----------
4.19.1. Filing of Tax Returns. The Company has timely filed with
----------------------
the appropriate taxing authorities all returns (including without limitation
information returns and other material information) in respect of Taxes required
to be filed through the date hereof and will timely file any such returns
required. The returns and other information filed are complete and accurate in
all material respects. Except as specified in Schedule 4.19, since October 31,
1990, neither the Company, nor any group of which the Company now or was a
member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any taxes. The
Company has made available to Buyer complete and accurate copies of the
Company's federal, state and local income tax returns for its fiscal years ended
October 31, 1994, 1995 and 1996, and will deliver to Buyer copies of the
19
<PAGE>
Company's federal, state and local tax returns for the twelve months ended
October 31, 1997 when completed and will deliver, upon Buyer's request, any
other Tax returns.
4.19.2. Payment of Taxes. All Taxes, in respect of taxable
-----------------
periods ending on or before the date of the Effective Control Balance Sheet,
have been timely paid, or will be timely paid prior to such date, or will be
fully accrued for on the Effective Control Balance Sheet. Any unpaid Taxes
relating to periods ending on or before the date of the Effective Control
Balance Sheet (whether full or partial periods) that are not fully accrued for
on the Effective Control Balance Sheet will be subject to full indemnification
by Seller in accordance with Section 10.3 hereof (without being limited as to
amount).
- --------
4.19.3. Audits, Investigations or Claims. Except as set forth in
---------------------------------
Schedule 4.19, the federal income tax returns and any required state tax returns
of the Company have been examined by the Internal Revenue Service and any
applicable state taxing authority for all periods from November 1, 1990, to and
including the Closing, and except to the extent shown therein, no deficiencies
for Taxes, have been assessed by any taxing or other governmental authority
against the Company. Except as set forth in Schedule 4.19, there are no pending
or, to the best of the Seller's or Company's knowledge, threatened audits,
investigations or claims for or relating to any material additional liability in
respect of Taxes, and there are no matters under discussion with any
governmental authorities with respect to Taxes that in the reasonable judgment
of the Company, or its counsel, is likely to result in a material additional
liability for Taxes. Audits of federal, state, and local returns for Taxes by
the relevant taxing authorities have been completed for each period subsequent
to October 31, 1990 except as set forth in Schedule 4.19 and, except as set
forth therein, the Company has not been notified that any taxing authority
intends to audit a return for any period. Except as set forth in Schedule 4.19,
no extension of a statute of limitations relating to Taxes is in effect with
respect to the Company.
4.19.4. Lien. There are no liens for Taxes (other than as could
----
be asserted for current Taxes not yet due and payable) on the Assets.
4.19.5. No Withholding. The transaction contemplated herein is
--------------
not subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
4.19.6. Tax-Exempt Use Property. None of the Assets is a "tax-
-----------------------
exempt use property" within the meaning of Section 168(h) of the Code.
4.20. Accounts Receivable. The accounts receivable reflected in the Balance
-------------------
Sheet represent bona fide claims of the Company against debtors for sales,
services performed or other charges arising on or before the date hereof, and
all the goods delivered and services performed which gave rise to said accounts
were delivered or performed in accordance with the applicable orders, Contracts
or customer requirements. All of such accounts receivable are collectible in the
ordinary course of business except to the extent of a bad debt reserve
representing the same percentage of accounts receivable of the Company at the
Closing Date as were reserved against on the Balance Sheet. The Company owns, or
contemporaneously with the conveyances to be
20
<PAGE>
consumated at the Closing, will own all such accounts receivable, free and clear
of all Encumbrances.
4.21. Inventory. All the Inventory (both rental and non-rental,
---------
supplies inventory and merchandise inventory) is located at the Facilities,
except items of rental equipment on lease to customers. There has been no
material decrease in the book value or fair value of the Inventory since the
Balance Sheet Date, except for sales of Inventory in the ordinary course of
business. The values at which the Inventory is shown on the Balance Sheet have
been determined on the average cost method in accordance with Federal tax
regulations, consistently applied throughout the periods covered by the
Financial Statements. The inventory is salable or rentable, as the case may be,
in the ordinary course of business consistent with past practice.
4.22. Employees and Employee Benefits
-------------------------------
4.22.1. As used in this Section 4.22, the following terms have
the meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting, severance
-------------------
or other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit-sharing bonuses, stock options,
stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (A) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into,
maintained, contributed to or required to be contributed to, as the case may be,
by the Company or an ERISA Affiliate or under which the Company or any ERISA
Affiliate may incur any liability, and (C) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
--------------
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant
---------------
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, the Company as
defined in Section 414(b), (c), (m) or (o) of the Code, or under "common
control" with the Company, within the meaning of Section 4001(b)(1) of ERISA.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined
------------------
in Section 4001(a)(3) of ERISA, (A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability and (B) which covers any employee or
21
<PAGE>
former employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Pension Plan" shall mean any "employee pension benefit plan" as
------------
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the five years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability; (B)
covers any employee or former employee of the Company or any ERISA Affiliate
(with respect to their relationship with such entities); and (C) is not a
Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
------------
defined in Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability; (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities); and (C) is not a Multiemployer Plan.
4.22.2. Schedule 4.22: (i) contains a list of all current
employees of the Company, and their wage rates or salaries, as of the date of
this Agreement, and (ii) sets forth the dates of employment for such employees.
4.22.3. Disclosure; Delivery of Copies of Relevant Documents and
--------------------------------------------------------
Other Information. Schedule 4.22 contains a complete list of Employee Plans.
- -----------------
True and complete copies of each of the following documents have been made
available by the Company to Buyer: (i) each Welfare Plan, Pension Plan and
Multiemployer Plan (and, if applicable, related trust agreements) and all
amendments thereto, all written interpretations thereof and written descriptions
thereof which have been distributed to the Company's employees and all annuity
contracts or other funding instruments; (ii) each Benefit Arrangement including
written interpretations thereof and written descriptions thereof which have been
distributed to the Company's employees (including descriptions of the number and
level of employees covered thereby) and a complete description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan; (iv) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and each Welfare Plan; (v) all actuarial reports
prepared for the last three plan years for each Pension Plan; (vi) a description
of complete age, salary, service and related data as of the last day of the last
plan year for employees and former employees of the Company; and (vii) a
description setting forth the amount of any liability of the company as of the
Closing Date for payments more than thirty (30) calendar days past due with
respect to each Welfare Plan.
22
<PAGE>
4.22.4. Representations.
---------------
4.22.4.1. Pension Plans. Neither the Company nor any ERISA
-------------
Affiliate has or contributes to or maintains or has any obligation to make
payments to any Pension Plan. No Pension Plan is subject to the minimum funding
requirements of Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any ERISA Affiliate is required to provide security to a Pension
Plan under Section 401(a)(29) of the Code. Each Pension Plan which is intended
to be qualified (and each related trust agreement, annuity contract or other
funding instrument) is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and has been so qualified
during the period from its adoption to date. Neither the Company nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an entity
that has engaged in, a transaction described in Section 4069 of ERISA. There
has been no "reportable event" (as defined in Section 4043(c) of ERISA and the
PBGC regulations under such Section) with respect to any Pension Plan and
neither the Company nor any ERISA Affiliate is subject to Section 4043(b) of
ERISA.
4.22.4.2. Multiemployer Plans. Neither the Company nor any ERISA
-------------------
Affiliate has any Multiemployer Plans.
4.22.4.3. Welfare Plans. Except as disclosed on Schedule 4.22,
-------------
none of the Company, any ERISA Affiliate or any Welfare Plan has any present or
future obligation to make any payment to, or with respect to any present or
former employee of the Company or any ERISA Affiliate pursuant to, any retiree
medical benefit plan, or other retiree Welfare Plan, and no condition exists
which would prevent the Company from amending or terminating any such benefit
plan or Welfare Plan. To the best of Seller's and Company's knowledge, each
Welfare Plan which is a "group health plan," as defined in Section 607(1) of
ERISA, has been operated in compliance with provisions of Part 6 of Title I,
Subtitle B of ERISA and Section 4980B of the Code at all times.
4.22.4.4. Compliance with Law. Each Employee Plan has been
-------------------
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Employee Plan, including without limitation ERISA
and the Code.
4.22.4.5. Employment at Will. The employment of all persons
------------------
presently employed or retained by the Company is terminable at will.
4.22.4.6. Unrelated Business Taxable Income. No Employee Plan
---------------------------------
(or trust or other funding vehicle pursuant thereto) is subject to any tax under
Code Section 511.
4.22.4.7. Deductibility of Payments. There is no contract,
-------------------------
agreement, plan or arrangement covering any employee or former employee of the
Company (with respect to its relationship with such entities) that, individually
or collectively, provides for the payment by the Company of any amount (i) that
is not deductible by the Company under Section 162(a)(1) or 404 of the Code,
whichever is applicable, (ii) for which the deduction by the Company would be
23
<PAGE>
disallowed under Section 162(m) of the Code, or (iii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
4.22.4.8. Fiduciary Duties and Prohibited Transactions. Neither
--------------------------------------------
the Company nor any plan fiduciary of any Welfare Plan or Pension Plan has
engaged in any transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code, or has otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA, except for any such violation which would not have a
Material Adverse Effect. To the best of Seller's and Company's knowledge, the
Company has not knowingly participated in a violation of Part 4 of Title I,
Subtitle B of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan
(or other employee benefit plan subject to ERISA) and has not been assessed any
civil penalty under Section 502(l) of ERISA.
4.22.4.9. Validity and Enforceability. Each Welfare Plan,
---------------------------
Pension Plan, related trust agreement, annuity contract or other funding
instrument and Benefit Arrangement is legally valid and binding and in full
force and effect.
4.22.4.10. Litigation. There is no action, order, writ,
----------
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or investigation relating to or
seeking benefits under any Employee Plan that is pending, or, to Seller's
knowledge, threatened or anticipated against the Company, any ERISA Affiliate or
any Employee Plan.
4.22.4.11. No Amendments. Neither the Company nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create any
additional Employee Plans or to amend or modify any existing Employee Plan other
than required by the Code or ERISA.
4.22.4.12. No Other Material Liability. No event has occurred in
---------------------------
connection with which the Company or any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating to any Employee Plans or (B)
pursuant to any obligation of the Company to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
4.22.4.13. Unpaid Contributions. Neither the Company nor any
--------------------
ERISA Affiliate has any liability for unpaid contributions under Section 515 of
ERISA with respect to any Pension Plan or Welfare Plan. The Company has paid or
will pay by October 31, 1997, all employer matching contributions to its 401(k)
Plan through October 31, 1997.
4.22.4.14. Insurance Contracts. To the Seller's knowledge,
-------------------
neither the Company nor any Employee Plan holds as an asset of any Employee Plan
any interest in any annuity contract, guaranteed investment contract or any
other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship or rehabilitation proceedings.
24
<PAGE>
4.22.4.15. No Acceleration or Creation of Rights. Neither the
-------------------------------------
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will result in the acceleration or creation
of any rights of any person to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting except by plan termination
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan except by plan termination or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
4.23. Compliance With Environmental Laws
----------------------------------
4.23.1. Definitions. The following terms, when used in this Section
-----------
4.23, shall have the following meanings. Unless the context otherwise requires,
any of these terms may be used in the singular or the plural depending on the
reference.
4.23.1.1. "Company". For purposes of this Section 4.23 only, the
-------
term "Company" shall include (i) all Related Entities of the Company, including,
without limitation the Seller, (ii) all partnerships, joint ventures and other
entities or organizations in which the Company was at any time or is a partner,
joint venturer, member or participant and (iii) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been acquired or assumed by
the Company or to which the Company has succeeded.
4.23.1.2. "Release" shall mean and include any spilling,
-------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the work place
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
4.23.1.3. "Hazardous Substance" shall mean any quantity of
-------------------
asbestos in any form, urea formaldehyde, PCBs, radon gas, crude oil or any
fraction thereof, all forms of natural gas, petroleum products or by-products,
any radioactive substance, any toxic, infectious, reactive, corrosive, ignitable
or flammable chemical or chemical compound and any other hazardous substance,
material or waste (as defined in or for purposes of any Environmental Law),
whether solid, liquid or gas.
4.23.2. Compliance With Environmental and Zoning Law. Except as
--------------------------------------------
set forth on Schedule 4.23 and except as set forth in the environmental
assessments referred to in Section 6.9, the Facilities have been owned, leased,
operated and maintained in material compliance with all environmental laws,
regulations and requirements (collectively, "Environmental Laws"). There is no
present or past Environmental Condition in any way relating to the Business or
Facilities. "Environmental Condition" means the introduction into the soil,
groundwater or environment of the Facilities (through leak, spill, release,
discharge, escape, emission, dumping disposal or otherwise) of any pollution,
including without limitation any contaminant, irritant or pollutant or Hazardous
Substance (whether or not upon the property of the Business and whether or not
such pollution constituted at the time thereof a violation of any Environmental
Law) as a
25
<PAGE>
result of which either Seller, the Company or Buyer has or may become
liable in any material respect to any person or federal, state or local
government or agency or by reason of which any of the Assets may suffer or be
subjected to any lien.
4.23.3. Facilities. Except as set forth in the environmental
----------
assessments referred to in Section 6.9 and in Schedule 4.23, the Facilities are,
and at all times have been, owned, leased and operated in material compliance
with all Environmental Laws and in a manner that will not give rise to any
liability under any Environmental Laws.
4.23.4. Permits. The Company has, and at all times has had, all
-------
material Permits required under any Environmental Law and the Facilities are,
and at all times have been, in material compliance with all such Permits subject
to the environmental assessments referred to in Section 6.9.
4.23.5. Permits Required. The consummation of any of the
----------------
transactions contemplated by this Agreement will not require an application for
issuance, renewal, transfer or extension of, or any other administrative action
regarding, any Permit required under any Environmental Law subject to the
environmental assessments referred to in Section 6.9.
4.23.6. Notice of Violation. Except as set forth on Schedule
-------------------
4.23.6, the Company has not received any notice at any time since January 1,
1992 (or, if the notice alleged material non-compliance, at any time whatsoever)
that it or the Facilities is or were claimed to be in violation of the
provisions of any Environmental Law or in non-compliance with the conditions of
any Permit, and there is no pending or, to Seller's knowledge, threatened
lawsuit, governmental or other legal action to that effect.
4.23.7. Pending Actions. There is not now pending or, to Seller's
---------------
best knowledge, threatened, nor has there ever been, any Action against the
Company, nor, to the best of Seller's knowledge, is there any basis for any
Action, under any Environmental Law or otherwise with respect to any Release or
mishandling of any Hazardous Substance.
4.23.8. Judgments. There are no consent decrees, judgments,
---------
judicial or administrative orders or agreements with, or liens by, any
governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate, bind or in any way materially affect
the Company or the Facilities.
4.23.9. Hazardous Substances. Except as set forth on Schedule
--------------------
4.23.9, there is not and has not been any Hazardous Substance used, generated,
treated, stored, transported, disposed of, handled or other placement of
Hazardous Substances on, under, about or from any Facility, except for
quantities of any such Hazardous Substances stored or otherwise held on, under
or about any such Facility in material compliance with all Environmental Laws
and necessary for the operation of the Business.
4.23.10. Handling of Hazardous Substances. The Company has at all
--------------------------------
times used, generated, treated, stored, transported, disposed of or otherwise
handled its Hazardous
26
<PAGE>
Substances in compliance in all material respects with all Environmental Laws
and in a manner that will not result in material liability of the Company or
Buyer under any Environmental Law.
4.23.11. Since August 31, 1997, (i) there has been no actual or
threatened Material Adverse Change or event that would result in a Material
Adverse Change, including without limitation the loss of any material customers;
(ii) there has not been any sale or other disposition of any of the Assets, or
any Encumbrance placed on the Assets, except in the ordinary course of business;
the Company has been operated in the ordinary course consistent with past
practice so as to preserve the Business intact, to keep available to the
business the service of Company's employees and to preserve the Business and the
goodwill of the Company's suppliers, customers, distributors and others having
business relations with it; and (iv) except as set forth on Schedule 4.23.11,
Seller has not purchased or entered into any agreement to purchase any item,
other than in the ordinary course of business consistent with past practices,
having a cost in excess of $5,000.
4.23.12. Except as set forth on Schedule 4.23.12 and except for
compliance with HSR Act, no notice to, declaration, filing or registration with,
or authorization or consent or approval of, or Permit from, any governmental or
regulatory body or authority or any other person or entity is required to be
made or obtained by Seller or the Company in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
4.23.13. Storage Tank. To Seller's knowledge, Schedule 4.23,
------------
together with the Environmental Assessments to be delivered, sets out the past
and present underground and above ground tanks at the Facilities.
4.23.14. Environmental Audits or Assessments. True, complete and
-----------------------------------
correct copies of the written reports, if any, and all parts thereof, including
any drafts of such reports if such drafts are in the possession or control of
the Company, of all environmental audits or assessments (including tank closure
reports) which have been conducted at any Facility within the past five years,
either by the Company or any attorney, environmental consultant or engineer
engaged by the Company or Seller for such purpose, will be delivered to Buyer
and a list of all such reports, audits and assessments and any other similar
report, audit or assessment not in the possession or control of the Company and
of which the Company or Seller has knowledge is included on Schedule 4.23.
4.23.15. Indemnification Agreements. Except for all Facility
--------------------------
leases and facility access agreements and Contracts, the Company is not a party,
whether as a direct signatory or as successor, assign or third party
beneficiary, or otherwise bound, to any Contract under which the Company is
obligated by or entitled to the benefits of, directly or indirectly, any
representation, warranty, indemnification, covenant, restriction or other
undertaking concerning Environmental Conditions.
4.23.16. Releases or Waivers. The Company has not released any
-------------------
other person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
27
<PAGE>
4.23.17. Notices, Warnings and Records. The Company has given all
-----------------------------
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all Environmental Laws, except where the
failure to do so would not have a Material Adverse Effect.
4.24. Liabilities Except as set forth on Schedule 4.24, the Company has no
-----------
material liabilities or obligations (absolute, accrued, contingent or otherwise)
except (i) liabilities which are reflected on the Balance Sheet, (ii)
liabilities incurred in the ordinary course of the Business and consistent with
past practice since the Balance Sheet Date, and (iii) liabilities arising under
Contracts identified in Schedule 4.8 to which the Company is a party.
4.25. Insurance
---------
4.25.1. Schedule 4.25 describes all currently in force policies of
insurance and all policies for the year ended October 31, 1996 (including the
insurer, type of insurance and period of coverage) to which the Company or any
Related Entity is a party or under which the Company, any Related Entity or any
employee, officer or director of the Company or any Related Entity (in his or
her capacity as such) is or has been insured. All such policies will continue
in full force and effect following the Closing. Incurrence policies shall be
deemed to be in force regardless of when they were issued.
4.25.2. [RESERVED.]
4.25.3. The Company and any Related Entity have paid all accumulated
premiums due, or have accrued same as a liability and has otherwise performed
substantially all of its material respective obligations, under each such
current insurance policy.
4.26. Conduct of the Business Except as set forth in Schedule 4.26, since
-----------------------
the Balance Sheet Date, the Company has conducted its operations in the ordinary
course of the Business and substantially in accordance with past practice, and
has not taken any action that, if taken after the date hereof, would violate
Section 6.5.
4.27. Knowledge Seller's "knowledge" or "best knowledge" or similar words
---------
includes the actual knowledge of David P. Lanoha, Jack Markle, Doug Bonnette and
such knowledge that such individuals obtained or would have obtained after
inquiry to determine the relevant fact at the branch manager level, after a
review of the Company files maintained at or above the branch manager level and
after inquiry of personnel responsible for inputting information into those
files.
4.28. The Company is acquiring the Parent Common Stock for its own
account as principal, for investment purposes only, and not with a view to, or
for, resale or distribution thereof, and no other person has or will have a
direct or indirect beneficial interest in such Parent Common Stock.
4.29. The Company understands that the offering and sale of the Parent
Common Stock is intended to be a transaction by an issuer not involving any
public offering exempt from
28
<PAGE>
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the rules and regulations of the Commission thereunder.
4.30. The Company is an "accredited investor" as such term is defined
in Rule 501 under the Securities Act.
4.31. The Company understands and acknowledges that there are substantial
risks of loss of investment involved in an investment in the Parent Common
Stock, and that the investment in the Parent Common Stock is an illiquid
investment subject to transfer restrictions, and Seller and the Company
represent and warrant that the Company has the financial ability to bear the
economic risk of such investment.
4.32. Seller has such knowledge and experience in financial and business
matters, including investments of the type represented by the Parent Common
Stock, as to be capable of evaluating the merits of the Company's investment
therein.
4.33. The Company has been furnished with a copy of the recent periodic
reports filed by Parent with the Commission and any documents that may have been
made available otherwise or upon its request, has carefully read and understands
such materials and has evaluated the risks of the Company's acquisition of the
Parent Common Stock and the parties acknowledge that each Seller is relying upon
the fact that all such information is true and correct in all material respects
and does not contain any omissions of material facts necessary to make the facts
stated therein, as of their dates, not misleading.
4.34. The Company has been given the opportunity to ask questions of, and
receive answers from, representatives of Parent in order for it to evaluate the
merits and risks of the Company's investment in the Parent Common Stock.
4.35. The Company has not been furnished with and has not relied upon
any oral or written representation, warranty or information in connection with
the offering of the Parent Common Stock except for that set forth in this
Agreement and in Parent's Prospectus, 10K and Parent's Annual Report.
4.36. The stock certificates evidencing the Parent Common Stock to be
delivered pursuant to this Agreement will bear a legend indicating that the
securities have not been registered and are subject to restrictions on transfer
and the holdback and registration rights set forth herein.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
Buyer and Parent hereby represent and warrant to Seller and the
Company as follows, which representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct:
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<PAGE>
5.1. Organization of Buyer and Parent Buyer is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
5.2. Authorization Except as provided in Section 8.11, each of Buyer and
-------------
Parent has all requisite corporate power and authority, and has taken all
corporate action necessary, to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its respective obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
Buyer and Parent and is, and (following their execution and delivery by Buyer,
Parent, the Company, the Seller Representative or the Seller, as applicable,
each of the Ancillary Agreements will be) a legal, valid and binding obligation
of Buyer or Parent, as applicable, enforceable against Buyer or Parent, as
applicable, in accordance with its terms.
5.3. No Conflict or Violation Neither the execution, delivery or
------------------------
performance of this Agreement or the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby, nor compliance by Buyer or
Parent with any of the provisions hereof or thereof, will (a) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws of
Buyer or Parent, or (b) violate any statute, rule, regulation, ordinance, code,
order, judgment, ruling, writ, injunction, decree, award or agreement binding
upon Buyer or Parent.
5.4. Consents and Approvals No notice to, declaration, filing or
----------------------
registration with, or authorization, consent or approval of, or permit from, any
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by Buyer or Parent in connection with the
execution, delivery and performance of this Agreement or the Ancillary
Agreements and the consummation of the transactions contemplated hereby or
thereby, except (a) as may be required by Buyer to operate the Business after
the Closing, (b) as has been obtained on or prior to the date hereof or (c) as
set forth in Schedule 5.4.
ARTICLE VI.
COVENANTS OF BUYER, THE COMPANY AND SELLER
------------------------------------------
Buyer, the Company and Seller each covenant with the others as
follows:
6.1. Further Assurances Upon the terms and subject to the conditions
------------------
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from third parties;
provided, however, that neither party shall be required to make any payments,
commence litigation or agree to modifications of the terms of Contracts or
Leases in order to obtain any such waivers, consents or approvals, (B) to obtain
all necessary Permits as are
30
<PAGE>
required to be obtained under any federal, state, local or foreign law or
regulations, (C) to effect all necessary registrations and filings, including
without limitation required filings under the HSR Act and all other submissions
of information requested by governmental authorities, and (D) to fulfill all
conditions to this Agreement.
6.2. No Solicitation From the date hereof through the Closing or the
---------------
earlier termination of this Agreement, each of the Company and the Seller shall
not, and shall cause their Representatives (including without limitation
investment bankers, attorneys and accountants) not to, directly or indirectly,
enter into, solicit, initiate or continue any discussions or negotiations with,
or encourage or respond to any inquiries or proposals by, or participate in any
negotiations with, or provide any information to, or otherwise cooperate in any
other way with, any corporation, partnership, person or other entity or group,
other than Buyer and its Representatives, concerning any sale of all or a
portion of the Assets, the Memberships or the Business, or any merger,
consolidation, liquidation, dissolution or similar transaction involving the
Company (each such transaction collectively being referred to herein as a
"Proposed Acquisition Transaction"). The Company and the Seller shall not,
directly or indirectly, through any Representative or otherwise, solicit,
initiate or encourage the submission of any proposal or offer from any person or
entity relating to any Proposed Acquisition Transaction or participate in any
negotiations regarding, or furnish to any other person any information with
respect to the other party for the purposes of, or otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to seek or effect a Proposed Acquisition
Transaction. The Company and the Seller each hereby severally represent that it
is not now engaged in discussions or negotiations with any party (other than
Buyer) with respect to any of the foregoing. The Company or Seller shall
promptly notify Buyer (orally and in writing) of any offer, inquiry or contact
with any person with respect to a Proposed Acquisition Transaction, including
the terms thereof and the identity of the prospective purchaser or soliciting
party.
6.3. Notification of Certain Matters From the date hereof through the
-------------------------------
Closing, Buyer or Parent shall give prompt notice to Seller and the Company of
(a) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of the Buyer or
Parent contained in this Agreement or in any exhibit or schedule hereto to be
untrue or inaccurate in any material respect and (b) any failure of Buyer or
Parent to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or any exhibit or schedule
hereto; provided, however, that such disclosure shall not be deemed to cure any
breach of a representation, warranty, covenant or agreement or to satisfy any
condition.
From the date hereof through the Closing, Seller and the Company shall
give prompt notice to Buyer or Parent of (a) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
representation or warranty of the Seller or Company contained in this Agreement
or in any exhibit or schedule hereto to be untrue or inaccurate in any material
respect and (b) any failure of Seller or Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or schedule hereto; provided, however, that such
disclosure shall not be
31
<PAGE>
deemed to cure any breach of a representation, warranty, covenant or agreement
or to satisfy any condition.
6.4. Access to Information From the date hereof through the Closing, the
---------------------
Company shall, and shall cause its Representatives to, afford the
Representatives of Buyer and its Affiliates complete access at all reasonable
times to the Assets and the Facilities for the purpose of inspecting and
conducting appropriate tests upon the same, and to the officers, employees,
agents, attorneys, accountants, properties, Books and Records and Contracts of
the Company, and shall furnish Buyer and its Representatives all financial,
operating and other data and information as Buyer or its Affiliates, through
their respective Representatives, may reasonably request, including but not
limited to data relating to operating procedures, workers' compensation history,
legal, tax and environmental, zoning and other legal compliance.
6.5. Conduct of Business From the date hereof through the Closing, the
-------------------
Seller shall, except as contemplated by this Agreement or as consented to by
Buyer in writing, operate the Business in the ordinary course of the Business
and substantially in accordance with past practice and will not take any action
inconsistent with this Agreement or with the consummation of the Closing.
Without limiting the generality of the foregoing, the Company shall not, except
as specifically contemplated by this Agreement or as consented to in writing by
Buyer:
6.5.1. issue or repurchase any units, options or other rights to
acquire any such units;
6.5.2. enter into, extend, materially modify, terminate or renew any
Contract;
6.5.3. purchase or enter into any agreement to purchase any item of
Inventory or Equipment;
6.5.4. make any material increase in compensation or benefits
payable to any employee of the Company, or adopt any new employee benefit plan
or policy;
6.5.5. sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets, or any interests therein;
6.5.6. accelerate the collection of accounts receivable, extend the
payment of accounts payable, or reduce inventories in a manner inconsistent with
the ordinary course of the Business's operation; or
6.5.7. fail to pay its accounts payable and any debts owed or
obligations due by it, or pay or discharge when due any liabilities.
6.6. Guarantee
---------
Through but not after the Closing, Parent hereby guarantees the
covenants and obligations of Buyer required to be performed by it hereunder.
32
<PAGE>
6.7. Employee Matters Buyer shall hire all employees of the Business who
----------------
pass a physical examination and drug and alcohol abuse screening by a licensed
laboratory chosen by Buyer, and who otherwise meet Buyer's customary criteria
for employment, and the Company shall reasonably cooperate with Buyer in
retaining all such employees (the "Retained Employees"). Buyer agrees to give
Retained Employees credit for their time of employment with the Company with
respect to their seniority as an employee of Buyer. The Company shall be and
remain solely responsible for the payment of all benefits due to its employees
at any time under its Employee Plans, including without limitation all
severance, accrued vacation, health care continuation coverage and other
benefits to which its employees may be entitled as a result of the transactions
contemplated hereby, whether or not such employees are hired by Buyer. All
Retained Employees will be at-will employees of Buyer and may be terminated by
Buyer in its sole discretion, subject to the requirements of applicable laws
governing employers and employees, and will receive substantially the same total
compensation as they did when employed by the Company.
6.8. [RESERVED]
----------
6.9. Environmental Assessments and Remediation
-----------------------------------------
6.9.1. Buyer will retain an environmental consultant (the "Consultant")
to perform Phase 1 (and, at Buyer's option Phase 2) environmental assessments
with respect to each of the Facilities. Upon its availability, Consultant will
deliver such assessments to Buyer and the Company. In the event any such
assessment recommends the performance of additional investigation (including,
without limitation, Phase 2 environmental assessments), such additional
investigation shall, if requested by Buyer, be undertaken promptly and delivered
to each of the Company and Buyer. The environmental assessments and
investigations undertaken pursuant to this Section 6.9.1 are collectively
referred to herein as the "Environmental Assessments." Buyer shall be solely
responsible for the cost of the Environmental Assessments.
6.9.2. In the event any of the Environmental Assessments reveals any
remediation work which must be completed in order to bring the Facilities into
compliance with applicable Environmental Laws or eliminate any potential
environmental liability, the Consultant shall be directed to prepare and to
deliver to each of the Company and Buyer a written report setting forth in
reasonable detail the scope of required remediation and an estimate of the cost
of completing such remediation. For the purposes of Section 6.9, "required
remediation" shall mean any action necessary to (i) comply with any governmental
order, (ii) comply with any Environmental Law effective at the Closing or (iii)
eliminate a potential environmental liability which has the reasonable
probability of ripening into with the passage of time the violation of any
Environmental Law (the "Remediation Standard"), as applicable to the Facilities
or the operation thereof by the Company as of the Closing Date.
6.9.3. Within 60 days of completion of the Consultant's report referred
to in Section 6.9.2, the Company shall engage a reliable environmental
engineering firm reasonably acceptable to Buyer to perform any required
remediation, as well as to remove any underground storage tanks on the
properties which are leased from Related Entities and perform all required
33
<PAGE>
remediation in connection therewith. The Company and the Seller Representative
shall use their respective best efforts to cause such required remediation to be
completed on or before the Closing Date, and the Company shall bear all costs of
such required remediation; Buyer may, in its sole discretion, authorize the
Company to defer any portion of the required remediation which the Company and
its contractors are unable to complete prior to Closing, in which case Seller
shall cause the portion of the required remediation so deferred to be completed
as promptly as practicable, but in no event later than 180 days following
Closing, at the Company's sole expense (which may be satisfied from the Holdback
Amount pursuant to the Escrow Agreement or from the funds held back by Buyer as
set forth in Section 6.9.4). In the event of such deferral, Buyer will provide
reasonable access to the Company and its agents to complete such remediation and
shall otherwise reasonably cooperate at the Company's expense in such
remediation. Buyer may monitor the performance of the required remediation and
application of the Remediation Standard, and at its election may cause the
Consultant to review the performance of the required remediation. If Buyer
directs the Consultant to undertake such review, the required remediation shall
be deemed completed only upon certification of its completion by the Consultant.
If, however, there is a dispute as to the performance of the required
remediation or the application of the Remediation Standard, any such dispute
shall be settled by a mutually agreed-upon environmental expert not otherwise
involved in the required remediation, whose determination shall be final and
binding on the parties. The estimated costs of the required remediation not
completed by Closing will be withheld and retained by Buyer outside of escrow.
Notwithstanding the foregoing, by December 31, 1997, the Company will begin to
cause the underground storage tanks located on property leased by the Company
from Related Entities to be removed and any required remediation to be completed
in connection therewith.
6.9.4. The Holdback Amount shall secure, among other things, the
completion by the Company of any required remediation which has not been
resolved by the Closing Date pursuant to this Section 6.9. Upon the completion
of the required remediation, certification of such completion by the Consultant
or mutually agreed-upon third party expert, and payment by the Company of all
expenses of such remediation and certification, all in accordance with the
standards set forth in this Section 6.9, no further claims may be made against
the Holdback Amount on account of the Company's obligations under this Section
6.9. However, if such required remediation has not been completed by the Company
due to their failure to timely perform and to continue performance of required
remediation, and so certified on or prior to the date which is no later than 180
days following the Closing Date, Buyer shall be entitled to engage its own
environmental engineering firm to complete such required remediation, and to
distribute such portion of the Holdback Amount as is necessary to pay the fees
and costs of such firm, or other costs incurred, in completing such required
remediation.
6.10. Registration Rights.
-------------------
6.10.1. In the event that, at any time prior to the first anniversary
of the Closing Date, Parent files a registration statement under the Securities
Act covering shares of Parent Common Stock, other than a registration statement
on Form S-4 or Form S-8, or a registration statement filed pursuant to "demand"
or similar contractual registration rights of any other
34
<PAGE>
stockholders of Parent, then Company shall have the right to include in such
registration statement (on a "piggyback" basis) any or all of its shares of
Parent Common Stock on the same terms and conditions (including pro rata
cutbacks) as all other selling stockholders in such registration, and to receive
the benefit of any representations, indemnities, opinions or comfort letters
given by the Parent (or its counsel or underwriters) to any underwriter in
connection with such registration, provided, however, that if the managing
underwriter or underwriters in the registered offering advise the Parent that
the inclusion in the offering of shares of Parent Common Stock owned by the
Company would have a Material Adverse Effect on the marketability or price of
the offering, then the number of shares of Parent Common Stock to be included by
the Company shall be reduced.
6.10.2. Anything herein to the contrary notwithstanding, in the event
that the Parent files a registration statement with respect to an underwritten
public offering under the Securities Act in which any class of Parent Common
Stock is offered, no Seller shall effect any public sale or distribution (except
pursuant to said registration statement) of any of the shares of Parent Common
Stock (which shares, for purposes of this Section 6.10.2, shall include any and
all voting securities received by such Seller as a stock dividend, stock split
or other recapitalization or similar distribution on or in respect of the shares
of Parent Common Stock) or any of Parent's other equity securities, or of any
securities convertible into or exchangeable for such securities, during the
period following delivery of notice to Sellers which begins ten (10) days before
the filing of such registration statement with the Securities and Exchange
Commission and ending ninety (90) days after such registration statement has
become effective or ten (10) days after it has been withdrawn. After January 4,
2001, this Section 6.10.2 shall cease to apply.
6.11. Cooperation Regarding Dealerships Seller and the Company will
---------------------------------
cooperate with Buyer and use their reasonable best efforts to assist Buyer in
obtaining the transfer of all dealerships and dealership agreements of the
Company and each Related Entity, including any required due to change of control
provisions.
6.12. Use of Name and Telephone Numbers From and after Closing, upon filing
---------------------------------
of appropriate assumed name affidavits, Buyer will have the right to use all of
the names used by the Company or variations thereof in its operation of the
Business. Upon Closing, the Company shall assign to Buyer all of the telephone
and facsimile numbers currently used in the Business.
6.13. 1997 Tax Returns Seller will prepare or cause to be prepared,
----------------
executed and timely filed all income tax returns for the Company's fiscal year
ended October 31, 1997. Buyer will provide access to books and records acquired
from the Company to facilitate such preparation. In addition, as set forth
elsewhere herein, David P. Lanoha will be responsible for any additional income
taxes or assessments or claims asserted by any Tax authority and will fully
indemnify the Company with respect thereto.
35
<PAGE>
ARTICLE VII.
CONDITIONS TO COMPANY'S OBLIGATIONS
-----------------------------------
Except as otherwise provided herein, the obligations of the Company to
consummate the transactions provided for hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by the Company.
36
<PAGE>
7.1. Representations, Warranties and Covenants All representations and
-----------------------------------------
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Buyer and
Parent shall have performed and satisfied all agreements and covenants required
hereby to be performed by them prior to or on the Closing Date.
7.2. No Proceedings, Litigation or Laws No Action by any governmental
----------------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Seller if the
transactions contemplated hereunder are consummated. The waiting period under
the HSR Act shall have expired or been terminated, and there shall not be any
statute, rule or regulation that makes the purchase and sale of the Memberships,
Business or the Assets contemplated hereby illegal or otherwise prohibited.
7.3. Certificates Buyer and Parent shall furnish the Company with such
------------
certificates of their officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by the
Company. The Company shall have received an opinion of Latham & Watkins in form
reasonably satisfactory to Seller Representative.
7.4. Other Conditions By October 31, 1997, (i) Jack Markle and Buyer shall
----------------
have both approved the form of his employment agreement in writing and (ii)
Buyer's board of directors shall have approved the transactions contemplated by
this Agreement; Buyer shall have delivered a letter from the agent bank for its
revolving credit facility indicating that the transaction has been approved; and
Buyer shall have completed its due diligence review and delivered notice to
Seller that it is satisfied with its due diligence review of the Company. If the
above conditions are not timely satisfied, then Seller shall have the option to
terminate this Agreement.
7.5. Consents All Permits and waivers necessary for the consummation by
--------
Seller of the transactions contemplated hereby and required to be obtained by
Buyer or Parent shall have been obtained.
7.6. Other Transactions The Related Purchase Transactions shall have been
------------------
consummated.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for hereby
are subject, to the satisfaction, on or prior to the Closing Date, of each of
the following conditions, any of which may be waived by Buyer:
37
<PAGE>
8.1. Representations, Warranties and Covenants All representations and
-----------------------------------------
warranties of Seller and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Seller
and the Company shall have performed and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
8.2. Consents All Permits and waivers necessary for the consummation by
--------
Buyer and Parent of the transactions contemplated hereby and for the continued
operation of the Business after the Closing (including, without limitation, all
required waivers of Parent's lenders and all required waivers of the Company's
vendors under supplier agreements other than as set forth on Schedule 8.2) shall
have been obtained. Company will use its reasonable best efforts to obtain oral
or written consents from customers as may be reasonably requested by Buyer to
continue doing business with the Company from and after the date of this
Agreement.
8.3. No Proceedings or Litigation No Action by any governmental authority
----------------------------
or other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer materially if the transactions
contemplated hereby are consummated, including without limitation any Material
Adverse Effect on the right or ability of the Company to own, operate, possess
or transfer the Assets after the Closing. The waiting period under the HSR Act
shall have expired or been terminated, and there shall not be any statute, rule
or regulation that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.4. Opinion of Counsel The Company shall have delivered to Buyer an
------------------
opinion of Graft, Thomson and Toedte, P.C., counsel to the Company and the
Seller, dated as of the Closing Date, in form and substance reasonably
satisfactory to Buyer, to the effect that:
8.4.1. Incorporation Company has been duly formed and is validly
-------------
existing and in good standing under the laws of the State of Colorado and is in
good standing as a foreign corporation in each state in which it owns or leases
property or operates a Facility;
8.4.2. Corporate Power and Authority The Company has the necessary
-----------------------------
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and to own, lease and operate the Assets and its
other properties and to conduct the Business as presently conducted;
8.4.3. Action The execution, delivery and performance of this
------
Agreement and the Ancillary Agreements to which the Company is a party have been
duly authorized by all necessary action of the Company, and this Agreement and
the Ancillary Agreements have been duly executed and delivered by the Company or
the Seller, as applicable;
8.4.4. Obligation of the Company or Seller This Agreement and each
-----------------------------------
Ancillary Agreement constitutes a legally valid and binding obligation of the
Company or the Seller, as applicable, enforceable against the Company or the
Seller in accordance with its terms, except as
38
<PAGE>
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally or by equitable principles
(whether considered in an action at law or in equity), (ii) limitations imposed
by federal or applicable state law or equitable principles upon the availability
of specific performance, injunctive relief or other equitable remedies, or (iii)
other customary limitations reasonably satisfactory to Buyer's counsel;
8.4.5. No Breach Neither the execution and delivery of this Agreement
---------
or the Ancillary Agreements by the Company or the Seller, as applicable, nor the
consummation of the transactions contemplated hereby or thereby will (i) violate
or conflict with any provision of the organizational documents of the Company,
or of the charter documents or other organizational instrument of Seller that is
not a natural person, (ii) breach, or cause a default under, any term or
provision of any material contract listed on a schedule to such opinion to which
contract the Company or the Seller is a party or by which the Assets are bound,
or (iii) violate any judgment, decree, injunction, writ or order applicable to
the Company or the Seller;
8.4.6. No Permits Required No Permit of, or filing with, any
-------------------
governmental authority or, to the best knowledge of such counsel, any other
person, is required for the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or the Seller, as applicable, or the
consummation by the Company or the Seller of the transactions contemplated
hereby or thereby, except as set forth in this Agreement or the schedules or
exhibits hereto;
8.4.7. No Actions Pending Except as set forth in this Agreement or the
------------------
schedules hereto, to the best knowledge of such counsel, no Action is pending or
threatened (i) against the Company or the Business, (ii) against any of the
officers or directors of the Company as such, (iii) in which the Company is a
plaintiff, or (iv) which questions the validity or legality of the transactions
contemplated hereby;
8.4.8. No Violation of Law To the best knowledge of such counsel,
-------------------
neither the execution and delivery of this Agreement or the Ancillary Agreements
by the Company or the Seller, as applicable, nor the consummation of the
transactions contemplated hereby or thereby will violate or result in a failure
to comply with any statute, law, ordinance, regulation, rule or order of any
federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to the
Company, the Seller or the Business; and, to the best knowledge of such counsel,
the Company has all licenses, franchises and other authority required to conduct
the Business as it is now being conducted;
8.4.9. Title to Memberships The issued and outstanding units of the
--------------------
Company consists solely of the Memberships, all of which are owned of record and
beneficially by the persons identified on a schedule attached to such opinion,
free and clear of all Encumbrances. To the knowledge of such counsel, there are
no outstanding warrants, options or other rights to acquire, or securities
convertible into or exercisable or exchangeable for, units of the Company, nor
any commitments or agreements by the Company to issue any such rights or
securities or units.
39
<PAGE>
8.4.10. Other Opinions Such other opinions as any lender to Buyer may
--------------
reasonably request. In rendering such opinions, such counsel may rely as to
factual matters upon certificates and assurances of public officials, Seller,
and officers of the Company. In addition, such opinions may be subject to such
additional qualifications and exceptions as are reasonably acceptable to counsel
to Buyer.
8.4.11. Schedules At or prior to Closing, the Company shall attach all
---------
Schedules to this Agreement and the Buyer shall have the opportunity to review
and approve such Schedules, such approval to not be unreasonably withheld. The
Company will deliver all schedules within ten days after execution of this
Agreement, and Buyer will have five days to disapprove such schedules, failing
which they will be deemed a part of this Agreement.
8.5. Certificates Seller and the Company shall furnish Buyer with such
------------
certificates of Seller, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.6. Conveyancing Documents; Release of Encumbrances The Company shall have
-----------------------------------------------
executed and delivered each of documents described in Section 3.2 hereof so as
to effect the transfer and assignment to Buyer of all right, title and interest
in and to the Assets and the Company shall have filed (where necessary) and
delivered to Buyer all documents necessary to release the Assets from all
Encumbrances which documents shall be in a form reasonably satisfactory to
Buyer's counsel.
8.7. Completion of Environmental Remediation The Company or its agents
---------------------------------------
shall have completed any "required remediation" or shall have approved any plan
of remediation within the meaning of Section 6.9, subject to the procedures set
forth in Section 6.9 with respect to the certification of such completion and
the resolution of any disputes relating thereto.
8.8. Tax Clearance Certificate The Company shall provide to Buyer with a
-------------------------
clearance certificate or similar document(s) that may be required by any state
taxing authority in order to relieve Buyer of any obligation to withhold any
portion of the Purchase Price.
8.9. Employment and Non-Competition Agreements Buyer or a subsidiary of
-----------------------------------------
Buyer shall have entered into an Employment and Non-Competition Agreement with
Mr. Lanoha, Mr. Markle and Mr. Bonnette in the forms attached.
8.10 Release of Encumbrances The Company shall have filed (where necessary)
-----------------------
and delivered to Buyer all documents necessary to release the Assets from all
Encumbrances which documents shall be in a form reasonably satisfactory to
Buyer's counsel.
8.11. Board Approval The Board of Directors of Parent shall have approved
--------------
the execution, delivery and performance of this Agreement.
40
<PAGE>
8.12. Documents. Buyer shall have received from the Company resolutions
---------
adopted by its manager approving this Agreement and the Ancillary Agreements to
which it will be a party, and the transactions contemplated hereby and thereby.
8.13. Schedules and Due Diligence Review Buyer and its Representatives
----------------------------------
shall be provided the opportunity to have conducted a due diligence review of
the Company's Books and Records, Financial Statements, and other records and
accounts of the Business, and Seller shall have delivered to Buyer all Schedules
required by this Agreement. Buyer shall be satisfied in its sole discretion with
its due diligence findings, and the contents of the Schedules; if Buyer is not
so satisfied in its sole discretion, it may terminate this Agreement. The
parties shall have drafted and agreed on any other agreement required pursuant
to this Agreement to be executed at Closing.
8.14. No Material Adverse Change There shall have been no material adverse
--------------------------
change or development in the Company's business.
8.15. Other Transactions The Related Purchase Transactions shall have been
------------------
consummated.
ARTICLE IX
CONSENTS TO ASSIGNMENT; RISK OF LOSS
------------------------------------
9.1. Consents to Assignment Anything in this Agreement to the contrary
----------------------
notwithstanding, this Agreement shall not constitute an agreement to assign or
to effect a change of control with respect to any Contract, lease, license,
sales order, purchase order or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment or change of
control thereof, without the consent of a third party thereto, would constitute
a breach thereof or in any way adversely affect the rights of Buyer thereunder.
If such consent is not obtained, or if an attempted assignment or change of
control thereof would be ineffective or would affect the rights thereunder so
that Buyer would not receive all such rights, the Company will cooperate with
Buyer, in all reasonable respects, to provide to Buyer the benefits under any
such Contract, lease, license, sales order, purchase order, claim or right
including without limitation enforcement for the benefit of Buyer of any and all
rights of the Company against a third party thereto arising out of the breach or
cancellation by such third party or otherwise.
41
<PAGE>
9.2. Risk of Loss. From the date hereof through the Closing, all risk of
------------
loss or damage to the property included in the Assets shall be borne by the
Company, and thereafter shall be borne by Buyer. If any portion of the Assets is
destroyed or damaged by fire or any other cause on or prior to the Closing,
other than use, wear or loss in the ordinary course of the Business, the Company
shall give written notice to Buyer as soon as practicable after discovery of
such damage or destruction, the amount of insurance, if any, covering such
Assets and the amount, if any, which the Company is otherwise entitled to
receive as a consequence. Prior to the Closing, Buyer shall have the option,
which shall be exercised by written notice to the Company within ten (10)
calendar days after receipt of the Company's notice or if there is not ten (10)
calendar days prior to the Closing, as soon as practicable prior to the Closing,
of (a) accepting such Assets in their destroyed or damaged condition in which
event Buyer shall be entitled to the proceeds of any insurance or other proceeds
payable with respect to such loss and to such indemnification for any uninsured
portion of such loss pursuant to Section 10.4, and the full Purchase Price shall
be paid for such Assets, (b) excluding such Assets from this Agreement, in which
event the Purchase Price shall be reduced by the amount allocated to such
Assets, as mutually agreed between the parties or (c) terminating this Agreement
in accordance with Section 11.1. If Buyer accepts such Assets, then after the
Closing, any insurance or other proceeds shall belong, and shall be assigned to,
Buyer without any reduction in the Purchase Price; otherwise, such insurance
proceeds shall belong to the Company.
ARTICLE X.
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
----------------------------------------------
10.1. Books and Records; Tax Examinations
-----------------------------------
10.1.1. Books and Records Each party agrees that it will cooperate
-----------------
with and make available to the other party, during normal business hours, all
Books and Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
10.1.2. Cooperation and Records Retention The Company and Buyer shall
---------------------------------
(i) each provide the other with such assistance as may reasonably be requested
by any of them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain for the period of all
applicable statutes of limitation and provide the other with any records or
other information that may be relevant to such return, audit or examination,
proceeding or determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding, or determination
that affects any amount required to be shown on any tax return of the other for
any period. This covenant will survive the Closing.
42
<PAGE>
10.2. Payment of Liabilities Following the Closing Date, the Company shall
----------------------
pay promptly when due all of the debts and liabilities of the Company relating
to the Business, other than Assumed Liabilities, including without limitation
any accounts payable not assumed by Buyer and any liability of the Company for
Taxes.
10.3. Survival of Representations, Etc All statements contained in any
--------------------------------
certificate, schedule, exhibit, instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations, warranties, covenants
and agreements of Seller, the Company, Parent and Buyer contained herein shall
survive the consummation of the transactions contemplated hereby and the Closing
Date, without regard to any investigation made by any of the parties hereto. All
such representations and warranties and all claims and causes of action with
respect thereto (other than the provisions of Sections 4.4, 4.17, 4.19, 4.22,
and 4.23, representations and warranties giving rise to Uncapped Claims and this
Section 10.3, and all claims and causes of action with respect thereto) shall
terminate upon expiration of three years after the Closing Date. The
representations and warranties in Sections 4.4, 4.17, 4.19, 4.22, and 4.23 shall
survive until the expiration of the applicable statute of limitations (with
extensions) with respect to the matters addressed in such sections. The
termination of the representations and warranties provided herein shall not
affect the rights of a party in respect of any Claim made by such party in a
writing received by the other party prior to the expiration of the applicable
survival period provided herein.
10.4. Indemnifications
----------------
10.4.1. By the Company and Seller. The Company and Seller,
-------------------------
jointly and severally, shall indemnify, defend, save and hold harmless Buyer,
its Affiliates, and its and their respective Representatives, from and against
any and all uninsured claims, damages, costs, losses (including without
limitation diminution in value), Taxes, liabilities, judgments, penalties,
fines, obligations, lawsuits, deficiencies, demands and expenses (whether or not
arising out of third-party claims), including without limitation interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including without limitation any clean-up or remedial action), lost profits and
other losses resulting from any shutdown or curtailment of operations, damages
to the environment, attorneys' fees, experts' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any representation or warranty, or the inaccuracy
of any representation or warranty, made by the Company or Seller in or pursuant
to this Agreement; (ii) any breach of any covenant or agreement made by the
Company or Seller in or pursuant to this Agreement; (iii) any liability arising
under any Environmental Law on account of the conduct of the Company or Seller
or prior owners or users of the Facilities or other persons, or on account of
the operation of the Business or the Facilities, or related to any Environmental
Condition existing, in each case on or at any time prior to the Closing Date;
(iv) any liability for Taxes in respect of taxable periods ending on or before
October 31, 1997; (v) any Excluded Liability, or (vi) any other liability
arising out of events prior to the Closing Date which has not been adequately
reflected on the Effective Control Balance Sheet. Without limiting the
generality of the foregoing, the indemnification provided herein, insofar as it
relates
43
<PAGE>
to any Environmental Law or Environmental Condition, shall specifically cover
costs incurred in connection with any investigation of site conditions
(excepting the cost of the Environmental Assessments) or any clean-up, remedial,
removal or restoration work required by any federal, state or local governmental
agency or political subdivision or by the provisions of Section 6.9 hereof.
Damages (except under Sections 4.4, 4.17, 4.19, 4.22, and 4.23 or caused by the
fraud of Seller or the Company) (collectively the "Uncapped Items") are limited
by the terms of Article XII of this Agreement. Except with respect to the
Uncapped Items for which there is no time limit and no monetary limit, the time
and maximum aggregate dollar amount of any indemnity or other obligation of
Seller or the Company under both this Agreement and all Related Purchase
Agreements is limited to (and Seller shall not be responsible for damages in
excess of) (i) for any claims made during the first full year after the Closing,
$10,000,000, (ii) for any claims made during the second full year after the
Closing, $8,000,000 and (iii) for any claims made during the third full year
after the Closing, $5,000,000, except that indemnification obligations related
to Environmental Conditions which become obligations of Buyer during the term of
the lease of the applicable property or within fifteen years of the Closing, if
sooner, and are demonstrated by Buyer on the basis of a preponderance of the
evidence not to have been caused by Buyer shall not be subject to such time or
monetary limitations, but shall be subject to an additional monetary limitation
of $5,000,000 in excess of the amount initially placed in escrow pursuant to the
Escrow Agreement. This indemnification obligation of up to $5,000,000 will
continue to apply even after the three-year period of the escrow has ended, but
will terminate upon any actual assignment by Buyer of the applicable lease to an
unrelated third-party.
10.4.2. By Parent and Buyer Parent and Buyer shall indemnify and save
-------------------
and hold harmless Seller, their Affiliates and their Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty,
or the inaccuracy of any representation or warranty, made by Parent or Buyer in
or pursuant to this Agreement; or (ii) any breach of any covenant or agreement
made by Parent or Buyer in or pursuant to this Agreement, and (iii) any
liability arising after November 1, 1997 arising out of or related to the
Buyer's ownership or operation of the Business.
44
<PAGE>
10.4.3. Cooperation The indemnified party shall cooperate in all
-----------
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
10.4.4. Defense of Claims If a claim for Damages (a "Claim") is to be
-----------------
made by a party entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall, subject to Section 10.4,
give written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.4. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the indemnified party)
to handle and defend the same, at the indemnifying party's cost, risk and
expense unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party, and (iii) to compromise or settle
such claim, which compromise or settlement shall be made only with the written
consent of both the indemnifying and the indemnified party, such consent not to
be unreasonably withheld; provided, however, if the remediation or resolution of
any such Claim will occur on or at any Facility or is reasonably expected to
have a material adverse effect on the indemnified party's business operations,
then, notwithstanding the foregoing, the indemnified party shall be entitled to
control such resolution, including without limitation to take control of the
defense and investigation of such lawsuit or action, to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense, and to compromise or settle such Claim with the
consent of the Indemnifying Party. If the indemnifying party fails to assume the
defense of such claim within fifteen (15) calendar days after receipt of the
Claim Notice, the indemnified party against which such claim has been asserted
will (upon delivering notice to such effect to the indemnifying party) have the
right to undertake, at the indemnifying party's cost and expense, the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the indemnifying party. In the event the indemnified party assumes the
defense of the claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
action effected with its consent pursuant to and in accordance with this Section
45
<PAGE>
10.4 and for any final judgment (subject to any right of appeal), and the
indemnifying party agrees to indemnify and hold harmless an indemnified party
from and against any Damages by reason of such settlement or judgment.
10.4.5. Buyer's Right to Distribution of Holdback Amount Buyer and its
------------------------------------------------
Affiliates and Representatives may at their election collect any amount due from
the Company pursuant to Seller's indemnification obligations under this Section
10.4 by distribution of an applicable portion of the Holdback Amount in
accordance with the terms of the Escrow Agreement.
10.4.6. Limitations Neither Buyer or Parent on the one hand, nor
-----------
Seller on other hand, shall be liable to the other under this Section 10.4 for
any Damages until the amount otherwise due the party, including amounts due
under this Agreement and all Related Purchase Agreements, being indemnified,
including all amounts due under this Agreement and all Ancillary Agreements,
exceeds $100,000 in the aggregate, in which case such indemnifying party will be
liable to the indemnified party for all such amounts in excess of the first
$100,000. Notwithstanding the preceding sentence, this limitation shall not
apply with respect to Damages arising out of a breach of a representation or
warranty contained in Sections 4.4, 4.17, 4.19, 4.22, or 4.23 or giving rise to
an Uncapped Claim due to fraud on the part of Seller.
10.4.7. Liability and Remedies, etc Except as set forth below, no
---------------------------
individual Representative of any party (other than Mr. Lanoha) shall be
personally liable for any Damages under the provisions contained in this Section
10.4. Nothing herein shall relieve either party of any liability to make any
payment expressly required to be made by such party pursuant to this Agreement.
The term "Damages" as used in this Section 10.4 is not limited to matters
asserted by third parties against Seller or Buyer, but includes Damages incurred
or sustained by an indemnified party in the absence of third party claims.
Payments by an indemnified party of amounts for which such party is indemnified
hereunder shall not be a condition precedent to recovery.
10.5. Further Action At and after the Closing, Seller shall take all
--------------
actions reasonably necessary to effect the conveyance of the Memberships to
Buyer free and clear of all Encumbrances and otherwise required by Buyer's
lenders.
ARTICLE XI.
MISCELLANEOUS
-------------
11.1. Termination
-----------
11.1.1. Termination. This Agreement may be terminated at any time
-----------
prior to Closing:
11.1.1.1. By mutual written consent of Buyer and the Seller
Representative;
46
<PAGE>
11.1.1.2. By Seller as provided in Section 7.4, and, except as is
provided in Section 7.4, by Buyer or the Company if the Closing shall not have
occurred on or before January 31, 1998; provided, however, that this provision
shall not be available to Buyer if the Company has the right to terminate this
Agreement under Section 11.1.1.4, and this provision shall not be available to
the Company if Buyer has the right to terminate this Agreement under Section
11.1.1.3;
11.1.1.3. By Buyer if there is a material breach of any
representation or warranty set forth in Article IV hereof or any covenant or
agreement to be complied with or performed by Seller or the Company pursuant to
the terms of this Agreement or the failure of a condition set forth in Article
VIII to be satisfied (and such condition is not waived in writing by Buyer) on
or prior to the Closing Date, or the occurrence of any event which results or
would result in the failure of a condition set forth in Article VIII to be
satisfied on or prior to the Closing Date, provided that Buyer may not terminate
this Agreement prior to the Closing if Seller or the Company have not had an
adequate opportunity to cure such failure; or
11.1.1.4. By the Company if there is a material breach of any
representation or warranty set forth in Article V hereof or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VII to be
satisfied (and such condition is not waived in writing by the Company) on or
prior to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition set forth in Article VII to be satisfied on
or prior to the Closing Date; provided that the Company may not terminate this
--------
Agreement prior to the Closing Date if Buyer has not had an adequate opportunity
to cure such failure.
11.1.2. In the Event of Termination In the event of termination of
---------------------------
this Agreement:
11.1.2.1. Each party will redeliver all documents, work papers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same.
11.2. Assignment Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Parent or Buyer may, without such
consent, assign all such rights to any lender as collateral security, and Buyer
may assign all such rights and obligations to a wholly-owned subsidiary or
subsidiaries of Parent or Buyer (or a partnership controlled by Parent or Buyer)
which shall assume all obligations and liabilities of Buyer under this
Agreement. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, and no other person shall have any right, benefit or
obligation under this Agreement as a third party beneficiary or otherwise.
11.3. Notices All notices, requests, demands and other communications which
-------
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted with electronic confirmation of receipt; if transmitted by telecopy,
electronic or digital transmission method; the
47
<PAGE>
day after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g., Federal Express); and upon receipt,
if sent by certified or registered mail, return receipt requested. In each case
notice shall be sent to:
If to Seller, Seller Representative, or to the Company:
David P. Lanoha
5215 Linden Court
Littleton, CO 80121
FAX: 303-220-0914
with a copy to:
Robert Graft, Esq.
Graft, Thomson & Toedte, P.C.
7430 East Caley Avenue
Suite 300
Englewood, CO 80111
FAX: 303 773-9047
If to Parent or Buyer, addressed to:
Rental Service Corporation
14505 N. Hayden Road, Suite 322
Scottsdale, Arizona 85260
Attention: Chief Executive Officer
FAX: 602-905-3400
With a copy to:
Elizabeth A. Blendell, Esq.
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
FAX: 213-891-8763
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4. Choice of Law This Agreement shall be construed, interpreted and the
-------------
rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
48
<PAGE>
11.5. Entire Agreement; Amendments and Waivers This Agreement, together
----------------------------------------
with all exhibits and schedules hereto and the Ancillary Agreements, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
11.6. Multiple Counterparts This Agreement may be executed in one or more
---------------------
counterparts and by fax, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.7. Expenses Except as otherwise specified in this Agreement, each party
--------
hereto shall pay its own legal, accounting, out of pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect (treating the Company as Seller for this
purpose), except that the Company may pay all of its legal and accounting
expenses incurred prior to September 22, 1997.
11.8. Invalidity In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9. Titles The titles, captions or headings of the Articles, Sections and
------
subsections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.10. Publicity; Confidentiality None of Parent, Buyer, Seller, the
--------------------------
Company or their respective Affiliates or Representatives shall issue any press
release or make any public statement regarding, or disclose to any third party
(except as required by law or legal process, and except to each party's lenders
if such lenders so require) any of the terms of, the transactions contemplated
hereby, without prior written approval of the other party, provided that Parent,
Buyers, Seller and the Company may, if they mutually agree, issue or make an
appropriate press release or public announcement after the Closing Date. Buyer
and Parent will use reasonable efforts, consistent with their legal obligations,
to consult with the Seller Representative regarding any proposed press release.
In the event that this Agreement is terminated prior to Closing, Buyer agrees to
return to Seller and the Company all correspondence and documents furnished by
Seller or the Company's Representatives, and agrees not to disclose or use for
its own purposes any confidential or proprietary information of the Company that
has been furnished to it by Seller or the Company's Representatives.
49
<PAGE>
11.11. Remedies All rights and remedies of the parties hereto are set forth
--------
specifically in this Agreement and the attachments hereto.
50
<PAGE>
11.12. Arbitration Any controversy arising after the Closing out of or
-----------
relating to this Agreement (including, without limitation, pursuant to Section
10.4, but excluding for purposes of this Section 11.12, the employment and non-
competition agreements attached as Exhibits hereto), or relating to the breach
hereof, shall be settled by arbitration in Denver, Colorado, in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect (except as otherwise expressly provided in this Agreement), except that
disputes related to the preparation of financial statements shall be arbitrated
by a mutually agreeable Big 6 accounting firm. The award rendered by the
arbitrator(s) shall be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction thereof.
The arbitrator(s) shall possess the powers to issue mandatory orders and
restraining orders in connection with such arbitration. The expenses of the
arbitration shall be borne by the losing party unless otherwise allocated by the
arbitrator(s). The agreement to arbitrate shall be specifically enforceable
under the prevailing arbitration law. During the continuance of any arbitration
proceedings, the parties shall continue to perform their respective obligations
under this Agreement.
11.13. Seller Representative
---------------------
11.13.1. David P. Lanoha shall also perform the role of "Seller
Representative" hereunder and of Representative under the Escrow Agreement. In
the event of the resignation, death or incapacity of Seller Representative, his
successor shall be appointed within 14 days of his death or incapacity by the
Company, and such successor must be acceptable to Buyer. If the Seller fail to
appoint a successor within such 21-day period, then Buyer shall have the right
to appoint the successor from among the Seller. The choice of a successor
Seller Representative appointed in any manner permitted above shall be final and
binding. The decisions and actions of any successor Seller Representative shall
be, for all purposes, those of Seller Representative as if originally named
herein.
11.13.2. The incapacity of Seller shall not terminate the authority
and agency of the Seller Representative.
ARTICLE XII.
SPECIAL PROVISIONS
------------------
12.1. These special provisions shall control where inconsistent with any
other term or provision of this Agreement and these special provisions are a
material inducement to Seller to enter into this Contract.
51
<PAGE>
12.2. The Buyer acknowledges that the Company has made no representations,
warranties, covenants or agreements or provided other inducements that are not
specifically set forth in this Agreement or the Ancillary Agreements and the
documents related to the asset purchases from the Related Entities. The Buyer
has been provided open and complete access to all books, records, facilities,
equipment, rolling stock, furniture, fixtures, inventory, books, tax returns,
records, minute books, contracts and other data relating to the Company, its
facilities, assets, real property and other tangible and intangible assets.
12.2.1. For purposes of this Agreement, "fraud" shall mean (i)
judicial finding of fraud from which all appeals have been exhausted or have
expired, (ii) an arbitrator's finding of fraud from which all appeals have bee
exhausted or have expired, or (iii) the parties have mutually agreed in writing
as to the existence of fraud.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
ZUNI RENTAL ENTERPRISES, L.L.C. RSC ACQUISITION CORP.
("Company") ("Buyer")
By: /s/ David P. Lanoha By: /s/ Martin R. Reid
------------------------ ------------------------------
Name: David P. Lanoha Name: Martin R. Reid
Its: Managing Member Its: Chief Executive Officer
DAVID P. LANOHA RENTAL SERVICE CORPORATION
("Seller") ("Parent")
By: /s/ Martin R. Reid
------------------------------
/s/ David P. Lanoha Name: Martin R. Reid
- ---------------------------- Its: Chief Executive Officer
David P. Lanoha
53
<PAGE>
Exhibit 10.16
ASSET PURCHASE AGREEMENT
by and among
David P. Lanoha
as "Seller"
RSC Acquisition Corp.
as "Buyer"
Rental Service Corporation
as "Parent"
and
Center Rental & Sales/Omaha, LLC
as the "Company"
October 6, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS..................................................... 1
1.1. Defined Terms......................................................... 1
1.2. Other Defined Terms................................................... 6
ARTICLE II. PURCHASE AND SALE OF ASSETS.................................... 7
2.1. Transfer of Assets.................................................... 7
2.2. Assumption of Liabilities............................................. 7
2.3. Excluded Liabilities.................................................. 8
2.4. Purchase Price........................................................ 9
2.5. Holdback.............................................................. 10
2.6. Closing Costs; Transfer Taxes and Fees................................ 10
2.7. Closing of Books; Benefits and Risks of Ownership..................... 10
2.8. Effective Control Balance Sheet; Dividends; Net Worth................. 11
ARTICLE III. CLOSING....................................................... 11
3.1. Closing............................................................... 11
3.2. Conveyances at Closing................................................ 11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF DAVID P. LANOHA
AND THE COMPANY............................................................. 12
4.1. Organization of the Company........................................... 12
4.2. Authorization......................................................... 13
4.3. No Violation.......................................................... 13
4.4. Capitalization........................................................ 14
4.5. Related Entities...................................................... 14
4.6. Equipment and Other Assets; Absence of Encumbrances................... 14
4.7. Assets................................................................ 15
4.8. Facilities............................................................ 15
4.9. Contracts and Commitments............................................. 15
4.10. Permits.............................................................. 17
4.11. Financial Statements................................................. 17
4.12. Books and Records.................................................... 17
4.13. Litigation........................................................... 17
4.14. Labor Matters........................................................ 18
4.15. Compliance with Law.................................................. 18
4.16. No Brokers........................................................... 18
4.17. No Other Agreements to Sell the Company.............................. 18
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
4.18. Proprietary Rights.................................................. 18
4.19. Tax Matters......................................................... 19
4.20. Accounts Receivable................................................. 20
4.21. Inventory........................................................... 21
4.22. Employees and Employee Benefits..................................... 21
4.23. Compliance With Environmental Laws.................................. 25
4.24. Liabilities......................................................... 28
4.25. Insurance........................................................... 28
4.26. Conduct of the Business............................................. 28
4.27. Knowledge........................................................... 28
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT............. 30
5.1. Organization of Buyer and Parent..................................... 30
5.2. Authorization........................................................ 30
5.3. No Conflict or Violation............................................. 30
5.4. Consents and Approvals............................................... 30
ARTICLE VI. COVENANTS OF BUYER, THE COMPANY AND SELLER.................... 31
6.1. Further Assurances................................................... 31
6.2. No Solicitation...................................................... 31
6.3. Notification of Certain Matters...................................... 32
6.4. Access to Information................................................ 32
6.5. Conduct of Business.................................................. 32
6.6. Guarantee............................................................ 33
6.7. Employee Matters..................................................... 33
6.8. [RESERVED]........................................................... 33
----------
6.9. Environmental Assessments and Remediation............................ 34
6.10. Registration Rights................................................. 35
6.11. Cooperation Regarding Dealerships................................... 36
6.12. Use of Name and Telephone Numbers................................... 36
6.13. 1997 Tax Returns.................................................... 36
ARTICLE VII. CONDITIONS TO COMPANY'S OBLIGATIONS.......................... 36
7.1. Representations, Warranties and Covenants............................ 37
7.2. No Proceedings, Litigation or Laws................................... 37
7.3. Certificates......................................................... 37
7.4. Other Conditions..................................................... 37
7.5. Consents............................................................. 37
7.6. Other Transactions................................................... 37
ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS........................... 38
8.1. Representations, Warranties and Covenants............................ 38
</TABLE>
ii
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<TABLE>
<CAPTION>
Page
<S> <C>
8.2. Consents.............................................................. 38
8.3. No Proceedings or Litigation.......................................... 38
8.4. Opinion of Counsel.................................................... 38
8.5. Certificates.......................................................... 41
8.6. Conveyancing Documents; Release of Encumbrances....................... 41
8.7. Completion of Environmental Remediation............................... 41
8.8. Tax Clearance Certificate............................................. 41
8.9. Employment and Non-Competition Agreements............................. 41
8.10. Release of Encumbrances.............................................. 41
8.11. Board Approval....................................................... 41
8.12. Documents............................................................ 42
8.13. Schedules and Due Diligence Review................................... 42
8.14. No Material Adverse Change........................................... 42
8.15. Other Transactions................................................... 42
ARTICLE IX. CONSENTS TO ASSIGNMENT; RISK OF LOSS........................... 42
9.1. Consents to Assignment................................................ 42
9.2. Risk of Loss.......................................................... 43
ARTICLE X. ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING.................. 43
10.1. Books and Records; Tax Examinations.................................. 43
10.2. Payment of Liabilities............................................... 44
10.3. Survival of Representations, Etc..................................... 44
10.4. Indemnifications..................................................... 44
10.5. Further Action....................................................... 47
ARTICLE XI. MISCELLANEOUS.................................................. 48
11.1. Termination.......................................................... 48
11.2. Assignment........................................................... 49
11.3. Notices.............................................................. 49
11.4. Choice of Law........................................................ 50
11.5. Entire Agreement; Amendments and Waivers............................. 50
11.6. Multiple Counterparts................................................ 50
11.7. Expenses............................................................. 51
11.8. Invalidity........................................................... 51
11.9. Titles............................................................... 51
11.10. Publicity; Confidentiality.......................................... 51
11.11. Remedies............................................................ 51
11.12. Arbitration......................................................... 52
11.13. Seller Representative............................................... 52
ARTICLE XII. SPECIAL PROVISIONS............................................ 52
</TABLE>
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of October 6, 1997 (the
"Agreement"), is by and among RSC Acquisition Corp., a Delaware corporation,
("Buyer"), Rental Service Corporation, a Delaware corporation ("Parent"), David
P. Lanoha ("Seller") and Center Rental & Sales/Omaha, LLC (herein the
"Company").
RECITALS
--------
A. The Company is engaged in the business of equipment rentals and
sales, operating under the Center Rental name.
B. Seller owns, of record and beneficially, a majority of the issued
and outstanding membership units of the Company ("Memberships").
C. The Company owns certain assets which it uses in its conduct of
the Business.
D. Buyer desires to purchase from the Company, and the Company
desires to sell to Buyer, such assets upon the terms and subject to the
conditions of this Agreement (the "Purchase").
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1. Defined Terms. As used herein, the terms below shall have the
-------------
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning set forth in the Exchange Act.
---------
"Agreement" shall have the meaning specified in the first paragraph of
---------
this Agreement.
"Ancillary Agreements" shall mean the Employment and Non-Competition
--------------------
Agreements to be entered into with David Lanoha, Jack Markle and Doug
Bonnettete, substantially in the forms attached as exhibits to the Related
Purchase Agreements and such other agreements mutually agreed to be necessary or
desirable to consummate the transactions contemplated hereby.
1
<PAGE>
"Assets" shall mean all of the right, title and interest of the
------
Company in and to the business, properties, assets and rights of any kind,
whether tangible or intangible, and constituting, or used or useful in
connection with, or related to, the Business, including without limitation all
of the Company's right, title and interest in the following:
1. all rights of the Company under the Assumed Contracts;
2. all rental and non-rental Equipment related to the Business;
3. all Inventory related to the Business;
4. all current and fixed assets;
5. all cash and cash equivalents (including short-term investments);
6. all Books and Records related to the Business;
7. all Proprietary Rights related to the Business;
8. to the extent transferable, all Permits related to the Business;
9. all computers and, to the extent transferable, software used in
the Business;
10. all utility deposits;
11. all available supplies, sales literature, promotional literature,
customer, supplier and distributor lists, display units, telephone and facsimile
numbers and purchasing records related to the Business;
12. all rights under or pursuant to all warranties, representations
and guarantees made by suppliers in connection with the Assets or services
furnished to the Company pertaining to the Business or affecting the Assets, to
the extent such warranties, representations and guarantees (i) are not required
by the Company to fulfill its obligations under this Agreement and (ii) are
assignable;
13. all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, against any person or entity,
including without limitation any liens, security interests, pledges or other
rights to payment or to enforce payment in connection with products delivered by
the Company on or prior to the Closing Date;
14. all accounts receivable;
15. all Open Rental Contracts and customer deposits made in
connection therewith (including, without limitation, deposits made in the form
of cash, check, or a preliminary charge on a credit or debit card); and
16. the Company's prepayments and prepaid expenses.
2
<PAGE>
"Assumed Leases" shall mean the Leases of the Facilities listed on
--------------
Schedule 4.8.
"Balance Sheet" shall mean the balance sheet of the Company as of the
-------------
Balance Sheet Date.
"Balance Sheet Date" shall mean August 31, 1997.
------------------
"Books and Records" shall mean (a) all records and lists pertaining to
-----------------
the Business, customers, suppliers or personnel of the Company, (b) all product,
business and marketing plans of the Company and (c) all books, ledgers,
subledgers, trial balances, files, reports, plans, drawings and operating
records of every kind maintained by the Company.
"Business" shall mean the Company's equipment rental and sales
--------
business.
"Buyer" shall have the meaning specified in the first paragraph of
-----
this Agreement.
"Closing Date" shall mean November 28, 1997, or such later date before
------------
January 31, 1998 on which the parties otherwise agree.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Company" shall have the meaning specified in the first paragraph of
-------
this Agreement.
"Contract" shall mean any agreement, contract, note, factoring
--------
agreement, loan, evidence of indebtedness, purchase order, letter of credit,
franchise agreement, lease, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation or commitment to which the Company is
a party or is bound and which relates to the Business or Assets, whether oral or
written.
"Effective Control Balance Sheet" shall mean the balance sheet of the
-------------------------------
Company at October 31, 1997.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
-----------
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Equipment" shall mean all of the rental and non-rental furniture,
---------
fixtures, furnishings, machinery, automobiles, trucks, spare parts, tools,
supplies, shop equipment, equipment and other tangible personal property owned
by the Company.
3
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"Escrow Agent" shall mean the Chase/Mellon Trust Company or another
------------
entity designated by Buyer and the Seller Representative to act as escrow agent
under the Escrow Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement dated as
----------------
of the Closing Date by and among Buyer, Seller Representative and the Escrow
Agent, substantially in the form attached hereto as an Exhibit.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"Facilities" shall mean the rental yards, stores, offices, maintenance
----------
and storage facilities, shops, warehouses, improvements and other structures,
together with all related fixtures and improvements, which are used (or will be
used) in the conduct of the Business, located at or on the Leased Real Property.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended.
"Financial Statements" shall mean the Balance Sheet and the related
--------------------
statement of operations of the Company for the 10 month period ended on the
Balance Sheet Date.
"Inventory" shall mean all of the Company's inventory held for resale
---------
and all of the Company's new repair or replacement parts, supplies and packaging
items and similar items with respect to the Business, in each case wherever the
same may be located.
"Leased Real Property" shall mean all real property leased by the
--------------------
Company, including without limitation, all rights, easements and privileges
appertaining or relating thereto, all buildings, fixtures, and improvements
located thereon and all Facilities thereon, if any.
"Material Adverse Effect" or "Material Adverse Change" shall mean with
----------------------- -----------------------
respect to the Business or the Assets any significant and substantial adverse
effect or change in the condition (financial or other), business, results of
operations, prospects, assets, liabilities or operations of the Business or the
Assets or on the ability of the Seller or the Company to consummate the
transactions contemplated hereby, or any event or condition which would, with
the passage of time, constitute a "Material Adverse Effect" or "Material Adverse
----------------------- ----------------
Change." "Material", when used as an adjective, refers to something the
- ------
existence or absence of which, as the context requires, would have a Material
Adverse Effect.
"Memberships" shall mean all of the issued and outstanding membership
-----------
units of the Company.
"New Leases" shall mean the leases of the Omaha and Olathe facilities.
----------
4
<PAGE>
"Open Rental Contracts" shall mean (i) all Contracts pursuant to which
---------------------
the Company has rented Equipment and, as of the Closing Date, the rentee under
each such Contract is still in possession of such Equipment and (ii) all
Contracts under which the rentee has returned the Equipment but has not yet been
invoiced.
"Owned Real Property" shall mean all real property owned in fee by the
-------------------
Company which is used in the conduct of the Business.
"Parent" shall mean Rental Service Corporation, a Delaware
------
corporation.
"Permits" shall mean all licenses, permits, franchises, approvals,
-------
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.
"Related Entity" shall mean any corporation, partnership, trust or
--------------
other organization in which the Company or any of its Affiliates has a material
interest, including, without limitation, Rent-It-Center, Inc. d/b/a Center
Rental and Sales, Inc., Zuni Rental Enterprises L.L.C. and Lanoha Leasing
Limited Liability Company.
"Related Purchase Agreements" shall mean the two other asset purchase
---------------------------
agreements with Zuni Rental Enterprises L.L.C. and Lanoha Leasing Limited
Liability Company and the stock purchase agreement pursuant to which the Related
Purchase Transactions are consummated.
"Related Purchase Transactions" shall mean the purchases by the Buyer
-----------------------------
of (i) all of the assets of Zuni Rental Enterprises L.L.C. and Lanoha Leasing
Limited Liability Company pursuant to the two asset purchase agreements with
Zuni Rental Enterprises L.L.C. and Lanoha Leasing Limited Liability Company and
(ii) all of the issued and outstanding shares of capital stock of Rent-It-
Center, Inc. d/b/a Center Rental and Sales, Inc.
"Rental and Non-Rental Asset Listing" shall mean the assets reflected
-----------------------------------
on the Balance Sheet and rental items that exist in the equipment inventory as
of August 31, 1997.
"Rental Ready" shall mean that all required maintenance has been
------------
performed and that the equipment does not require any repairs in excess of
$100,000 in the aggregate for the Company and all Related Entities.
"Representative" shall mean any officer, director, principal,
--------------
attorney, agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder.
"Seller" shall have the meaning specified in the first paragraph of
------
this Agreement.
5
<PAGE>
"Seller Representative" shall mean David Lanoha, whom Seller has
---------------------
irrevocably made, constituted and appointed their agent pursuant to Section
11.13 hereof.
"Tax" shall mean any federal, state, local, foreign or other tax,
---
levy, impost, fee, assessment or other government charge, including without
limitation income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation interest, penalties and additions in connection therewith.
"Year-End Balance Sheets" shall mean the balance sheet of the Company
-----------------------
at each of October 31, 1994, 1995 and 1996.
"Year-End Financial Statements" shall mean the Year End Balance Sheet
-----------------------------
dated as of October 31, 1994, 1995 and 1996, and the related statements of
operations of the Company for the fiscal years then ended.
1.2. Other Defined Terms. The following terms shall have the meanings
--------------------
defined for such terms in the Sections set forth below:
Term Section
---- -------
Actions 4.13
Assumed Contracts 4.9
Assumed Liabilities 2.2
Assumption Document 3.2.2.2
Benefit Arrangement 4.22.1
Cash Purchase Price 2.4
Claim 10.4.4
Claim Notice 10.4.4
Closing 3.1
Consultant 6.9.1
Damages 10.4.1
Employee Plans 4.22.1
Environmental Laws 4.23.2
Environmental Assessments 6.9.1
ERISA Affiliate 4.22.1
Excluded Liabilities 2.3
GAAP 4.11
Hazardous Substance 4.23.1.3
Holdback Amount 2.5.1
Missing Inventory 2.4.3
Multiemployer Plan 4.22.1
PBGC 4.22.1
Pension Plan 4.22.1
Parent Common Stock 2.4
6
<PAGE>
Proposed Acquisition Transaction 6.2
Proprietary Rights 4.18.1
Purchase Price 2.4
Release 4.23.1.2
Remediation Standard 6.9.2
Required Remediation 6.9.2
Retained Employees 6.7
Seller Representative 11.13.1
Welfare Plan 4.22.1
ARTICLE II.
PURCHASE AND SALE OF ASSETS
---------------------------
2.1. Transfer of Assets. Upon the terms and subject to the conditions
-------------------
contained herein, at the Closing, the Company will sell, convey, transfer,
assign and deliver to Buyer, and Buyer will acquire from the Company, the
Assets.
2.2. Assumption of Liabilities. Upon the terms and subject to the
--------------------------
conditions contained herein, at the Closing, Buyer shall assume (i) all accounts
payable, current notes payable, customer rental deposits, accrued expenses,
taxes payable, other current liabilities, and long-term debt reflected on the
Effective Control Balance Sheet and (ii) all obligations and liabilities
accruing, arising out of, or relating to events or occurrences happening after
October 31, 1997 under, and only under, the Assumed Contracts listed on Schedule
4.9 and the Assumed Leases listed on Schedule 4.8, but not including any
obligation or liability for any breach of any Contract or Lease occurring on or
prior to October 31, 1997 (i) and (ii) together, the "Assumed Liabilities").
7
<PAGE>
2.3. Excluded Liabilities. Notwithstanding any other provision of this
---------------------
Agreement, except for the Assumed Liabilities expressly specified in Section
2.2, Buyer shall not assume, or otherwise be responsible for, any of the
Company's liabilities or obligations, whether actual or contingent, matured or
unmatured, liquidated or unliquidated, known or unknown, or related or unrelated
to the Business or the Assets, arising out of occurrences on or prior to, the
Closing Date (collectively, "Excluded Liabilities"), which Excluded Liabilities
include, without limitation:
2.3.1. Except as provided in Section 6.9, any liability or
obligation to or in respect of any employees or former employees of the Company
including without limitation (i) any employment agreement, whether or not
written, between the Company and any person, (ii) any liability under any
Employee Plan at any time maintained, contributed to or required to be
contributed to by or with respect to the Company or under which the Company may
incur liability, or any contributions, benefits or liabilities therefor, or any
liability with respect to the Company's withdrawal or partial withdrawal from or
termination of any Employee Plan and (iii) any claim of an unfair labor
practice, or any claim under any state unemployment compensation or worker's
compensation law or regulation or under any federal or state employment
discrimination law or regulation, which shall have been asserted on or prior to
the Closing Date or is based on acts or omissions which occurred on or prior to
the Closing Date;
2.3.2. Any liability or obligation of the Company in respect of any
Tax which is not adequately reflected for on the Effective Control Balance
Sheet;
2.3.3. Any liability arising from any injury to or death of any
person or damage to or destruction of any property, whether based on negligence,
breach of warranty, strict liability, enterprise liability or any other legal or
equitable theory arising from defects in products sold or services performed by
or on behalf of the Company or any other person or entity on or prior to the
Closing Date, or arising from any other cause, including without limitation any
liabilities arising (on a date of occurrence basis or otherwise) on or prior to
the Closing Date relating to the use or misuse of Equipment or to traffic
accidents;
2.3.4. Any liability or obligation of the Company arising out of or
related to any Action against the Company or any Action which adversely affects
the Assets and which shall have been asserted on or prior to the Closing Date or
to the extent the basis of which shall have arisen on or prior to the Closing
Date;
2.3.5. Any liability or obligation of the Company resulting from
entering into, performing its obligations pursuant to or consummating the
transactions contemplated by, this Agreement (including without limitation any
liability or obligation of the Company pursuant to Article X hereof);
2.3.6. Any liability or obligation related to the Facilities, except
for those expressly set forth in the Assumed Leases; and
8
<PAGE>
2.3.7. Any liability or obligation arising out of CERCLA, any
equivalent state statute, or any other Environmental Law arising out of
occurrences on or prior to the Closing Date, except as otherwise provided
herein.
2.4. Purchase Price. At the Closing, upon the terms and subject to the
---------------
conditions set forth herein, Buyer shall pay to the Company in consideration for
the Assets, the aggregate amount of (i) Ten Million and Four Hundred Nine
Thousand Dollars ($10,409,000), subject to adjustment as set forth in Section
2.4.3 below (the "Cash Purchase Price") payable by wire transfer of immediately
available funds to accounts designated by the Company in the amounts as set
forth on Schedule 2.4 and (ii) Thirty-Four Thousand Four Hundred and Twenty-
Three (34,423) shares of Common Stock, par value $.01 per share, of Parent (the
"Parent Common Stock"). The cash and shares referred to in clauses (i) and (ii)
are collectively called the "Purchase Price". Any shares of Parent Common Stock
paid to the Company will be contributed by Parent to Buyer in a transaction
intended to qualify under Section 351 of the Code immediately prior to delivery
of such Parent Common Stock to the Company. The Purchase Price shall be
allocated among the Assets in the manner required by Section 1060 of the Code
and regulations thereunder. Exhibit 2.4 attached hereto sets forth the amount of
the Purchase Price allocable to the various Assets; provided that such
allocation shall be subject to necessary adjustments, to be completed and
reflected in such allocation within 30 days following the Closing Date, on
account of the final Inventory and Equipment valuations under Section 2.4.3.
Buyer and the Company agree to each prepare and file on a timely basis with the
Internal Revenue Service substantially identical initial and supplemental
Internal Revenue Service Forms 8594 "Asset Acquisition Statements Under Section
1060" consistent with Exhibit 2.4 and which give effect to any adjustment to the
Cash Purchase Price determined in accordance with Section 2.4.3 hereof.
2.4.1. If between the date of this Agreement and the Closing Date,
the outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock dividend, stock combination,
exchange of shares or readjustment, the number of shares of Parent Common Stock
issued to the Company pursuant to Section 2.4 shall be proportionately adjusted.
2.4.2. No fractional shares of Parent Common Stock shall be issued,
but in lieu thereof, the Company shall receive from Buyer an amount of cash
equal to the product of the fraction of a share of Parent Common Stock to which
the Company would otherwise be entitled, multiplied by $23.24.
2.4.3. On October 25, 1997 (or such other date as the parties
agree), the Company will conduct, and Buyer shall observe, a physical inventory
of the Company's merchandise inventory, supplies inventory and rental inventory.
The Company may participate in or have their representatives participate in or
observe such inventory. To the extent that the net book value of any Missing
Inventory is greater than $150,000, the Cash Purchase Price will be reduced
dollar for dollar by the amount of such shortfall applicable to Inventory owned
by the Company. "Missing Inventory" means Inventory shown on the combined
perpetual inventory listing of the Company and the Related Entities at October
25, 1997 (or such other date on which
9
<PAGE>
the applicable inventory is taken), which is missing or not accounted for
in the physical inventory.
2.5. Holdback
--------
2.5.1. The "Holdback Amount" shall be (subject to increase pursuant
to Section 6.9.3) Ten Million Dollars ($10,000,000) (which shall also serve as
the Holdback Amount in the Related Purchase Transaction) in cash which, at
Closing, shall be placed in escrow pursuant to the Escrow Agreement pending the
Company's indemnification obligations, if any, as set forth in Section 10.4, and
any remediation required under Section 6.9 hereof which is not resolved by the
Closing Date. The Escrow Agent will remit to the Company the entire Holdback
Amount, net of any amount which Buyer is entitled under the provisions of
Sections 6.9 and 10.4 hereof, when such amounts have been determined, all in
accordance with the provisions of the Escrow Agreement. In the event of any
disagreement between Buyer and the Company regarding the dollar amount of any
such indemnification or remediation obligation, Buyer and the Company shall
submit such dispute to a third-party arbitrator for binding arbitration pursuant
to Section 11.12 of this Agreement. The Company will pay all costs of the
escrow.
2.6. Closing Costs; Transfer Taxes and Fees. The Company shall be
--------------------------------------
responsible for any documentary and transfer taxes and any sales or other taxes
(excluding use taxes on equipment constituting registered motor vehicles, which
use taxes will be paid one-half by each of the Company and Buyer) imposed by
reason of the transfers of Assets provided hereunder and any deficiency,
interest or penalty asserted with respect thereto. Buyer will pay any licensing
fees associated with re-registering motor vehicles. The Company shall pay all
costs of obtaining the transfer of existing Permits which may be lawfully
transferred. The Company shall pay the fees and costs of recording or filing all
applicable conveyancing instruments described in Section 3.2.1, and shall pay
the fees and costs of recording or filing all UCC termination statements and
other releases of Encumbrances.
2.7. Closing of Books; Benefits and Risks of Ownership. The transactions
-------------------------------------------------
contemplated by this Agreement shall be deemed effective as of November 1, 1997,
and all profits and losses of the Company from and after November 1, 1997, shall
be solely for the account of, and inure solely to the benefit or detriment of,
Buyer, except as otherwise set forth in this Agreement. The accounting books and
records of the Company will be closed as of the close of business on October 31,
1997. Seller shall operate the Company subject to and pursuant to the
requirements of this Agreement by, from and after November 1, 1997, until such
time as this Agreement is terminated or closed. If this transaction does not
close for any reason on or prior to January 31, 1998, and is not extended by
agreement of the parties, then the Company shall pay within ten days to the
Buyer profits accumulated during the period from November 1, 1997, to the date
that the closing is deemed not to occur, but not later than January 31, 1998. If
this transaction does not close for any reason on or prior to January 31, 1998
and is not extended by agreement of the parties, then the Buyer shall within ten
days pay to the Company all losses accumulated by the Company during the period
from November 1, 1997, to the date that the closing is deemed not to occur, but
not later than January 31, 1998.
10
<PAGE>
2.8. Effective Control Balance Sheet; Dividends; Net Worth.
------------------------------------------------------
2.8.1. The Company will prepare the Effective Control Balance Sheet
in accordance with GAAP, which Effective Control Balance Sheet will fairly and
accurately reflect the assets and liabilities of the Company as of October 31,
1997.
2.8.2. Without the consent of Buyer, until the Closing Date, the
Company or Seller shall not repurchase, sell or transfer any Memberships, make
or declare any dividends or make other distributions to members or otherwise
take any action restricted under this Agreement.
2.8.3. The Cash Purchase Price will be reduced dollar for dollar to
the extent the aggregate net worth of the Company and other LLC's, the assets
of which are being acquired incident to the Related Purchase Transactions, at
October 31, 1997 is less than $928,164 in the aggregate.
ARTICLE III.
CLOSING
-------
3.1. Closing. The Closing of the transactions contemplated herein
-------
(the "Closing") shall be held on the Closing Date at a time and place as the
parties shall mutually agree.
3.2. Conveyances at Closing.
----------------------
3.2.1. Company's and Seller's Delivery Obligations. To effect the
--------------------------------------------
sale and transfer referred to in Section 2.1 hereof, the Company will, at the
Closing, execute and deliver to Buyer:
3.2.1.1. one or more bills of sale, each in the form of Exhibit
3.2.1.1 attached hereto, conveying in the aggregate all of the Company's owned
personal property included in the Assets, free and clear of all Encumbrances;
3.2.1.2. subject to Section 9.1, Assignments of Contract
Rights, each in the form of Exhibit 3.2.1.2 attached hereto, with respect to the
Assumed Contracts;
3.2.1.3. assignments of Trademarks, Service Marks and other
Proprietary Rights, each in the form of Exhibit 3.2.1.3 attached hereto, in
recordable form to the extent necessary to assign such rights; and
3.2.1.4. such other instruments as shall be requested by Buyer
to vest in Buyer title in and to the Assets in accordance with the provisions
hereof.
3.2.1.5. all Ancillary Agreements required to be executed by
the Seller;
3.2.1.6. all certificates, opinions of counsel and other
documents described in Article VIII; and
11
<PAGE>
3.2.1.7. all Permits and any other third party consents required
for the valid transfer of the Assets as contemplated by this Agreement, or for
the continued operation of the Business following such transfer.
3.2.2. Buyer's Delivery Obligations. To effect the sale and transfer
----------------------------
referred to in Section 2.1 hereof, Buyer will, at the Closing, execute and
deliver to the Company:
3.2.2.1. all Ancillary Agreements required to be executed by Buyer;
and
3.2.2.2. Upon the terms and subject to the conditions contained
herein, an instrument of assumption substantially in the form attached hereto as
Exhibit 3.2.2, evidencing Buyer's assumption, pursuant to Section 2.2, of the
Assumed Liabilities (the "Assumption Document").
3.2.2.3. all certificates, opinions of counsel and other documents
described in Article VII.
3.2.2.4. the payment of the Purchase Price and repayment of the
Company's outstanding loan to Colorado National Bank.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF DAVID P. LANOHA AND THE COMPANY
-----------------------------------------------------------------
David P. Lanoha and the Company hereby jointly and severally represent and
warrant to Buyer and Parent as follows, which representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
4.1. Organization of the Company
---------------------------
The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Colorado. Copies
of the organizational documents of the Company, and all amendments thereto,
heretofore or hereafter delivered to Buyer are accurate and complete as of the
date hereof. The Company is duly qualified or licensed to do business as a
foreign corporation in good standing in the states where Facilities are located
and in other states where this is legally required, except where the failure to
be so qualified would not have a Material Adverse Effect.
4.2. Authorization
-------------
The Seller and the Company each has full power and authority
(corporate or other) to enter into this Agreement and the Ancillary Agreements,
as the case may be, and to carry out the transactions contemplated hereby and
thereby, and the Company and Seller has taken all action required by law, its
charter documents, as the case may be, or otherwise to be taken by it to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements, as the case may be, and the consummation of the
transactions contemplated hereby and thereby. This Agreement and the Ancillary
Agreements, as the case may be, are the legal, valid and binding obligations of
Seller and the Company, enforceable against each of them in accordance with
their respective terms, subject to bankruptcy, insolvency, moratorium and
creditors' rights generally. A copy of the resolutions of
12
<PAGE>
the Company's manager and members authorizing this Agreement and the related
transactions is attached hereto as Schedule 4.2.
4.3. No Violation. None of the execution, delivery and performance
------------
of this Agreement and the Ancillary Agreements nor the consummation of the
transactions contemplated hereby and thereby will (i) violate any provision of
the organizational documents of the Company, (ii) violate, result in a breach
of, conflict with, or constitute a default (or an event which, with the giving
of notice or lapse of time or both, would constitute a default) under, require
any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of any note, bond,
mortgage, or indenture, contract, agreement, lease, sublease, license, permit,
franchise, distributorship agreement or other instrument or arrangement to which
Seller or the Company is a party or by which any of the Memberships or any of
the assets or properties of the Company or Seller is bound or affected, which
violation, breach, conflict or default will have a Material Adverse Effect,
(iii) result in the creation or imposition of any Encumbrance upon any of the
Memberships or any property or Assets of the Company or Seller under any
agreement or commitment to which the Company or Seller is a party or by which
the Company or Seller is bound or affected, or to which the property of the
Company or Seller is subject, or (iv) violate, conflict with or result in the
breach of (or cause an event which could have a Material Adverse Effect as a
result of) any statute or law or any judgment, decree, order, regulation or rule
of any court or governmental authority to which Seller, the Company, the
Business or any of the properties or Assets of any of the foregoing is subject,
which violation, breach or conflict would have a Material Adverse Effect. Except
as set forth on Schedule 4.3 or as required by the HSR Act, no action, consent,
approval or authorization by or filing with any person or entity, including,
without limitation, any governmental authority, is required in connection with
the execution, delivery and performance by Seller and the Company of this
Agreement and the Ancillary Agreements, as the case may be, or the consummation
by Seller and the Company of the transactions respectively contemplated by each
of them herein and therein, except consents, the failure of which to obtain
would not have a Material Adverse Effect.
4.4. Capitalization
--------------
4.4.1. The authorized and the issued membership units of the Company
are as set forth on Schedule 4.4. Seller is and will be on the Closing Date the
record and beneficial owners and holders of the Memberships as set forth on
Schedule 4.4, free and clear of all Encumbrances.
4.4.2. There are no other membership units of the Company issued and
outstanding other than those listed on Schedule 4.4. None of the membership
units was issued in violation of any preemptive rights. There are no outstanding
(i) securities convertible into or exchangeable or exercisable for any of the
Company's membership units; (ii) options, warrants, calls or other rights,
including, without limitation, rights to demand registration or to sell in
connection with any registration by the Company under the Securities Act, with
respect to the issued membership units of the Company, or to purchase or
subscribe to membership units of the Company or securities convertible into or
exchangeable or exercisable for membership units of the Company; (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance, sale, transfer, and/or assignment of any membership
units of the Company, any such convertible or exchangeable securities or any
such options, warrants or
13
<PAGE>
rights; or (iv) membership units pledged as collateral to secure any agreement
or obligation. There are no voting trust agreements or other contracts,
agreements, arrangements, commitments, plans, proxies or understandings
restricting or otherwise relating to any conveyance, voting or dividend rights
with respect to the membership units.
4.5. Related Entities.
----------------
4.5.1. Schedule 4.5(a) sets forth a complete and accurate list of
all of the Related Entities, all of which are, directly or indirectly, wholly-
owned by Seller or the Company. Schedule 4.5(a) also sets forth the jurisdiction
of incorporation of each of the Related Entities, each jurisdiction in which
each such Related Entity is qualified to do business, and the ownership
interests thereof.
4.5.2. Schedule 4.5(b) sets forth a list of all agreements among the
Company, any of the Seller and the Related Entities.
4.6. Equipment and Other Assets; Absence of Encumbrances. The Asset
---------------------------------------------------
attached as Schedule 4.6 sets forth the asset description and original cost of
all Equipment. Buyer shall have the right, prior to Closing, to inspect all of
the Assets (wherever located) that are reflected on the Balance Sheet. All
rental equipment is Rental Ready.
14
<PAGE>
4.7. Assets. The Company has and will transfer good and marketable fee
------
simple title to the Assets and upon the consummation of the transactions
contemplated hereby, Buyer will acquire good title to all of the Assets, free
and clear of any Encumbrances, except for any Encumbrance that Buyer, in its
sole discretion, specifically accepts in writing. The Assets reflected in the
1996 Year End Balance Sheet and all of the Assets acquired after such date are
or will be valued at the lower of actual cost or market less an adequate and
proper depreciation charge. The Assets include without limitation all assets
necessary for the conduct of the Business as presently conducted.
4.8. Facilities.
----------
4.8.1. Real Property. The Company has no Owned Real Property.
-------------
All of the Leased Real Property is listed on Schedule 4.8. The Company has
delivered to Buyer an accurate copy of its existing leases. The Company enjoys
peaceful and undisturbed possession of the Leased Real Property. Other than the
leases provided, there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting to any person the right to purchase, use or occupy the Facilities
or any portion thereof. The Facilities are supplied with utilities and other
services necessary for the operation of the Business. Neither the Company nor,
to its knowledge, any lessor under the Leases, is in breach or default of its
obligations thereunder.
4.8.2. Improvements, Fixtures and Equipment. The Facilities and
------------------------------------
the improvements thereon, including without limitation all Equipment (including
all fixtures) and other tangible assets owned, leased or used by the Company at
the Facilities are insured to the extent and in a manner customary in the
industry, are in the reasonable business judgment of the Company sufficient for
the operation of the Business as presently conducted and are in conformity, in
all material respects, with all applicable laws, ordinances, orders, regulations
and other requirements currently in effect. None of the improvements is subject
to any commitment or other arrangement for their sale or use by any Affiliate of
the Company or third parties other than purchase options set forth in leases
identified on Schedule 4.8. Buyer shall have the right, prior to Closing, to
inspect all of the Facilities.
4.8.3. Conformity. All Facilities have received all material
----------
required approvals of governmental authorities (including without limitation
Permits and a certificate of occupancy or other similar certificate permitting
lawful occupancy of the Facilities) required in connection with the operation
thereof.
4.1. Contracts and Commitments
-------------------------
4.9.1. Contracts. Schedule 4.9 sets forth a complete and accurate
---------
list of all material Contracts of the following categories:
4.9.1.1. Contracts not made in the ordinary course of the
Company's conduct of the Business;
4.9.1.2. Employment contracts and severance agreements;
15
<PAGE>
4.9.1.3. Supply, purchase, distribution, franchise, license,
sales or commission agreements related to the Business;
4.9.1.4. Contracts involving expenditures or liabilities, actual
or potential, in excess of $5,000 or otherwise material to the Business, and not
cancelable (without liability) within 30 calendar days;
4.9.1.5. Contracts or commitments relating to commission
arrangements with others;
4.9.1.6. Factoring agreements, promissory notes, loans,
agreements, evidences of indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, whether the Company shall be
the borrower, lender or guarantor thereunder or whereby any Equipment or
Inventory are pledged (excluding credit provided by the Company in the ordinary
course of the Business to its customers);
4.9.1.7. Leases of personal property not cancelable (without
liability) within 30 calendar days; and
4.9.1.8. Contracts containing covenants limiting the freedom of
the Company or any officer, director or shareholder of the Company to engage in
any line of business or compete with any person.
For purposes of this Agreement, the "Assumed Contracts" are the
Contracts listed as such on Schedule 4.9. The Company has made available to
Buyer true, correct and complete copies of all of the Contracts listed on
Schedule 4.9, including all amendments and supplements thereto, whether or not
such Contracts are Assumed Contracts.
4.9.2. Absence of Breaches or Defaults. All of the material
-------------------------------
Contracts are valid and in full force and effect, subject to any repudiation
claims of other parties not known to Seller. The Company has duly performed all
of its material obligations under the Contracts to the extent those obligations
to perform have accrued, and no material violation of, or material default or
breach under any Contracts by the Company or, to the best of Seller's knowledge,
any other party has occurred and neither the Company nor, to Seller's knowledge,
any other party has repudiated any provisions thereof. All of the material
Contracts will be enforceable by the Company after the Closing to the same
extent as if the transactions contemplated by this Agreement had not been
consummated, subject to compliance with applicable change of control provisions,
all of which are identified on Schedule 4.3.
4.10. Permits The Company has all material Permits required to conduct
-------
the Business, except where the failure to obtain such Permits would not have a
Material Adverse Effect. All material Permits of the Company related to the
Business are valid and in full force and effect, and are listed on Schedule
4.10.
4.11. Financial Statements The Company has heretofore delivered to
--------------------
Buyer the Financial Statements and Year-End Financial Statements. Except as set
forth on Schedule 4.11,
16
<PAGE>
the Financial Statements and Year-End Financial Statements (a) are in accordance
with the underlying books and records of the Company, (b) have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods covered thereby, excluding any footnotes which
may be required by GAAP, and (c) fairly and accurately present the assets,
liabilities (including all reserves) and financial position of the Business as
of the respective dates thereof and the results of operations and changes in
cash flows for the periods then ended (subject to normal year-end adjustments).
Except as set forth on Schedule 4.11, at the Balance Sheet Date there were no
liabilities of the Company, which, in accordance with GAAP, should have been
shown or reflected in the Financial Statements or the notes thereto, which are
not shown or reflected in the Financial Statements or the notes thereto.
4.12. Books and Records The Company has made and kept (and given Buyer
-----------------
access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of the Company. The books and
records of the Company made available to Buyer accurately and adequately reflect
all action previously taken by managers and members of the Company. The
ownership records of the Company made available to Buyer are true, correct and
complete, and accurately reflect all transactions effected with respect to
Company's membership interests through and including the date hereof.
4.13. Litigation Except as set forth on Schedule 4.13, there is no
----------
no action, order, writ, injunction, judgment or decree outstanding or any claim,
suit, litigation, proceeding, labor dispute, arbitral action, governmental audit
or investigation (collectively, "Actions") pending, or to the best of the
Seller's or Company's knowledge, threatened or anticipated (a) against, related
to or affecting the Company or the Business or (b) seeking to delay, limit or
enjoin the transactions contemplated by this Agreement. The Company is not in
default with respect to or subject to any judgment, order, writ, injunction or
decree of any court or governmental agency, and there are no unsatisfied
judgments against the Company or the Business.
17
<PAGE>
4.14. Labor Matters The Company is not a party to any labor agreement
-------------
with respect to its employees with any labor organization, union, group or
association and none of the Company's employees are represented by employee
unions (or any other similar labor or employee organizations). The Company has
not experienced within the past five (5) years any attempt by organized labor or
its representatives to make the Company conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company.
4.15. Compliance with Law The Company, the conduct of the Business and
-------------------
the operation of the Facilities have not materially violated and are in material
compliance with all laws, statutes, ordinances, regulations, rules and orders of
any foreign, federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree or order of any court
or governmental agency, department or authority, including without limitation
Environmental Laws (as defined in Section 4.23.2), relating to the Assets,
Facilities or Business or operations of the Company, except where the violation
or failure to comply, individually or in the aggregate would not have a Material
Adverse Effect on the Facilities, Assets or Business. The Company and the
conduct of the Business and the operation of the Facilities are in material
conformity with all energy, public utility, zoning, building and health codes,
regulations and ordinances, the Americans with Disabilities Act, ERISA, OSHA and
Environmental Laws and all other foreign, federal, state, and local governmental
and regulatory requirements. The Company has not received any notice to the
effect that, or otherwise been advised that, it is not in compliance with any
such statutes, regulations, rules, judgments, decrees, orders, ordinances or
other laws, and the Company has no reason to anticipate that any existing
circumstances are likely to result in violations of any of the foregoing.
4.16. No Brokers Except as set forth on Schedule 4.16, neither the
----------
Seller, the Company nor any of the Company's managers or Affiliates has employed
or made any agreement with any broker, finder or similar agent or any person or
firm which will result in an obligation on the part of the Company or Buyer to
pay any finder's fee, brokerage fees or commission or similar payment in
connection with the transactions contemplated hereby.
4.17. No Other Agreements to Sell the Company Neither the Seller nor
---------------------------------------
the Company has any commitment or legal obligation, absolute or contingent, to
any other person or firm other than the Buyer to sell, assign, transfer or
effect a sale of any of the Memberships or the Assets or to effect any merger,
consolidation, liquidation, dissolution or other reorganization of the Company,
and no person or entity has notified Seller or the Company that it believes such
a commitment or legal obligation exists.
4.18. Proprietary Rights.
-------------------
4.18.1. Proprietary Rights. Schedule 4.18 lists all of the
------------------
Company's material federal, state and foreign registrations of trademarks,
service marks and other marks, trade names or other trade rights, and all
pending applications for any such registrations, all other trademarks and other
marks, trade names and other trade rights or in which the Company has any
interest whatsoever, and all other trade secrets, if any, and other proprietary
rights, whether or not
18
<PAGE>
registered, and all computer software (including without limitation the tool
rental control software used by the Company) other than software generally
available to the public, created or used by or on behalf of the Company, in each
case relating to the Business (collectively, "Proprietary Rights"). The
Proprietary Rights listed in Schedule 4.18 are all those used by the Company in
connection with the Business other than software generally available to the
public.
4.18.2. Royalties and Licenses. No person has a right to receive
----------------------
a royalty or similar payment in respect of any material Proprietary Rights.
Except as set forth on Schedule 4.18.2 the Company has no licenses granted, sold
or otherwise transferred by or to it or other agreements to which it is a party,
relating in whole or in part to any of the material Proprietary Rights.
4.18.3. Ownership and Protection of Proprietary Rights. Except as
----------------------------------------------
set forth on Schedule 4.18.3, the Company owns or licenses, and has the sole
right to use or (as it so elects) to sublicense, each of the Proprietary Rights,
and the Company is not a party to any litigation with respect to any of the
Proprietary Rights. The Company has not received any notice of invalidity or
infringement of any rights of others with respect to such Proprietary Rights.
The Company has taken all reasonable and prudent steps in the reasonable
business judgment of the Company to protect the Proprietary Rights from
infringement by any other firm, corporation, association or person. The
Company's use of the Proprietary Rights is not, to Seller's knowledge,
infringing upon or otherwise violating the rights of any third party in or to
such Proprietary Rights, nor has such infringement been alleged by any third
party. All of the material Proprietary Rights are valid and enforceable rights
of the Company and will not cease to be valid and in full force and effect by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated by this Agreement.
4.19. Tax Matters
-----------
4.19.1. Filing of Tax Returns. The Company has timely filed with the
---------------------
appropriate taxing authorities all returns (including without limitation
information returns and other material information) in respect of Taxes required
to be filed through the date hereof and will timely file any such returns
required. The returns and other information filed are complete and accurate in
all material respects. Except as specified in Schedule 4.19, since October 31,
1990, neither the Company, nor any group of which the Company now or was a
member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any taxes. The
Company has made available to Buyer complete and accurate copies of the
Company's federal, state and local income tax returns for its fiscal years ended
October 31, 1994, 1995 and 1996, and will deliver to Buyer copies of the
Company's federal, state and local tax returns for the twelve months ended
October 31, 1997 when completed and will deliver, upon Buyer's request, any
other Tax returns.
4.19.2. Payment of Taxes. All Taxes, in respect of taxable periods
----------------
ending on or before the date of the Effective Control Balance Sheet, have been
timely paid, or will be timely paid prior to such date, or will be fully accrued
for on the Effective Control Balance Sheet. Any unpaid Taxes relating to periods
ending on or before the date of the Effective Control Balance
19
<PAGE>
Sheet (whether full or partial periods) that are not fully accrued for on the
Effective Control Balance Sheet will be subject to full indemnification by
Seller in accordance with Section 10.3 hereof (without being limited as to
amount).
4.19.3. Audits, Investigations or Claims. Except as set forth in
--------------------------------
Schedule 4.19, the federal income tax returns and any required state tax returns
of the Company have been examined by the Internal Revenue Service and any
applicable state taxing authority for all periods from November 1, 1990, to and
including the Closing, and except to the extent shown therein, no deficiencies
for Taxes, have been assessed by any taxing or other governmental authority
against the Company. Except as set forth in Schedule 4.19, there are no pending
or, to the best of the Seller's or Company's knowledge, threatened audits,
investigations or claims for or relating to any material additional liability in
respect of Taxes, and there are no matters under discussion with any
governmental authorities with respect to Taxes that in the reasonable judgment
of the Company, or its counsel, is likely to result in a material additional
liability for Taxes. Audits of federal, state, and local returns for Taxes by
the relevant taxing authorities have been completed for each period subsequent
to October 31, 1990 except as set forth in Schedule 4.19 and, except as set
forth therein, the Company has not been notified that any taxing authority
intends to audit a return for any period. Except as set forth in Schedule 4.19,
no extension of a statute of limitations relating to Taxes is in effect with
respect to the Company.
4.19.4. Lien. There are no liens for Taxes (other than as could
----
be asserted for current Taxes not yet due and payable) on the Assets.
4.19.5. No Withholding. The transaction contemplated herein is
--------------
not subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
4.19.6. Tax-Exempt Use Property. None of the Assets is a "tax-
-----------------------
exempt use property" within the meaning of Section 168(h) of the Code.
4.20. Accounts Receivable The accounts receivable reflected in the Balance
-------------------
Sheet represent bona fide claims of the Company against debtors for sales,
services performed or other charges arising on or before the date hereof, and
all the goods delivered and services performed which gave rise to said accounts
were delivered or performed in accordance with the applicable orders, Contracts
or customer requirements. All of such accounts receivable are collectible in the
ordinary course of business except to the extent of a bad debt reserve
representing the same percentage of accounts receivable of the Company at the
Closing Date as were reserved against on the Balance Sheet. The Company owns, or
contemporaneously with the conveyances to be consumated at the Closing, will own
all such accounts receivable, free and clear of all Encumbrances.
4.21. Inventory All the Inventory (both rental and non-rental, supplies
---------
inventory and merchandise inventory) is located at the Facilities, except items
of rental equipment on lease to customers. There has been no material decrease
in the book value or fair value of the Inventory since the Balance Sheet Date,
except for sales of Inventory in the ordinary course of business. The values at
which the Inventory is shown on the Balance Sheet have been determined on the
20
<PAGE>
average cost method in accordance with Federal tax regulations, consistently
applied throughout the periods covered by the Financial Statements. The
inventory is salable or rentable, as the case may be, in the ordinary course of
business consistent with past practice.
4.22. Employees and Employee Benefits
-------------------------------
4.22.1. As used in this Section 4.22, the following terms have the
meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting, severance
-------------------
or other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit-sharing bonuses, stock options,
stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (A) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into,
maintained, contributed to or required to be contributed to, as the case may be,
by the Company or an ERISA Affiliate or under which the Company or any ERISA
Affiliate may incur any liability, and (C) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
--------------
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant
---------------
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, the Company as
defined in Section 414(b), (c), (m) or (o) of the Code, or under "common
control" with the Company, within the meaning of Section 4001(b)(1) of ERISA.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined
------------------
in Section 4001(a)(3) of ERISA, (A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability and (B) which covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Pension Plan" shall mean any "employee pension benefit plan" as
------------
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the five
21
<PAGE>
years prior to the Closing Date, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability; (B) covers any employee or former employee of the Company
or any ERISA Affiliate (with respect to their relationship with such entities);
and (C) is not a Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
------------
defined in Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability; (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities); and (C) is not a Multiemployer Plan.
4.22.2 Schedule 4.22: (i) contains a list of all current
employees of the Company, and their wage rates or salaries, as of the date of
this Agreement, and (ii) sets forth the dates of employment for such employees.
4.22.3 Disclosure; Delivery of Copies of Relevant Documents and
--------------------------------------------------------
Other Information. Schedule 4.22 contains a complete list of Employee Plans.
- -----------------
True and complete copies of each of the following documents have been made
available by the Company to Buyer: (i) each Welfare Plan, Pension Plan and
Multiemployer Plan (and, if applicable, related trust agreements) and all
amendments thereto, all written interpretations thereof and written descriptions
thereof which have been distributed to the Company's employees and all annuity
contracts or other funding instruments; (ii) each Benefit Arrangement including
written interpretations thereof and written descriptions thereof which have been
distributed to the Company's employees (including descriptions of the number and
level of employees covered thereby) and a complete description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan; (iv) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and each Welfare Plan; (v) all actuarial reports
prepared for the last three plan years for each Pension Plan; (vi) a description
of complete age, salary, service and related data as of the last day of the last
plan year for employees and former employees of the Company; and (vii) a
description setting forth the amount of any liability of the company as of the
Closing Date for payments more than thirty (30) calendar days past due with
respect to each Welfare Plan.
4.22.4 Representations.
---------------
4.22.4.1 Pension Plans. Neither the Company nor any ERISA
-------------
Affiliate has or contributes to or maintains or has any obligation to make
payments to any Pension Plan. No Pension Plan is subject to the minimum funding
requirements of Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any ERISA Affiliate is required to provide security to a Pension
Plan under Section 401(a)(29) of the Code. Each Pension Plan which is intended
to be qualified (and each related trust agreement, annuity contract or other
funding instrument) is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and has been so qualified
during the period from its adoption to date.
22
<PAGE>
Neither the Company nor any ERISA Affiliate has engaged in, or is a successor or
parent corporation to an entity that has engaged in, a transaction described in
Section 4069 of ERISA. There has been no "reportable event" (as defined in
Section 4043(c) of ERISA and the PBGC regulations under such Section) with
respect to any Pension Plan and neither the Company nor any ERISA Affiliate is
subject to Section 4043(b) of ERISA.
4.22.4.2. Multiemployer Plans. Neither the Company nor any ERISA
-------------------
Affiliate has any Multiemployer Plans.
4.22.4.3. Welfare Plans. Except as disclosed on Schedule 4.22, none
-------------
of the Company, any ERISA Affiliate or any Welfare Plan has any present or
future obligation to make any payment to, or with respect to any present or
former employee of the Company or any ERISA Affiliate pursuant to, any retiree
medical benefit plan, or other retiree Welfare Plan, and no condition exists
which would prevent the Company from amending or terminating any such benefit
plan or Welfare Plan. To the best of Seller's and Company's knowledge, each
Welfare Plan which is a "group health plan," as defined in Section 607(1) of
ERISA, has been operated in compliance with provisions of Part 6 of Title I,
Subtitle B of ERISA and Section 4980B of the Code at all times.
4.22.4.4. Compliance with Law. Each Employee Plan has been
-------------------
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Employee Plan, including without limitation ERISA
and the Code.
4.22.4.5. Employment at Will. The employment of all persons
------------------
presently employed or retained by the Company is terminable at will.
4.22.4.6. Unrelated Business Taxable Income. No Employee Plan (or
---------------------------------
trust or other funding vehicle pursuant thereto) is subject to any tax under
Code Section 511.
4.22.4.7. Deductibility of Payments. There is no contract,
-------------------------
agreement, plan or arrangement covering any employee or former employee of the
Company (with respect to its relationship with such entities) that, individually
or collectively, provides for the payment by the Company of any amount (i) that
is not deductible by the Company under Section 162(a)(1) or 404 of the Code,
whichever is applicable, (ii) for which the deduction by the Company would be
disallowed under Section 162(m) of the Code, or (iii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
4.22.2 Fiduciary Duties and Prohibited Transactions. Neither the
--------------------------------------------
Company nor any plan fiduciary of any Welfare Plan or Pension Plan has engaged
in any transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code, or has otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA, except for any such violation which would not have a
Material Adverse Effect. To the best of Seller's and Company's knowledge, the
Company has not knowingly participated in a violation of Part 4 of Title I,
Subtitle B of ERISA by any plan
23
<PAGE>
fiduciary of any Welfare Plan or Pension Plan (or other employee benefit plan
subject to ERISA) and has not been assessed any civil penalty under Section
502(l) of ERISA.
4.22.4.9. Validity and Enforceability. Each Welfare Plan, Pension
---------------------------
Plan, related trust agreement, annuity contract or other funding instrument and
Benefit Arrangement is legally valid and binding and in full force and effect.
4.22.4.10. Litigation. There is no action, order, writ, injunction,
----------
judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral
action, governmental audit or investigation relating to or seeking benefits
under any Employee Plan that is pending, or, to Seller's knowledge, threatened
or anticipated against the Company, any ERISA Affiliate or any Employee Plan.
4.22.4.11. No Amendments. Neither the Company nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create any
additional Employee Plans or to amend or modify any existing Employee Plan other
than required by the Code or ERISA.
4.22.4.12. No Other Material Liability. No event has occurred in
------------------------------------------------------
connection with which the Company or any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating to any Employee Plans or (B)
pursuant to any obligation of the Company to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
4.22.4.13. Unpaid Contributions. Neither the Company nor any ERISA
--------------------
Affiliate has any liability for unpaid contributions under Section 515 of ERISA
with respect to any Pension Plan or Welfare Plan. The Company has paid or will
pay by October 31, 1997, all employer matching contributions to its 401(k) Plan
through October 31, 1997.
4.22.4.14. Insurance Contracts. To the Seller's knowledge, neither
-------------------
the Company nor any Employee Plan holds as an asset of any Employee Plan any
interest in any annuity contract, guaranteed investment contract or any other
investment or insurance contract issued by an insurance company that is the
subject of bankruptcy, conservatorship or rehabilitation proceedings.
4.22.4.15. No Acceleration or Creation of Rights. Neither the
-------------------------------------
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will result in the acceleration or creation
of any rights of any person to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting except by plan termination
or exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan except by plan termination or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
4.23. Compliance With Environmental Laws
----------------------------------
24
<PAGE>
4.23.1. Definitions. The following terms, when used in this Section
-----------
4.23, shall have the following meanings. Unless the context otherwise requires,
any of these terms may be used in the singular or the plural depending on the
reference.
4.23.1.1. "Company". For purposes of this Section 4.23 only, the
-------
term "Company" shall include (i) all Related Entities of the Company, including,
without limitation the Seller, (ii) all partnerships, joint ventures and other
entities or organizations in which the Company was at any time or is a partner,
joint venturer, member or participant and (iii) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been acquired or assumed by
the Company or to which the Company has succeeded.
4.23.1.2. "Release" shall mean and include any spilling, leaking,
-------
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the work place
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
4.23.1.3. "Hazardous Substance" shall mean any quantity of asbestos
-------------------
in any form, urea formaldehyde, PCBs, radon gas, crude oil or any fraction
thereof, all forms of natural gas, petroleum products or by-products, any
radioactive substance, any toxic, infectious, reactive, corrosive, ignitable or
flammable chemical or chemical compound and any other hazardous substance,
material or waste (as defined in or for purposes of any Environmental Law),
whether solid, liquid or gas.
4.23.2. Compliance With Environmental and Zoning Law. Except as
--------------------------------------------
set forth on Schedule 4.23 and except as set forth in the environmental
assessments referred to in Section 6.9, the Facilities have been owned, leased,
operated and maintained in material compliance with all environmental laws,
regulations and requirements (collectively, "Environmental Laws"). There is no
present or past Environmental Condition in any way relating to the Business or
Facilities. "Environmental Condition" means the introduction into the soil,
groundwater or environment of the Facilities (through leak, spill, release,
discharge, escape, emission, dumping disposal or otherwise) of any pollution,
including without limitation any contaminant, irritant or pollutant or Hazardous
Substance (whether or not upon the property of the Business and whether or not
such pollution constituted at the time thereof a violation of any Environmental
Law) as a result of which either Seller, the Company or Buyer has or may become
liable in any material respect to any person or federal, state or local
government or agency or by reason of which any of the Assets may suffer or be
subjected to any lien.
4.23.3. Facilities. Except as set forth in the environmental
----------
assessments referred to in Section 6.9 and in Schedule 4.23, the Facilities are,
and at all times have been, owned, leased and operated in material compliance
with all Environmental Laws and in a manner that will not give rise to any
liability under any Environmental Laws.
4.23.4. Permits. The Company has, and at all times has had, all
-------
material Permits required under any Environmental Law and the Facilities are,
and at all times have been, in
25
<PAGE>
material compliance with all such Permits subject to the environmental
assessments referred to in Section 6.9.
4.23.5. Permits Required. The consummation of any of the
----------------
transactions contemplated by this Agreement will not require an application for
issuance, renewal, transfer or extension of, or any other administrative action
regarding, any Permit required under any Environmental Law subject to the
environmental assessments referred to in Section 6.9.
4.23.6. Notice of Violation. Except as set forth on Schedule
-------------------
4.23.6, the Company has not received any notice at any time since January 1,
1992 (or, if the notice alleged material non-compliance, at any time whatsoever)
that it or the Facilities is or were claimed to be in violation of the
provisions of any Environmental Law or in non-compliance with the conditions of
any Permit, and there is no pending or, to Seller's knowledge, threatened
lawsuit, governmental or other legal action to that effect.
4.23.7. Pending Actions. There is not now pending or, to Seller's
---------------
best knowledge, threatened, nor has there ever been, any Action against the
Company, nor, to the best of Seller's knowledge, is there any basis for any
Action, under any Environmental Law or otherwise with respect to any Release or
mishandling of any Hazardous Substance.
4.23.8. Judgments. There are no consent decrees, judgments,
---------
judicial or administrative orders or agreements with, or liens by, any
governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate, bind or in any way materially affect
the Company or the Facilities.
4.23.9. Hazardous Substances. Except as set forth on Schedule
--------------------
4.23.9, there is not and has not been any Hazardous Substance used, generated,
treated, stored, transported, disposed of, handled or other placement of
Hazardous Substances on, under, about or from any Facility, except for
quantities of any such Hazardous Substances stored or otherwise held on, under
or about any such Facility in material compliance with all Environmental Laws
and necessary for the operation of the Business.
4.23.10. Handling of Hazardous Substances. The Company has at all
--------------------------------
times used, generated, treated, stored, transported, disposed of or otherwise
handled its Hazardous Substances in compliance in all material respects with all
Environmental Laws and in a manner that will not result in material liability of
the Company or Buyer under any Environmental Law.
4.23.11. Since August 31, 1997, (i) there has been no actual or
threatened Material Adverse Change or event that would result in a Material
Adverse Change, including without limitation the loss of any material customers;
(ii) there has not been any sale or other disposition of any of the Assets, or
any Encumbrance placed on the Assets, except in the ordinary course of business;
the Company has been operated in the ordinary course consistent with past
practice so as to preserve the Business intact, to keep available to the
business the service of Company's employees and to preserve the Business and the
goodwill of the Company's suppliers, customers, distributors and others having
business relations with it; and (iv) except as set forth on Schedule 4.23.11,
Seller has not purchased or entered into any agreement to purchase
26
<PAGE>
any item, other than in the ordinary course of business consistent with past
practices, having a cost in excess of $5,000.
4.23.12. Except as set forth on Schedule 4.23.12 and except for
compliance with HSR Act, no notice to, declaration, filing or registration with,
or authorization or consent or approval of, or Permit from, any governmental or
regulatory body or authority or any other person or entity is required to be
made or obtained by Seller or the Company in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
4.23.13. Storage Tank. To Seller's knowledge, Schedule 4.23,
------------
together with the Environmental Assessments to be delivered, sets out the past
and present underground and above ground tanks at the Facilities.
4.23.14. Environmental Audits or Assessments. True, complete and
-----------------------------------
correct copies of the written reports, if any, and all parts thereof, including
any drafts of such reports if such drafts are in the possession or control of
the Company, of all environmental audits or assessments (including tank closure
reports) which have been conducted at any Facility within the past five years,
either by the Company or any attorney, environmental consultant or engineer
engaged by the Company or Seller for such purpose, will be delivered to Buyer
and a list of all such reports, audits and assessments and any other similar
report, audit or assessment not in the possession or control of the Company and
of which the Company or Seller has knowledge is included on Schedule 4.23.
4.23.15. Indemnification Agreements. Except for all Facility
--------------------------
leases and facility access agreements and Contracts, the Company is not a party,
whether as a direct signatory or as successor, assign or third party
beneficiary, or otherwise bound, to any Contract under which the Company is
obligated by or entitled to the benefits of, directly or indirectly, any
representation, warranty, indemnification, covenant, restriction or other
undertaking concerning Environmental Conditions.
4.23.16. Releases or Waivers. The Company has not released any
-------------------
other person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
4.23.17. Notices, Warnings and Records. The Company has given all
-----------------------------
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all Environmental Laws, except where the
failure to do so would not have a Material Adverse Effect.
4.24. Liabilities Except as set forth on Schedule 4.24, the Company
-----------
has no material liabilities or obligations (absolute, accrued, contingent or
otherwise) except (i) liabilities which are reflected on the Balance Sheet, (ii)
liabilities incurred in the ordinary course of the Business and consistent with
past practice since the Balance Sheet Date, and (iii) liabilities arising under
Contracts identified in Schedule 4.8 to which the Company is a party.
27
<PAGE>
4.25. Insurance
---------
4.25.1. Schedule 4.25 describes all currently in force policies of
insurance and all policies for the year ended October 31, 1996 (including the
insurer, type of insurance and period of coverage) to which the Company or any
Related Entity is a party or under which the Company, any Related Entity or any
employee, officer or director of the Company or any Related Entity (in his or
her capacity as such) is or has been insured. All such policies will continue in
full force and effect following the Closing. Incurrence policies shall be deemed
to be in force regardless of when they were issued.
4.25.2. [RESERVED.]
4.25.3. The Company and any Related Entity have paid all
accumulated premiums due, or have accrued same as a liability and has otherwise
performed substantially all of its material respective obligations, under each
such current insurance policy.
4.26. Conduct of the Business Except as set forth in Schedule 4.26,
-----------------------
since the Balance Sheet Date, the Company has conducted its operations in the
ordinary course of the Business and substantially in accordance with past
practice, and has not taken any action that, if taken after the date hereof,
would violate Section 6.5.
4.27. Knowledge Seller's "knowledge" or "best knowledge" or similar
---------
words includes the actual knowledge of David P. Lanoha, Jack Markle, Doug
Bonnette and such knowledge that such individuals obtained or would have
obtained after inquiry to determine the relevant fact at the branch manager
level, after a review of the Company files maintained at or above the branch
manager level and after inquiry of personnel responsible for inputting
information into those files.
4.28. The Company is acquiring the Parent Common Stock for its own
account as principal, for investment purposes only, and not with a view to, or
for, resale or distribution thereof, and no other person has or will have a
direct or indirect beneficial interest in such Parent Common Stock.
4.29. The Company understands that the offering and sale of the Parent
Common Stock is intended to be a transaction by an issuer not involving any
public offering exempt from registration under the Securities Act by virtue of
Section 4(2) of the Securities Act and the rules and regulations of the
Commission thereunder.
4.30. The Company is an "accredited investor" as such term is defined
in Rule 501 under the Securities Act.
4.31. The Company understands and acknowledges that there are
substantial risks of loss of investment involved in an investment in the Parent
Common Stock, and that the investment in the Parent Common Stock is an illiquid
investment subject to transfer restrictions, and Seller and the Company
represent and warrant that the Company has the financial ability to bear the
economic risk of such investment.
28
<PAGE>
4.32. Seller has such knowledge and experience in financial and
business matters, including investments of the type represented by the Parent
Common Stock, as to be capable of evaluating the merits of the Company's
investment therein.
4.33. The Company has been furnished with a copy of the recent periodic
reports filed by Parent with the Commission and any documents that may have been
made available otherwise or upon its request, has carefully read and understands
such materials and has evaluated the risks of the Company's acquisition of the
Parent Common Stock and the parties acknowledge that each Seller is relying upon
the fact that all such information is true and correct in all material respects
and does not contain any omissions of material facts necessary to make the facts
stated therein, as of their dates, not misleading.
4.34. The Company has been given the opportunity to ask questions of,
and receive answers from, representatives of Parent in order for it to evaluate
the merits and risks of the Company's investment in the Parent Common Stock.
4.35. The Company has not been furnished with and has not relied upon
any oral or written representation, warranty or information in connection with
the offering of the Parent Common Stock except for that set forth in this
Agreement and in Parent's Prospectus, 10K and Parent's Annual Report.
4.36. The stock certificates evidencing the Parent Common Stock to be
delivered pursuant to this Agreement will bear a legend indicating that the
securities have not been registered and are subject to restrictions on transfer
and the holdback and registration rights set forth herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
Buyer and Parent hereby represent and warrant to Seller and the
Company as follows, which representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct:
5.1. Organization of Buyer and Parent
--------------------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
5.2. Authorization Except as provided in Section 8.11, each of Buyer
-------------
and Parent has all requisite corporate power and authority, and has taken all
corporate action necessary, to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its respective obligations
hereunder and thereunder. This Agreement has been duly executed and delivered by
Buyer and Parent and is, and (following their execution and delivery by Buyer,
Parent, the Company, the Seller Representative or the Seller, as applicable,
each of the Ancillary
29
<PAGE>
Agreements will be) a legal, valid and binding obligation of Buyer or Parent, as
applicable, enforceable against Buyer or Parent, as applicable, in accordance
with its terms.
5.3. No Conflict or Violation Neither the execution, delivery or
------------------------
performance of this Agreement or the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby, nor compliance by Buyer or
Parent with any of the provisions hereof or thereof, will (a) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws of
Buyer or Parent, or (b) violate any statute, rule, regulation, ordinance, code,
order, judgment, ruling, writ, injunction, decree, award or agreement binding
upon Buyer or Parent.
5.4. Consents and Approvals No notice to, declaration, filing or
----------------------
registration with, or authorization, consent or approval of, or permit from, any
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by Buyer or Parent in connection with the
execution, delivery and performance of this Agreement or the Ancillary
Agreements and the consummation of the transactions contemplated hereby or
thereby, except (a) as may be required by Buyer to operate the Business after
the Closing, (b) as has been obtained on or prior to the date hereof or (c) as
set forth in Schedule 5.4.
ARTICLE VI.
COVENANTS OF BUYER, THE COMPANY AND SELLER
------------------------------------------
Buyer, the Company and Seller each covenant with the others as
follows:
6.1. Further Assurances Upon the terms and subject to the conditions
------------------
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from third parties;
provided, however, that neither party shall be required to make any payments,
commence litigation or agree to modifications of the terms of Contracts or
Leases in order to obtain any such waivers, consents or approvals, (B) to obtain
all necessary Permits as are required to be obtained under any federal, state,
local or foreign law or regulations, (C) to effect all necessary registrations
and filings, including without limitation required filings under the HSR Act and
all other submissions of information requested by governmental authorities, and
(D) to fulfill all conditions to this Agreement.
6.2. No Solicitation
---------------
From the date hereof through the Closing or the earlier termination of
this Agreement, each of the Company and the Seller shall not, and shall cause
their Representatives (including without limitation investment bankers,
attorneys and accountants) not to, directly or indirectly, enter into, solicit,
initiate or continue any discussions or negotiations with, or encourage or
respond to any inquiries or proposals by, or participate in any negotiations
with, or provide any information to, or otherwise cooperate in any other way
30
<PAGE>
with, any corporation, partnership, person or other entity or group, other than
Buyer and its Representatives, concerning any sale of all or a portion of the
Assets, the Memberships or the Business, or any merger, consolidation,
liquidation, dissolution or similar transaction involving the Company (each such
transaction collectively being referred to herein as a "Proposed Acquisition
Transaction"). The Company and the Seller shall not, directly or indirectly,
through any Representative or otherwise, solicit, initiate or encourage the
submission of any proposal or offer from any person or entity relating to any
Proposed Acquisition Transaction or participate in any negotiations regarding,
or furnish to any other person any information with respect to the other party
for the purposes of, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to seek or effect a Proposed Acquisition Transaction. The Company and
the Seller each hereby severally represent that it is not now engaged in
discussions or negotiations with any party (other than Buyer) with respect to
any of the foregoing. The Company or Seller shall promptly notify Buyer (orally
and in writing) of any offer, inquiry or contact with any person with respect to
a Proposed Acquisition Transaction, including the terms thereof and the identity
of the prospective purchaser or soliciting party.
6.3. Notification of Certain Matters From the date hereof through the
-------------------------------
Closing, Buyer or Parent shall give prompt notice to Seller and the Company of
(a) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of the Buyer or
Parent contained in this Agreement or in any exhibit or schedule hereto to be
untrue or inaccurate in any material respect and (b) any failure of Buyer or
Parent to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or any exhibit or schedule
hereto; provided, however, that such disclosure shall not be deemed to cure any
breach of a representation, warranty, covenant or agreement or to satisfy any
condition.
From the date hereof through the Closing, Seller and the Company shall
give prompt notice to Buyer or Parent of (a) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
representation or warranty of the Seller or Company contained in this Agreement
or in any exhibit or schedule hereto to be untrue or inaccurate in any material
respect and (b) any failure of Seller or Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or schedule hereto; provided, however, that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition.
6.4. Access to Information From the date hereof through the Closing, the
---------------------
Company shall, and shall cause its Representatives to, afford the
Representatives of Buyer and its Affiliates complete access at all reasonable
times to the Assets and the Facilities for the purpose of inspecting and
conducting appropriate tests upon the same, and to the officers, employees,
agents, attorneys, accountants, properties, Books and Records and Contracts of
the Company, and shall furnish Buyer and its Representatives all financial,
operating and other data and information as Buyer or its Affiliates, through
their respective Representatives, may reasonably
31
<PAGE>
request, including but not limited to data relating to operating procedures,
workers' compensation history, legal, tax and environmental, zoning and other
legal compliance.
6.5. Conduct of Business From the date hereof through the Closing, the
-------------------
Seller shall, except as contemplated by this Agreement or as consented to by
Buyer in writing, operate the Business in the ordinary course of the Business
and substantially in accordance with past practice and will not take any action
inconsistent with this Agreement or with the consummation of the Closing.
Without limiting the generality of the foregoing, the Company shall not, except
as specifically contemplated by this Agreement or as consented to in writing by
Buyer:
6.5.1. issue or repurchase any units, options or other rights to
acquire any such units;
6.5.2. enter into, extend, materially modify, terminate or renew any
Contract;
6.5.3. purchase or enter into any agreement to purchase any item of
Inventory or Equipment;
6.5.4. make any material increase in compensation or benefits
payable to any employee of the Company, or adopt any new employee benefit plan
or policy;
6.5.5. sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets, or any interests therein;
6.5.6. accelerate the collection of accounts receivable, extend the
payment of accounts payable, or reduce inventories in a manner inconsistent with
the ordinary course of the Business's operation; or
6.5.7. fail to pay its accounts payable and any debts owed or
obligations due by it, or pay or discharge when due any liabilities.
6.6. Guarantee
---------
Through but not after the Closing, Parent hereby guarantees the
covenants and obligations of Buyer required to be performed by it hereunder.
6.7. Employee Matters Buyer shall hire all employees of the Business who
----------------
pass a physical examination and drug and alcohol abuse screening by a licensed
laboratory chosen by Buyer, and who otherwise meet Buyer's customary criteria
for employment, and the Company shall reasonably cooperate with Buyer in
retaining all such employees (the "Retained Employees"). Buyer agrees to give
Retained Employees credit for their time of employment with the Company with
respect to their seniority as an employee of Buyer. The Company shall be and
remain solely responsible for the payment of all benefits due to its employees
at any time under its Employee Plans, including without limitation all
severance, accrued vacation, health care continuation coverage and other
benefits to which its employees may be entitled as a result of the transactions
contemplated hereby, whether or not such employees are hired by Buyer. All
32
<PAGE>
Retained Employees will be at-will employees of Buyer and may be terminated by
Buyer in its sole discretion, subject to the requirements of applicable laws
governing employers and employees, and will receive substantially the same total
compensation as they did when employed by the Company.
6.8. [RESERVED]
--------
6.9. Environmental Assessments and Remediation
-----------------------------------------
6.9.1. Buyer will retain an environmental consultant (the
"Consultant") to perform Phase 1 (and, at Buyer's option Phase 2) environmental
assessments with respect to each of the Facilities. Upon its availability,
Consultant will deliver such assessments to Buyer and the Company. In the event
any such assessment recommends the performance of additional investigation
(including, without limitation, Phase 2 environmental assessments), such
additional investigation shall, if requested by Buyer, be undertaken promptly
and delivered to each of the Company and Buyer. The environmental assessments
and investigations undertaken pursuant to this Section 6.9.1 are collectively
referred to herein as the "Environmental Assessments." Buyer shall be solely
responsible for the cost of the Environmental Assessments.
6.9.2. In the event any of the Environmental Assessments reveals any
remediation work which must be completed in order to bring the Facilities into
compliance with applicable Environmental Laws or eliminate any potential
environmental liability, the Consultant shall be directed to prepare and to
deliver to each of the Company and Buyer a written report setting forth in
reasonable detail the scope of required remediation and an estimate of the cost
of completing such remediation. For the purposes of Section 6.9, "required
remediation" shall mean any action necessary to (i) comply with any governmental
order, (ii) comply with any Environmental Law effective at the Closing or (iii)
eliminate a potential environmental liability which has the reasonable
probability of ripening into with the passage of time the violation of any
Environmental Law (the "Remediation Standard"), as applicable to the Facilities
or the operation thereof by the Company as of the Closing Date.
6.9.2. Within 60 days of completion of the Consultant's report
referred to in Section 6.9.2, the Company shall engage a reliable environmental
engineering firm reasonably acceptable to Buyer to perform any required
remediation, as well as to remove any underground storage tanks on the
properties which are leased from Related Entities and perform all required
remediation in connection therewith. The Company and the Seller Representative
shall use their respective best efforts to cause such required remediation to be
completed on or before the Closing Date, and the Company shall bear all costs of
such required remediation; Buyer may, in its sole discretion, authorize the
Company to defer any portion of the required remediation which the Company and
its contractors are unable to complete prior to Closing, in which case Seller
shall cause the portion of the required remediation so deferred to be completed
as promptly as practicable, but in no event later than 180 days following
Closing, at the Company's sole expense (which may be satisfied from the Holdback
Amount pursuant to the Escrow Agreement or from the funds held back by Buyer as
set forth in Section 6.9.4). In the event of such deferral, Buyer will provide
reasonable access to the Company and its agents to complete such
33
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remediation and shall otherwise reasonably cooperate at the Company's expense in
such remediation. Buyer may monitor the performance of the required remediation
and application of the Remediation Standard, and at its election may cause the
Consultant to review the performance of the required remediation. If Buyer
directs the Consultant to undertake such review, the required remediation shall
be deemed completed only upon certification of its completion by the Consultant.
If, however, there is a dispute as to the performance of the required
remediation or the application of the Remediation Standard, any such dispute
shall be settled by a mutually agreed-upon environmental expert not otherwise
involved in the required remediation, whose determination shall be final and
binding on the parties. The estimated costs of the required remediation not
completed by Closing will be withheld and retained by Buyer outside of escrow.
Notwithstanding the foregoing, by December 31, 1997, the Company will begin to
cause the underground storage tanks located on property leased by the Company
from Related Entities to be removed and any required remediation to be completed
in connection therewith.
6.9.4. The Holdback Amount shall secure, among other things, the
completion by the Company of any required remediation which has not been
resolved by the Closing Date pursuant to this Section 6.9. Upon the completion
of the required remediation, certification of such completion by the Consultant
or mutually agreed-upon third party expert, and payment by the Company of all
expenses of such remediation and certification, all in accordance with the
standards set forth in this Section 6.9, no further claims may be made against
the Holdback Amount on account of the Company's obligations under this Section
6.9. However, if such required remediation has not been completed by the Company
due to their failure to timely perform and to continue performance of required
remediation, and so certified on or prior to the date which is no later than 180
days following the Closing Date, Buyer shall be entitled to engage its own
environmental engineering firm to complete such required remediation, and to
distribute such portion of the Holdback Amount as is necessary to pay the fees
and costs of such firm, or other costs incurred, in completing such required
remediation.
6.10. Registration Rights.
-------------------
6.10.1. In the event that, at any time prior to the first
anniversary of the Closing Date, Parent files a registration statement under the
Securities Act covering shares of Parent Common Stock, other than a registration
statement on Form S-4 or Form S-8, or a registration statement filed pursuant to
"demand" or similar contractual registration rights of any other stockholders of
Parent, then Company shall have the right to include in such registration
statement (on a "piggyback" basis) any or all of its shares of Parent Common
Stock on the same terms and conditions (including pro rata cutbacks) as all
other selling stockholders in such registration, and to receive the benefit of
any representations, indemnities, opinions or comfort letters given by the
Parent (or its counsel or underwriters) to any underwriter in connection with
such registration, provided, however, that if the managing underwriter or
underwriters in the registered offering advise the Parent that the inclusion in
the offering of shares of Parent Common Stock owned by the Company would have a
Material Adverse Effect on the marketability or price of the offering, then the
number of shares of Parent Common Stock to be included by the Company shall be
reduced.
34
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6.10.2. Anything herein to the contrary notwithstanding, in the
event that the Parent files a registration statement with respect to an
underwritten public offering under the Securities Act in which any class of
Parent Common Stock is offered, no Seller shall effect any public sale or
distribution (except pursuant to said registration statement) of any of the
shares of Parent Common Stock (which shares, for purposes of this Section
6.10.2, shall include any and all voting securities received by such Seller as a
stock dividend, stock split or other recapitalization or similar distribution on
or in respect of the shares of Parent Common Stock) or any of Parent's other
equity securities, or of any securities convertible into or exchangeable for
such securities, during the period following delivery of notice to Sellers which
begins ten (10) days before the filing of such registration statement with the
Securities and Exchange Commission and ending ninety (90) days after such
registration statement has become effective or ten (10) days after it has been
withdrawn. After January 4, 2001, this Section 6.10.2 shall cease to apply.
6.11. Cooperation Regarding Dealerships Seller and the Company will
---------------------------------
cooperate with Buyer and use their reasonable best efforts to assist Buyer in
obtaining the transfer of all dealerships and dealership agreements of the
Company and each Related Entity, including any required due to change of control
provisions.
6.12. Use of Name and Telephone Numbers From and after Closing,
---------------------------------
upon filing of appropriate assumed name affidavits, Buyer will have the right to
use all of the names used by the Company or variations thereof in its operation
of the Business. Upon Closing, the Company shall assign to Buyer all of the
telephone and facsimile numbers currently used in the Business.
6.13. 1997 Tax Returns Seller will prepare or cause to be prepared,
----------------
executed and timely filed all income tax returns for the Company's fiscal year
ended October 31, 1997. Buyer will provide access to books and records acquired
from the Company to facilitate such preparation. In addition, as set forth
elsewhere herein, David P. Lanoha will be responsible for any additional income
taxes or assessments or claims asserted by any Tax authority and will fully
indemnify the Company with respect thereto.
ARTICLE VII.
CONDITIONS TO COMPANY'S OBLIGATIONS
-----------------------------------
Except as otherwise provided herein, the obligations of the Company to
consummate the transactions provided for hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by the Company.
35
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7.1. Representations, Warranties and Covenants All representations
-----------------------------------------
and warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Buyer and
Parent shall have performed and satisfied all agreements and covenants required
hereby to be performed by them prior to or on the Closing Date.
7.2. No Proceedings, Litigation or Laws No Action by any
----------------------------------
governmental authority or other person shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated hereby
and which could reasonably be expected to materially damage Seller if the
transactions contemplated hereunder are consummated. The waiting period under
the HSR Act shall have expired or been terminated, and there shall not be any
statute, rule or regulation that makes the purchase and sale of the Memberships,
Business or the Assets contemplated hereby illegal or otherwise prohibited.
7.3. Certificates Buyer and Parent shall furnish the Company
------------
with such certificates of their officers and others to evidence compliance with
the conditions set forth in this Article VII as may be reasonably requested by
the Company. The Company shall have received an opinion of Latham & Watkins in
form reasonably satisfactory to Seller Representative.
7.4. Other Conditions By October 31, 1997, (i) Jack Markle and
----------------
Buyer shall have both approved the form of his employment agreement in writing
and (ii) Buyer's board of directors shall have approved the transactions
contemplated by this Agreement; Buyer shall have delivered a letter from the
agent bank for its revolving credit facility indicating that the transaction has
been approved; and Buyer shall have completed its due diligence review and
delivered notice to Seller that it is satisfied with its due diligence review of
the Company. If the above conditions are not timely satisfied, then Seller shall
have the option to terminate this Agreement.
7.5. Consents All Permits and waivers necessary for the
--------
consummation by Seller of the transactions contemplated hereby and required to
be obtained by Buyer or Parent shall have been obtained.
7.6. Other Transactions The Related Purchase Transactions shall
------------------
have been consummated.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for hereby
are subject, to the satisfaction, on or prior to the Closing Date, of each of
the following conditions, any of which may be waived by Buyer:
36
<PAGE>
8.1. Representations, Warranties and Covenants All representations
-----------------------------------------
and warranties of Seller and the Company contained in this Agreement shall be
true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date, except as and to the extent that
the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms hereof, and
Seller and the Company shall have performed and satisfied all agreements and
covenants required hereby to be performed by them prior to or on the Closing
Date.
8.2. Consents All Permits and waivers necessary for the
--------
consummation by Buyer and Parent of the transactions contemplated hereby and for
the continued operation of the Business after the Closing (including, without
limitation, all required waivers of Parent's lenders and all required waivers of
the Company's vendors under supplier agreements other than as set forth on
Schedule 8.2) shall have been obtained. Company will use its reasonable best
efforts to obtain oral or written consents from customers as may be reasonably
requested by Buyer to continue doing business with the Company from and after
the date of this Agreement.
8.3. No Proceedings or Litigation No Action by any governmental
----------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to damage Buyer materially if the
transactions contemplated hereby are consummated, including without limitation
any Material Adverse Effect on the right or ability of the Company to own,
operate, possess or transfer the Assets after the Closing. The waiting period
under the HSR Act shall have expired or been terminated, and there shall not be
any statute, rule or regulation that makes the purchase and sale of the Business
or the Assets contemplated hereby illegal or otherwise prohibited.
8.4. Opinion of Counsel The Company shall have delivered to
------------------
Buyer an opinion of Graft, Thomson and Toedte, P.C., counsel to the Company and
the Seller, dated as of the Closing Date, in form and substance reasonably
satisfactory to Buyer, to the effect that:
8.4.1. Incorporation Company has been duly formed and is
-------------
validly existing and in good standing under the laws of the State of Colorado
and is in good standing as a foreign corporation in each state in which it owns
or leases property or operates a Facility;
8.4.2. Corporate Power and Authority The Company has the
-----------------------------
necessary corporate power and authority to enter into this Agreement and the
Ancillary Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and to own, lease and operate the Assets and its
other properties and to conduct the Business as presently conducted;
8.4.3. Action The execution, delivery and performance of this
------
Agreement and the Ancillary Agreements to which the Company is a party have been
duly authorized by all necessary action of the Company, and this Agreement and
the Ancillary Agreements have been duly executed and delivered by the Company or
the Seller, as applicable;
8.4.4. Obligation of the Company or Seller This Agreement
-----------------------------------
and each Ancillary Agreement constitutes a legally valid and binding obligation
of the Company or the Seller, as applicable, enforceable against the Company or
the Seller in accordance with its terms, except as
37
<PAGE>
limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally or by equitable
principles (whether considered in an action at law or in equity), (ii)
limitations imposed by federal or applicable state law or equitable principles
upon the availability of specific performance, injunctive relief or other
equitable remedies, or (iii) other customary limitations reasonably satisfactory
to Buyer's counsel;
8.4.5. No Breach Neither the execution and delivery of this
---------
Agreement or the Ancillary Agreements by the Company or the Seller, as
applicable, nor the consummation of the transactions contemplated hereby or
thereby will (i) violate or conflict with any provision of the organizational
documents of the Company, or of the charter documents or other organizational
instrument of Seller that is not a natural person, (ii) breach, or cause a
default under, any term or provision of any material contract listed on a
schedule to such opinion to which contract the Company or the Seller is a party
or by which the Assets are bound, or (iii) violate any judgment, decree,
injunction, writ or order applicable to the Company or the Seller;
8.4.6. No Permits Required No Permit of, or filing with, any
-------------------
governmental authority or, to the best knowledge of such counsel, any other
person, is required for the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or the Seller, as applicable, or the
consummation by the Company or the Seller of the transactions contemplated
hereby or thereby, except as set forth in this Agreement or the schedules or
exhibits hereto;
8.4.7. No Actions Pending Except as set forth in this
------------------
Agreement or the schedules hereto, to the best knowledge of such counsel, no
Action is pending or threatened (i) against the Company or the Business, (ii)
against any of the officers or directors of the Company as such, (iii) in which
the Company is a plaintiff, or (iv) which questions the validity or legality of
the transactions contemplated hereby;
8.4.8. No Violation of Law To the best knowledge of such
-------------------
counsel, neither the execution and delivery of this Agreement or the Ancillary
Agreements by the Company or the Seller, as applicable, nor the consummation of
the transactions contemplated hereby or thereby will violate or result in a
failure to comply with any statute, law, ordinance, regulation, rule or order of
any federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to the
Company, the Seller or the Business; and, to the best knowledge of such counsel,
the Company has all licenses, franchises and other authority required to conduct
the Business as it is now being conducted;
8.4.9. Title to Memberships The issued and outstanding units
--------------------
of the Company consists solely of the Memberships, all of which are owned of
record and beneficially by the persons identified on a schedule attached to such
opinion, free and clear of all Encumbrances. To the knowledge of such counsel,
there are no outstanding warrants, options or other rights to acquire, or
securities convertible into or exercisable or exchangeable for, units of the
Company, nor any commitments or agreements by the Company to issue any such
rights or securities or units.
38
<PAGE>
8.4.10. Other Opinions Such other opinions as any lender to
--------------
Buyer may reasonably request. In rendering such opinions, such counsel may rely
as to factual matters upon certificates and assurances of public officials,
Seller, and officers of the Company. In addition, such opinions may be subject
to such additional qualifications and exceptions as are reasonably acceptable to
counsel to Buyer.
8.4.11. Schedules At or prior to Closing, the Company shall
---------
attach all Schedules to this Agreement and the Buyer shall have the opportunity
to review and approve such Schedules, such approval to not be unreasonably
withheld. The Company will deliver all schedules within ten days after execution
of this Agreement, and Buyer will have five days to disapprove such schedules,
failing which they will be deemed a part of this Agreement.
8.5. Certificates Seller and the Company shall furnish Buyer with
------------
such certificates of Seller, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.6. Conveyancing Documents; Release of Encumbrances The Company
-----------------------------------------------
shall have executed and delivered each of documents described in Section 3.2
hereof so as to effect the transfer and assignment to Buyer of all right, title
and interest in and to the Assets and the Company shall have filed (where
necessary) and delivered to Buyer all documents necessary to release the Assets
from all Encumbrances which documents shall be in a form reasonably satisfactory
to Buyer's counsel.
8.7. Completion of Environmental Remediation The Company or its
---------------------------------------
agents shall have completed any "required remediation" or shall have approved
any plan of remediation within the meaning of Section 6.9, subject to the
procedures set forth in Section 6.9 with respect to the certification of such
completion and the resolution of any disputes relating thereto.
8.8. Tax Clearance Certificate The Company shall provide to buyer
-------------------------
with a clearance certificate or similar document(s) that may be required by any
state taxing authority in order to relieve Buyer of any obligation to withhold
any portion of the Purchase Price.
8.9. Employment and Non-Competition Agreements Buyer or a subsidiary
-----------------------------------------
of Buyer shall have entered into an Employment and Non-Competition Agreement
with Mr. Lanoha, Mr. Markle and Mr. Bonnette in the forms attached.
8.10. Release of Encumbrances The Company shall have filed
-----------------------
(where necessary) and delivered to Buyer all documents necessary to release the
Assets from all Encumbrances which documents shall be in a form reasonably
satisfactory to Buyer's counsel.
8.11. Board Approval The Board of Directors of Parent shall have
--------------
approved the execution, delivery and performance of this Agreement.
39
<PAGE>
8.12. Documents Buyer shall have received from the Company
---------
resolutions adopted by its manager approving this Agreement and the Ancillary
Agreements to which it will be a party, and the transactions contemplated hereby
and thereby.
8.13. Schedules and Due Diligence Review Buyer and its
----------------------------------
Representatives shall be provided the opportunity to have conducted a due
diligence review of the Company's Books and Records, Financial Statements, and
other records and accounts of the Business, and Seller shall have delivered to
Buyer all Schedules required by this Agreement. Buyer shall be satisfied in its
sole discretion with its due diligence findings, and the contents of the
Schedules; if Buyer is not so satisfied in its sole discretion, it may terminate
this Agreement. The parties shall have drafted and agreed on any other agreement
required pursuant to this Agreement to be executed at Closing.
8.14. No Material Adverse Change There shall have been no material
--------------------------
adverse change or development in the Company's business.
8.15. Other Transactions The Related Purchase Transactions shall
------------------
have been consummated.
ARTICLE IX.
CONSENTS TO ASSIGNMENT; RISK OF LOSS
------------------------------------
9.1. Consents to Assignment Anything in this Agreement to the
----------------------
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign or to effect a change of control with respect to any Contract, lease,
license, sales order, purchase order or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment or change
of control thereof, without the consent of a third party thereto, would
constitute a breach thereof or in any way adversely affect the rights of Buyer
thereunder. If such consent is not obtained, or if an attempted assignment or
change of control thereof would be ineffective or would affect the rights
thereunder so that Buyer would not receive all such rights, the Company will
cooperate with Buyer, in all reasonable respects, to provide to Buyer the
benefits under any such Contract, lease, license, sales order, purchase order,
claim or right including without limitation enforcement for the benefit of Buyer
of any and all rights of the Company against a third party thereto arising out
of the breach or cancellation by such third party or otherwise.
40
<PAGE>
9.1. Risk of Loss. From the date hereof through the Closing,
------------
all risk of loss or damage to the property included in the Assets shall be borne
by the Company, and thereafter shall be borne by Buyer. If any portion of the
Assets is destroyed or damaged by fire or any other cause on or prior to the
Closing, other than use, wear or loss in the ordinary course of the Business,
the Company shall give written notice to Buyer as soon as practicable after
discovery of such damage or destruction, the amount of insurance, if any,
covering such Assets and the amount, if any, which the Company is otherwise
entitled to receive as a consequence. Prior to the Closing, Buyer shall have the
option, which shall be exercised by written notice to the Company within ten
(10) calendar days after receipt of the Company's notice or if there is not ten
(10) calendar days prior to the Closing, as soon as practicable prior to the
Closing, of (a) accepting such Assets in their destroyed or damaged condition in
which event Buyer shall be entitled to the proceeds of any insurance or other
proceeds payable with respect to such loss and to such indemnification for any
uninsured portion of such loss pursuant to Section 10.4, and the full Purchase
Price shall be paid for such Assets, (b) excluding such Assets from this
Agreement, in which event the Purchase Price shall be reduced by the amount
allocated to such Assets, as mutually agreed between the parties or (c)
terminating this Agreement in accordance with Section 11.1. If Buyer accepts
such Assets, then after the Closing, any insurance or other proceeds shall
belong, and shall be assigned to, Buyer without any reduction in the Purchase
Price; otherwise, such insurance proceeds shall belong to the Company.
ARTICLE X.
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
----------------------------------------------
10.1. Books and Records; Tax Examinations
-----------------------------------
10.1.1. Books and Records Each party agrees that it
-----------------
will cooperate with and make available to the other party, during normal
business hours, all Books and Records, information and employees (without
substantial disruption of employment) retained and remaining in existence after
the Closing which are necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such Books and Records, information or employees for any
reasonable business purpose.
10.1.2. Cooperation and Records Retention The Company and
---------------------------------
Buyer shall (i) each provide the other with such assistance as may reasonably be
requested by any of them in connection with the preparation of any return,
audit, or other examination by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes, (ii) each retain for
the period of all applicable statutes of limitation and provide the other with
any records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the other for any period. This covenant will survive the Closing.
41
<PAGE>
10.2. Payment of Liabilities Following the Closing Date, the Company
----------------------
shall pay promptly when due all of the debts and liabilities of the Company
relating to the Business, other than Assumed Liabilities, including without
limitation any accounts payable not assumed by Buyer and any liability of the
Company for Taxes.
10.3. Survival of Representations, Etc All statements contained in any
--------------------------------
certificate, schedule, exhibit, instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations, warranties, covenants
and agreements of Seller, the Company, Parent and Buyer contained herein shall
survive the consummation of the transactions contemplated hereby and the Closing
Date, without regard to any investigation made by any of the parties hereto. All
such representations and warranties and all claims and causes of action with
respect thereto (other than the provisions of Sections 4.4, 4.17, 4.19, 4.22,
and 4.23, representations and warranties giving rise to Uncapped Claims and this
Section 10.3, and all claims and causes of action with respect thereto) shall
terminate upon expiration of three years after the Closing Date. The
representations and warranties in Sections 4.4, 4.17, 4.19, 4.22, and 4.23 shall
survive until the expiration of the applicable statute of limitations (with
extensions) with respect to the matters addressed in such sections. The
termination of the representations and warranties provided herein shall not
affect the rights of a party in respect of any Claim made by such party in a
writing received by the other party prior to the expiration of the applicable
survival period provided herein.
10.4. Indemnifications
----------------
10.4.1. By the Company and Seller. The Company and Seller,
-------------------------
jointly and severally, shall indemnify, defend, save and hold harmless Buyer,
its Affiliates, and its and their respective Representatives, from and against
any and all uninsured claims, damages, costs, losses (including without
limitation diminution in value), Taxes, liabilities, judgments, penalties,
fines, obligations, lawsuits, deficiencies, demands and expenses (whether or not
arising out of third-party claims), including without limitation interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including without limitation any clean-up or remedial action), lost profits and
other losses resulting from any shutdown or curtailment of operations, damages
to the environment, attorneys' fees, experts' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any representation or warranty, or the inaccuracy
of any representation or warranty, made by the Company or Seller in or pursuant
to this Agreement; (ii) any breach of any covenant or agreement made by the
Company or Seller in or pursuant to this Agreement; (iii) any liability arising
under any Environmental Law on account of the conduct of the Company or Seller
or prior owners or users of the Facilities or other persons, or on account of
the operation of the Business or the Facilities, or related to any Environmental
Condition existing, in each case on or at any time prior to the Closing Date;
(iv) any liability for Taxes in respect of taxable periods ending on or before
October 31, 1997; (v) any Excluded Liability, or (vi) any other liability
arising out of events prior to the Closing Date which has not been adequately
reflected on the Effective Control Balance Sheet. Without limiting the
generality of the foregoing, the indemnification provided herein, insofar as it
relates
42
<PAGE>
to any Environmental Law or Environmental Condition, shall specifically cover
costs incurred in connection with any investigation of site conditions
(excepting the cost of the Environmental Assessments) or any clean-up, remedial,
removal or restoration work required by any federal, state or local governmental
agency or political subdivision or by the provisions of Section 6.9 hereof.
Damages (except under Sections 4.4, 4.17, 4.19, 4.22, and 4.23 or caused by the
fraud of Seller or the Company) (collectively the "Uncapped Items") are limited
by the terms of Article XII of this Agreement. Except with respect to the
Uncapped Items for which there is no time limit and no monetary limit, the time
and maximum aggregate dollar amount of any indemnity or other obligation of
Seller or the Company under both this Agreement and all Related Purchase
Agreements is limited to (and Seller shall not be responsible for damages in
excess of) (i) for any claims made during the first full year after the Closing,
$10,000,000, (ii) for any claims made during the second full year after the
Closing, $8,000,000 and (iii) for any claims made during the third full year
after the Closing, $5,000,000, except that indemnification obligations related
to Environmental Conditions which become obligations of Buyer during the term of
the lease of the applicable property or within fifteen years of the Closing, if
sooner, and are demonstrated by Buyer on the basis of a preponderance of the
evidence not to have been caused by Buyer shall not be subject to such time or
monetary limitations, but shall be subject to an additional monetary limitation
of $5,000,000 in excess of the amount initially placed in escrow pursuant to the
Escrow Agreement. This indemnification obligation of up to $5,000,000 will
continue to apply even after the three-year period of the escrow has ended, but
will terminate upon any actual assignment by Buyer of the applicable lease to an
unrelated third-party.
10.4.2. By Parent and Buyer Parent and Buyer shall indemnify and save
-------------------
and hold harmless Seller, their Affiliates and their Representatives from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty,
or the inaccuracy of any representation or warranty, made by Parent or Buyer in
or pursuant to this Agreement; or (ii) any breach of any covenant or agreement
made by Parent or Buyer in or pursuant to this Agreement, and (iii) any
liability arising after November 1, 1997 arising out of or related to the
Buyer's ownership or operation of the Business.
43
<PAGE>
10.4.3. Cooperation The indemnified party shall cooperate in all
-----------
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
10.4.4. Defense of Claims If a claim for Damages (a "Claim") is to be
-----------------
made by a party entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall, subject to Section 10.4,
give written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.4. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the indemnified party)
to handle and defend the same, at the indemnifying party's cost, risk and
expense unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party, and (iii) to compromise or settle
such claim, which compromise or settlement shall be made only with the written
consent of both the indemnifying and the indemnified party, such consent not to
be unreasonably withheld; provided, however, if the remediation or resolution of
any such Claim will occur on or at any Facility or is reasonably expected to
have a material adverse effect on the indemnified party's business operations,
then, notwithstanding the foregoing, the indemnified party shall be entitled to
control such resolution, including without limitation to take control of the
defense and investigation of such lawsuit or action, to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense, and to compromise or settle such Claim with the
consent of the Indemnifying Party. If the indemnifying party fails to assume the
defense of such claim within fifteen (15) calendar days after receipt of the
Claim Notice, the indemnified party against which such claim has been asserted
will (upon delivering notice to such effect to the indemnifying party) have the
right to undertake, at the indemnifying party's cost and expense, the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the indemnifying party. In the event the indemnified party assumes the
defense of the claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
action effected with its consent pursuant to and in accordance with this Section
44
<PAGE>
10.4 and for any final judgment (subject to any right of appeal), and the
indemnifying party agrees to indemnify and hold harmless an indemnified party
from and against any Damages by reason of such settlement or judgment.
10.4.5. Buyer's Right to Distribution of Holdback Amount Buyer and its
------------------------------------------------
Affiliates and Representatives may at their election collect any amount due from
the Company pursuant to Seller's indemnification obligations under this Section
10.4 by distribution of an applicable portion of the Holdback Amount in
accordance with the terms of the Escrow Agreement.
10.4.6. Limitations Neither Buyer or Parent on the one hand, nor Seller
-----------
on other hand, shall be liable to the other under this Section 10.4 for any
Damages until the amount otherwise due the party, including amounts due under
this Agreement and all Related Purchase Agreements, being indemnified, including
all amounts due under this Agreement and all Ancillary Agreements, exceeds
$100,000 in the aggregate, in which case such indemnifying party will be liable
to the indemnified party for all such amounts in excess of the first $100,000.
Notwithstanding the preceding sentence, this limitation shall not apply with
respect to Damages arising out of a breach of a representation or warranty
contained in Sections 4.4, 4.17, 4.19, 4.22, or 4.23 or giving rise to an
Uncapped Claim due to fraud on the part of Seller.
10.4.7. Liability and Remedies, etc Except as set forth below, no
---------------------------
individual Representative of any party (other than Mr. Lanoha) shall be
personally liable for any Damages under the provisions contained in this Section
10.4. Nothing herein shall relieve either party of any liability to make any
payment expressly required to be made by such party pursuant to this Agreement.
The term "Damages" as used in this Section 10.4 is not limited to matters
asserted by third parties against Seller or Buyer, but includes Damages incurred
or sustained by an indemnified party in the absence of third party claims.
Payments by an indemnified party of amounts for which such party is indemnified
hereunder shall not be a condition precedent to recovery.
10.5. Further Action At and after the Closing, Seller shall take all
--------------
actions reasonably necessary to effect the conveyance of the Memberships to
Buyer free and clear of all Encumbrances and otherwise required by Buyer's
lenders.
ARTICLE XI.
MISCELLANEOUS
-------------
11.1. Termination
-----------
11.1.1. Termination. This Agreement may be terminated at any
-----------
time prior to Closing:
11.1.1.1. By mutual written consent of Buyer and the Seller
Representative;
45
<PAGE>
11.1.1.2. By Seller as provided in Section 7.4, and, except as is
provided in Section 7.4, by Buyer or the Company if the Closing shall not have
occurred on or before January 31, 1998; provided, however, that this provision
shall not be available to Buyer if the Company has the right to terminate this
Agreement under Section 11.1.1.4, and this provision shall not be available to
the Company if Buyer has the right to terminate this Agreement under Section
11.1.1.3;
11.1.1.3. By Buyer if there is a material breach of any
representation or warranty set forth in Article IV hereof or any covenant or
agreement to be complied with or performed by Seller or the Company pursuant to
the terms of this Agreement or the failure of a condition set forth in Article
VIII to be satisfied (and such condition is not waived in writing by Buyer) on
or prior to the Closing Date, or the occurrence of any event which results or
would result in the failure of a condition set forth in Article VIII to be
satisfied on or prior to the Closing Date, provided that Buyer may not terminate
this Agreement prior to the Closing if Seller or the Company have not had an
adequate opportunity to cure such failure; or
11.1.1.4. By the Company if there is a material breach of any
representation or warranty set forth in Article V hereof or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VII to be
satisfied (and such condition is not waived in writing by the Company) on or
prior to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition set forth in Article VII to be satisfied on
or prior to the Closing Date; provided that the Company may not terminate this
--------
Agreement prior to the Closing Date if Buyer has not had an adequate opportunity
to cure such failure.
11.1.2. In the Event of Termination In the event of termination of
---------------------------
this Agreement:
11.1.2.1. Each party will redeliver all documents, work papers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same.
11.2. Assignment Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Parent or Buyer may, without such
consent, assign all such rights to any lender as collateral security, and Buyer
may assign all such rights and obligations to a wholly-owned subsidiary or
subsidiaries of Parent or Buyer (or a partnership controlled by Parent or Buyer)
which shall assume all obligations and liabilities of Buyer under this
Agreement. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, and no other person shall have any right, benefit or
obligation under this Agreement as a third party beneficiary or otherwise.
11.3. Notices All notices, requests, demands and other communications
-------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted with electronic confirmation of receipt; if transmitted by
telecopy, electronic or digital transmission method; the
46
<PAGE>
day after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g., Federal Express); and upon receipt,
if sent by certified or registered mail, return receipt requested. In each case
notice shall be sent to:
If to Seller, Seller Representative, or to the Company:
David P. Lanoha
5215 Linden Court
Littleton, CO 80121
FAX: 303-220-0914
with a copy to:
Robert Graft, Esq.
Graft, Thomson & Toedte, P.C.
7430 East Caley Avenue
Suite 300
Englewood, CO 80111
FAX: 303 773-9047
If to Parent or Buyer, addressed to:
Rental Service Corporation
14505 N. Hayden Road, Suite 322
Scottsdale, Arizona 85260
Attention: Chief Executive Officer
FAX: 602-905-3400
With a copy to:
Elizabeth A. Blendell, Esq.
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
FAX: 213-891-8763
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4. Choice of Law This Agreement shall be construed, interpreted and
-------------
the rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
47
<PAGE>
11.5. Entire Agreement; Amendments and Waivers This Agreement, together
----------------------------------------
with all exhibits and schedules hereto and the Ancillary Agreements, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
11.6. Multiple Counterparts This Agreement may be executed in one or
---------------------
more counterparts and by fax, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11.7. Expenses Except as otherwise specified in this Agreement, each
--------
party hereto shall pay its own legal, accounting, out of pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect (treating the Company as
Seller for this purpose), except that the Company may pay all of its legal and
accounting expenses incurred prior to September 22, 1997.
11.8. Invalidity In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9. Titles The titles, captions or headings of the Articles, Sections
------
and subsections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.10. Publicity; Confidentiality None of Parent, Buyer, Seller, the
--------------------------
Company or their respective Affiliates or Representatives shall issue any press
release or make any public statement regarding, or disclose to any third party
(except as required by law or legal process, and except to each party's lenders
if such lenders so require) any of the terms of, the transactions contemplated
hereby, without prior written approval of the other party, provided that Parent,
Buyers, Seller and the Company may, if they mutually agree, issue or make an
appropriate press release or public announcement after the Closing Date. Buyer
and Parent will use reasonable efforts, consistent with their legal obligations,
to consult with the Seller Representative regarding any proposed press release.
In the event that this Agreement is terminated prior to Closing, Buyer agrees to
return to Seller and the Company all correspondence and documents furnished by
Seller or the Company's Representatives, and agrees not to disclose or use for
its own purposes any confidential or proprietary information of the Company that
has been furnished to it by Seller or the Company's Representatives.
48
<PAGE>
11.11. Remedies All rights and remedies of the parties hereto are set
--------
forth specifically in this Agreement and the attachments hereto.
49
<PAGE>
11.12. Arbitration Any controversy arising after the Closing out of or
-----------
relating to this Agreement (including, without limitation, pursuant to Section
10.4, but excluding for purposes of this Section 11.12, the employment and non-
competition agreements attached as Exhibits hereto), or relating to the breach
hereof, shall be settled by arbitration in Denver, Colorado, in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect (except as otherwise expressly provided in this Agreement), except that
disputes related to the preparation of financial statements shall be arbitrated
by a mutually agreeable Big 6 accounting firm. The award rendered by the
arbitrator(s) shall be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction thereof.
The arbitrator(s) shall possess the powers to issue mandatory orders and
restraining orders in connection with such arbitration. The expenses of the
arbitration shall be borne by the losing party unless otherwise allocated by the
arbitrator(s). The agreement to arbitrate shall be specifically enforceable
under the prevailing arbitration law. During the continuance of any arbitration
proceedings, the parties shall continue to perform their respective obligations
under this Agreement.
11.13. Seller Representative
---------------------
11.13.1. David P. Lanoha shall also perform the role of "Seller
Representative" hereunder and of Representative under the Escrow Agreement. In
the event of the resignation, death or incapacity of Seller Representative, his
successor shall be appointed within 14 days of his death or incapacity by the
Company, and such successor must be acceptable to Buyer. If the Seller fail to
appoint a successor within such 21-day period, then Buyer shall have the right
to appoint the successor from among the Seller. The choice of a successor
Seller Representative appointed in any manner permitted above shall be final and
binding. The decisions and actions of any successor Seller Representative shall
be, for all purposes, those of Seller Representative as if originally named
herein.
11.13.2. The incapacity of Seller shall not terminate the
authority and agency of the Seller Representative.
ARTICLE XII.
SPECIAL PROVISIONS
------------------
12.1. These special provisions shall control where inconsistent with any
other term or provision of this Agreement and these special provisions are a
material inducement to Seller to enter into this Contract.
50
<PAGE>
12.2. The Buyer acknowledges that the Company has made no
representations, warranties, covenants or agreements or provided other
inducements that are not specifically set forth in this Agreement or the
Ancillary Agreements and the documents related to the asset purchases from the
Related Entities. The Buyer has been provided open and complete access to all
books, records, facilities, equipment, rolling stock, furniture, fixtures,
inventory, books, tax returns, records, minute books, contracts and other data
relating to the Company, its facilities, assets, real property and other
tangible and intangible assets.
12.2.1. For purposes of this Agreement, "fraud" shall mean (i)
judicial finding of fraud from which all appeals have been exhausted or have
expired, (ii) an arbitrator's finding of fraud from which all appeals have bee
exhausted or have expired, or (iii) the parties have mutually agreed in writing
as to the existence of fraud.
51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
CENTER RENTAL & SALES/OMAHA, LLC RSC ACQUISITION CORP.
("Company") ("Buyer")
By: /s/ David P. Lanoha By: /s/ Martin R. Reid
------------------------ ------------------------------
Name: David P. Lanoha Name: Martin R. Reid
Its: Managing Member Its: Chief Executive Officer
DAVID P. LANOHA RENTAL SERVICE CORPORATION
("Seller") ("Parent")
By: /s/ Martin R. Reid
--------------------------
/s/ David P. Lanoha Name: Martin R. Reid
- ------------------------- Its: Chief Executive Officer
David P. Lanoha
52
<PAGE>
Exhibit 10.17
STOCK PURCHASE AGREEMENT
by and among
Leonard A. Siems, Marvin W. Abbott and
the Trustees, as defined herein
as "Sellers,"
RSC Alabama, Inc.
as "Buyer,"
Rental Service Corporation
as "Parent"
and
Siems Rental & Sales Co., Inc.
as the "Company"
October 31, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS................................................... 1
1.1. Defined Terms........................................................ 1
1.2. Other Defined Terms.................................................. 5
ARTICLE II. SALE AND TRANSFER OF SHARES.................................. 6
2.1. Transfer of Shares................................................... 6
2.2. Purchase Price....................................................... 6
2.3. Purchase Price Adjustment............................................ 9
2.4. Transfer Taxes and Fees.............................................. 10
2.5. Closing of Books, Benefits and Risks of Ownership.................... 10
ARTICLE III. CLOSING..................................................... 11
3.1. Closing.............................................................. 11
3.2. Conveyances at Closing............................................... 11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY.... 12
4.1. Organization of the Company.......................................... 12
4.2. Authorization........................................................ 12
4.3. No Violation......................................................... 13
4.4. Capitalization....................................................... 13
4.5. Related Entities..................................................... 14
4.6. Equipment and Other Assets; Absence of Encumbrances.................. 14
4.7. Facilities........................................................... 14
4.8. Contracts and Commitments............................................ 15
4.9. Permits.............................................................. 16
4.10. Financial Statements................................................ 16
4.11. Books and Records................................................... 17
4.12. Litigation.......................................................... 17
4.13. Labor Matters....................................................... 17
4.14. Compliance with Law................................................. 17
4.15. No Brokers.......................................................... 18
4.16. No Other Agreements to Sell the Company............................. 18
4.17. Proprietary Rights.................................................. 18
4.18. Tax Matters......................................................... 19
4.19. Accounts Receivable................................................. 20
4.20. Inventory........................................................... 20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.21. Employees and Employee Benefits..................................... 20
4.22. Compliance With Environmental Laws.................................. 25
4.23. Liabilities......................................................... 28
4.24. Insurance........................................................... 28
4.25. Conduct of the Business............................................. 29
4.26. Securities Law Matters.............................................. 29
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT............ 30
5.1. Organization of Buyer and Parent..................................... 30
5.2. Authorization........................................................ 30
5.3. No Conflict or Violation............................................. 30
5.4. Consents and Approvals............................................... 31
5.5. Capitalization....................................................... 31
5.6. Parent Common Stock.................................................. 31
5.7. SEC Filings; Parent Financial Statements............................. 31
ARTICLE VI. COVENANTS OF BUYER, THE COMPANY AND SELLERS.................. 32
6.1. Further Assurances................................................... 32
6.2. No Solicitation...................................................... 32
6.3. Notification of Certain Matters...................................... 33
6.4. Access to Information................................................ 33
6.5. Conduct of Business.................................................. 33
6.6. Environmental Assessments and Remediation............................ 34
6.7. The Holdback......................................................... 35
6.8. Registration Rights.................................................. 35
6.9. Key Man Life Insurance; Vehicle...................................... 36
6.10. Termination of Plans................................................ 36
ARTICLE VII. CONDITIONS TO SELLERS' OBLIGATIONS.......................... 37
7.1. Representations, Warranties and Covenants............................ 37
7.2. No Proceedings, Litigation or Laws................................... 37
7.3. Certificates......................................................... 37
7.4. Material Changes..................................................... 37
7.5. Opinion of Counsel................................................... 37
7.6. Escrow Agreement..................................................... 38
7.7. Employment and Non-Competition Agreements............................ 38
7.8. Registration Rights Agreement........................................ 39
7.9. New Leases........................................................... 39
7.10. Payoffs............................................................. 39
ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS.......................... 39
8.1. Representations, Warranties and Covenants............................ 39
8.2. Consents............................................................. 39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.3. No Proceedings or Litigation......................................... 39
8.4. Opinion of Counsel................................................... 40
8.5. Certificates......................................................... 41
8.6. Escrow Agreement..................................................... 41
8.7. Employment and Non-Competition Agreements............................ 42
8.8. Registration Rights Agreement........................................ 42
8.9. New Leases........................................................... 42
8.10. Release of Encumbrances............................................. 42
8.11. Material Changes.................................................... 42
8.12. Corporate Documents................................................. 42
8.13. Due Diligence Review................................................ 42
8.14. Completion of Environmental Remediation............................. 43
ARTICLE IX. RISK OF LOSS; CONSENTS TO ASSIGNMENT......................... 43
9.1. Risk of Loss......................................................... 43
9.2. Consents to Assignment............................................... 43
ARTICLE X. ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING................ 44
10.1. Books and Records; Tax Examinations................................. 44
10.2. Survival of Representations, Etc.................................... 44
10.3. Indemnifications.................................................... 45
10.4. Further Action...................................................... 48
ARTICLE XI. MISCELLANEOUS................................................ 48
11.1. Termination......................................................... 48
11.2. Assignment.......................................................... 49
11.3. Notices............................................................. 49
11.4. Choice of Law....................................................... 50
11.5. Entire Agreement; Amendments and Waivers............................ 51
11.6. Multiple Counterparts............................................... 51
11.7. Expenses............................................................ 51
11.8. Invalidity.......................................................... 51
11.9. Titles.............................................................. 51
11.10. Publicity; Confidentiality......................................... 51
11.11. Cumulative Remedies................................................ 52
11.12. Arbitration........................................................ 52
11.13. Seller Representative.............................................. 52
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of October 31, 1997 (the
"Agreement"), is by and among RSC Alabama, Inc., an Alabama corporation
("Buyer"), Rental Service Corporation, a Delaware corporation ("Parent"),
Leonard A. Siems, Marvin W. Abbott and Leonard A. Siems, Marvin W. Abbott,
Michael E. Mullen and Porter Siems as trustees of the Company's Employee Stock
Ownership Plan (collectively, the "Trustees") (each of Leonard A. Siems, Marvin
W. Abbott and the Trustees a "Seller" and collectively, the "Sellers") and Siems
Rental & Sales Co., Inc., a Maryland corporation (the "Company").
RECITALS
--------
A. The Company is engaged in the business of equipment rental and sales.
B. Sellers own, of record and beneficially, all of the issued and
outstanding shares of capital stock of the Company (the "Shares") and, as of the
Closing Date (as defined below), will own, of record and beneficially, all of
the Shares.
C. Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer, all of the Shares upon the terms and subject to the conditions of this
Agreement, whereupon Buyer will own all of the equity interests in the Company.
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1. Defined Terms. As used herein, the terms below shall have the following
-------------
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning set forth in the Exchange Act.
---------
"Agreement" shall have the meaning specified in the first paragraph of this
---------
Agreement.
"Ancillary Agreements" shall mean the New Leases for the properties and at
--------------------
the respective rents and terms set forth on Schedule 4.7, a form of which is
attached hereto as
1
<PAGE>
Exhibit 8.9, the Employment and Non Competition Agreement attached hereto as
Exhibit 8.7.1, the Non Competition Agreement attached hereto as Exhibit 8.7.2,
the Escrow Indemnification Agreement attached hereto as Exhibit 8.6 and the
Registration Rights Agreement attached hereto as Exhibit 8.8.
"Assets" shall mean the assets of the Company as reflected on the Interim
------
Balance Sheet dated July 31, 1997, together with those assets acquired (less
those assets disposed of) in the ordinary course of business since the Interim
Balance Sheet Date, less: (i) all life insurance to be distributed to the
insured parties thereunder pursuant to Section 6.8, (ii) the Vehicle, and (iii)
the personal assets of Leonard A. Siems, Marvin W. Abbott, Mike Mullen and
Porter Siems.
"Balance Sheets" shall mean the reviewed balance sheets of the Company at
--------------
each of December 31, 1994 and 1995 and the audited balance sheet of the Company
at December 31, 1996.
"Books and Records" shall mean (a) all records and lists pertaining to the
-----------------
Business, customers, suppliers or personnel of the Company, (b) all product,
business and marketing plans of the Company and (c) all books, ledgers,
subledgers, trial balances, files, reports, plans, drawings and operating
records of every kind maintained by the Company.
"Business" shall mean the Company's equipment rental and sales business,
--------
operating under the "Siems Rental & Sales Co." name or otherwise.
"Buyer" shall have the meaning specified in the first paragraph of this
-----
Agreement.
"Closing Date" shall mean December 12, 1997, or such other date as Buyer and
------------
Sellers shall mutually agree upon; provided that upon the mutual agreement of
Buyer and Sellers, the Closing Date may be changed to a date on or prior to
December 30, 1997 (which date shall be a date which is reasonably satisfactory
to both parties) if necessary to complete the Closing.
"Closing Balance Sheet" shall mean the reviewed balance sheet of the Company
---------------------
dated October 31, 1997, less any acquired reserves added by Buyer or Parent
provided, however, that any such reserves added by Parent or Buyer shall not
reduce the Shareholder Net Worth for purposes of calculating the Purchase Price.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
----
rules and regulations promulgated thereunder.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Company" shall have the meaning specified in the first paragraph of this
-------
Agreement.
2
<PAGE>
"Contract" shall mean any agreement, contract, note, loan, evidence of
--------
indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, instrument,
obligation or commitment to which the Company is a party or is bound and which
relates to the Business or Assets, whether oral or written.
"Encumbrance" shall mean any claim, lien, pledge, option, charge, easement,
-----------
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, encumbrance or other right of
third parties, whether voluntarily incurred or arising by operation of law, and
includes, without limitation, any agreement to give any of the foregoing in the
future, and any contingent sale or other title retention agreement or lease in
the nature thereof.
"Equipment" shall mean all of the furniture, fixtures, furnishings,
---------
machinery, automobiles, trucks, spare parts, tools, supplies, office and other
equipment and other tangible personal property owned by the Company and used in
connection with the Business.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Escrow Agent" shall mean the entity designated by Buyer and the Seller
------------
Representative to act as escrow agent under the Escrow Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement, dated as of the
----------------
Closing Date, by and among Buyer, Seller Representative and the Escrow Agent,
substantially in the form of Exhibit 8.6 attached hereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"Facilities" shall mean the rental yards, stores, offices, maintenance and
----------
storage facilities, shops, warehouses, improvements and other structures,
together with all related fixtures and improvements, located at or on the Leased
Real Property, as well as any other property owned, operated or leased by the
Company.
"Financial Statements" shall mean the Year-End Financial Statements and the
--------------------
Interim Financial Statements.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended.
"Interim Balance Sheet" shall mean the balance sheet of the Company as of
---------------------
the Interim Balance Sheet Date, less the book value of the Vehicle and the life
insurance policies to be distributed pursuant to Section 6.8.
3
<PAGE>
"Interim Balance Sheet Date" shall mean July 31, 1997.
--------------------------
"Interim Financial Statements" shall mean the Interim Balance Sheet and the
----------------------------
related statement of operations of the Company for the seven months ended on the
Interim Balance Sheet Date.
"Inventory" shall mean all of the Company's inventory held for resale and
---------
all of the Company's new repair or replacement parts, supplies and packaging
items and similar items with respect to the Business, in each case wherever the
same may be located.
"Leased Real Property" shall mean all real property listed on Schedule 4.7
--------------------
leased by the Company and which is used in the conduct of the Business,
including without limitation, all rights, easements and privileges appertaining
or relating thereto, all buildings, fixtures, and improvements located thereon
and all Facilities thereon, if any.
"Material Adverse Effect" or "Material Adverse Change" shall mean with
----------------------- -----------------------
respect to the Business or the Assets any significant and substantial adverse
effect or change in the condition (financial or other), business, results of
operations, prospects, assets, liabilities or operations of the Business or the
Assets or on the ability of the Sellers or the Company to consummate the
transactions contemplated hereby, or any event or condition which would, with
the passage of time, constitute a "Material Adverse Effect" or "Material Adverse
Change."
"Parent" shall have the meaning specified in the first paragraph of this
------
Agreement.
"Permits" shall mean all licenses, permits, franchises, approvals,
-------
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.
"Related Entity" shall mean any corporation, partnership, trust or other
--------------
organization in which the Company or any of the Sellers has a controlling
interest and shall include, without limitation, A&S Development, a Maryland
partnership.
"Rental and Non-Rental Asset Listing" shall mean the asset listing attached
-----------------------------------
as Schedule 4.6 hereto, listing all assets as of October 18, 1997.
"Representative" shall mean any officer, director, principal, attorney,
--------------
agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Sellers" shall have the meaning specified in the first paragraph of this
-------
Agreement.
4
<PAGE>
"Seller Representative" shall mean Leonard A. Siems, whom Sellers have
---------------------
irrevocably made, constituted and appointed their agent pursuant to Section
11.13 hereof.
"Shares" shall mean all of the issued and outstanding shares of capital
------
stock of the Company.
"Tax" shall mean any federal, state, local, foreign or other tax, levy,
---
impost, fee, assessment or other government charge, including without limitation
income, estimated income, business, occupation, franchise, property, payroll,
personal property, sales, transfer, use, employment, commercial rent, occupancy,
franchise or withholding taxes, and any premium, including without limitation
interest, penalties and additions in connection therewith.
"Vehicle" shall mean that 1995 BMW 525i, Vehicle Identification Number
-------
WBAHD6325SGK51661, currently driven by Leonard A. Siems.
"Year-End Financial Statements" shall mean the Balance Sheets dated as of
-----------------------------
December 31, 1994, 1995 and 1996, and the related statement of operations of the
Company for the fiscal years then ended.
1.2. Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
<S> <C>
Actions 4.12
Average Share Price 2.2.1.2
Cash Purchase Price 2.2.1.1
CERCLA 4.22.2
Claim 10.3.4
Claim Notice 10.3.4
Closing 3.1
Company 4.22.1.1
Consultant 6.6.1
Damages 10.3.1
E&Y 2.3.1
Environmental Conditions. 4.22.11
Environmental Laws 4.22.2
Environmental Assessments 6.6.1
GAAP 2.3.1
Hazardous Substance 4.22.1.3
Holdback Amount 2.2.3.1
Parent Common Stock 2.2.1.1
Post-Closing Environmental Liability 10.3.1
Proposed Acquisition Transaction 6.2
Proprietary Rights 4.17.1
Purchase Price 2.2.1.1
RCRA 4.22.2
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Release 4.22.1.2
Remediation Standard 6.6.2
Rental Ready 4.6
Seller Representative 11.13.1
Shareholder Net Worth 2.3.3
Tax Reserve 2.3.2
</TABLE>
ARTICLE II.
SALE AND TRANSFER OF SHARES
---------------------------
2.1. Transfer of Shares. Upon the terms and subject to the conditions
------------------
contained herein, at the Closing, Sellers will sell, convey, transfer, assign
and deliver to Buyer, and Buyer will acquire from Sellers, the Shares, for the
consideration specified in Section 2.2.1.
2.2. Purchase Price
--------------
2.2.1. Purchase Price.
--------------
2.2.1.1. At the Closing, upon the terms and subject to the
conditions set forth herein, Buyer shall pay to Sellers in consideration for the
Shares, the aggregate amount of Eleven Million Dollars ($11,000,000) (the
"Purchase Price"), of which Eight Million Dollars ($8,000,000) (the "Cash
Purchase Price") shall be paid to Sellers by wire transfer of immediately
available funds to an account designated by Sellers and Three Million Dollars
($3,000,000) shall be paid by delivery to Sellers of Common Stock, par value
$.01 per share, of Parent (the "Parent Common Stock"). The number of shares of
Parent Common Stock to be issued to Sellers shall be determined as set forth in
Section 2.2.1.2. The Purchase Price shall be subject, however, to adjustment as
set forth in Section 2.3 and the Parent Common Stock, or the cash proceeds from
the sale thereof, shall serve as the Holdback Amount as described below. The
Trustees shall receive all of their pro rata portion of the Purchase Price,
calculated in accordance with their ownership interest in the Company, as set
forth on Schedule 2.2.1, in the form of cash. The Parent Common Stock and the
remaining portion of the Cash Purchase Price shall be allocated among the
Sellers, other than the Trustees, pro rata in accordance with their respective
ownership interests in the Company, as set forth on Schedule 2.2.1. The Holdback
Amount (and any remittance of the Holdback Amount pursuant to the Escrow
Agreement) shall be allocated among each Seller, other than the Trustees, in
accordance with such Seller's respective ownership interests in the Company, as
set forth on Schedule 2.2.1.
2.2.1.2. The number of shares of Parent Common Stock to be issued to
Sellers shall be the result of dividing Three Million Dollars ($3,000,000) by
the average closing price of Parent Common Stock on the New York Stock Exchange
during the ten trading days beginning ten trading days prior to the date of this
Agreement (the "Average Share Price").
6
<PAGE>
2.2.1.3. No fractional shares of Parent Common Stock shall be issued,
but in lieu thereof each Seller who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock shall receive from Buyer an amount of
cash equal to the product of the fraction of a share of Parent Common Stock to
which such holder would otherwise be entitled, multiplied by the Average Share
Price.
2.2.2. Employment and Non-Competition Agreements. Buyer shall enter into (i)
-----------------------------------------
an Employment and Non-Competition Agreement with Marvin W. Abbott, in
substantially the form attached hereto as Exhibit 8.7.1, and (ii) a Non-
Competition Agreement with Leonard A. Siems, in substantially the form attached
hereto as Exhibit 8.7.2.
2.2.3. Holdback and Escrow Agreement.
-----------------------------
2.2.3.1. For purposes of this Section 2.2.3 only, the term "Sellers"
shall not include the Trustees. The "Holdback Amount" shall be Three Million
Dollars ($3,000,000), in the form of Parent Common Stock (valued pursuant to
Section 2.2.1.2), or the cash proceeds from the sale thereof, allocated among
the Sellers according to their pro rata portion of the Holdback Amount, as
calculated in accordance with Sellers respective ownership interests in the
Company. At the Closing, the Holdback Amount shall be placed in escrow pursuant
to the Escrow Agreement, pending the determination of the amount of any purchase
price adjustment pursuant to Section 2.3, Sellers' indemnification obligations,
if any, as set forth in Section 10.3, and any remediation required under Section
6.6 hereof which is not resolved by the Closing Date. The Escrow Agent will
remit to Sellers 33-1/3% of the Holdback Amount on January 2, 1999, an
additional 33-1/3% on January 2, 2000, and the final 33-1/3% on January 2, 2001
(each of January 2, 1999, 2000 and 2001, a "Distribution Date"), less any
amounts necessary to cover undisputed claims, unresolved adjustments,
indemnification or environmental remediation claims pursuant to Sections 2.3,
6.6 and/or 10.3. Each such remittance from the Holdback Amount shall equal the
product of the initial number of shares of Parent Common Stock multiplied by the
number .3333 and, to the extent that such number of shares of Parent Common
Stock are not in Escrow, adding such number of shares of Parent Common Stock
that are in Escrow to the product of the amount of cash, cash equivalents or
other securities held in Escrow multiplied by .3333; provided, however, that the
value of the Escrow shall not be less than (i) $2,000,000 after the first
Distribution Date or (ii) $1,000,000 after the second Distribution Date.
Sellers shall be entitled to all stock dividends and interest earned on
investments held in escrow. In the event of any disagreement between Buyer and
Sellers regarding the dollar amount of any such adjustment or indemnification or
remediation obligation, Buyer and Sellers shall submit such dispute to a
nationally recognized accounting firm (other than an accounting firm engaged by
Buyer, Parent or Sellers) for resolution pursuant to Section 2.3.1 (in the case
of a disagreement relating to the purchase price adjustment) or to a third-party
arbitrator for binding arbitration pursuant to Section 11.12 of this Agreement
in all other cases. Any amounts required to be paid to Buyer out of the
Holdback Amount to satisfy a Purchase Price Adjustment or an indemnification
claim shall be paid in cash, regardless of whether Sellers must sell some or all
of the Parent Common Stock in escrow to satisfy any such claim. The Escrow
Agreement shall provide that, if Sellers must sell some or all of the Parent
Common Stock, the Escrow Agent shall sell such Parent
7
<PAGE>
Common Stock in a private placement that comports with all applicable securities
laws under the Securities Act and that Sellers shall provide Buyer with an
opinion of counsel that such sale is permissible under the Securities Act.
Notwithstanding the foregoing, Buyer shall not be limited to retention of the
Holdback Amount as a sole remedy in the event that any purchase price adjustment
or indemnification obligation arising from (a) Sellers' fraud, (b) a breach of
Section 4.4 after the Closing Date, other than pursuant to rights under
applicable law with respect to participants in the Company's Employee Stock
Ownership Plan (the "ESOP"), (c) a breach of Section 4.18, (d) a breach of
Section 4.21 or (e) a breach by Sellers of any environmental remediation
obligation under Section 6.6 exceeds the Holdback Amount; rather, in such event,
Buyer shall have the right to collect within 60 days from Sellers, in cash, the
amount of such excess. Further, in the event that Sellers fail to satisfy any
such purchase price adjustment or indemnification or remediation obligation
arising under subsections 2.2.3.1.(a)-(e) that exceeds the Holdback Amount and
such adjustment or obligation is either the result of a final adjudicated claim
or has been agreed to by Sellers, Buyer or Parent shall have the right of set-
off under any of the New Leases. With respect to any purchase price adjustment
or indemnification not arising under subsections 2.2.3.1 (a), (b), (c), (d) or
(e) above, Buyer shall be limited to the Holdback Amount as a sole remedy.
2.2.3.2. Buyer and the Seller Representative, acting on behalf of the
Sellers, shall enter into the Escrow Agreement, in substantially the form
attached hereto as Exhibit 8.6, pursuant to which Buyer shall deposit with the
Escrow Agent the Holdback Amount of the Parent Common Stock or cash proceeds
from the sale thereof. All costs of the escrow shall be paid one-half by Buyer,
on the one hand, and one-half by the Sellers collectively, on the other hand,
all as further provided in the Escrow Agreement.
8
<PAGE>
2.3. Purchase Price Adjustment
-------------------------
2.3.1. Closing Balance Sheet. Not later than 90 days after the Closing Date,
---------------------
the Sellers, on behalf of the Company, shall deliver to Buyer and to Buyer's
certified public accountant, Ernst & Young LLP ("E&Y"), the Closing Balance
Sheet. The Closing Balance Sheet shall be prepared in accordance with generally
accepted accounting principals ("GAAP") on a basis consistent with that applied
by the Company in its most recent annual financial statements. Sellers, on
behalf of the Company, shall provide Buyer and E&Y with all information used in
the preparation of the Closing Balance Sheet. The Closing Balance Sheet shall
be reviewed by E&Y, at Buyer's expense, who shall propose such adjustments
therein as are necessary for the issuance of a reviewed opinion as promptly as
practicable following delivery of the Closing Balance Sheet. Such reviewed
opinion shall be delivered to Sellers immediately upon its issuance. The
Closing Balance Sheet will become final and binding on the parties unless within
ten business days following Sellers' delivery of the Closing Balance Sheet to
Buyer and E&Y, Buyer notifies Seller Representative in writing that Buyer
objects thereto, which objection shall be solely on the basis of mathematical
errors in the calculation thereof, the failure to present the Company's
financial position on a GAAP basis consistent with the Company's most recent
annual financial statements or a disagreement about the materiality of an
adjustment made or not made. If Buyer so objects, Buyer and the Seller
Representative shall use their best efforts to resolve any differences with
respect to the Closing Balance Sheet. If, within ten business days following
such notice by Buyer, such differences have been resolved, the Closing Balance
Sheet, as revised to reflect changes agreed to by Buyer and the Seller
Representative, shall be final, binding and conclusive. If by such date such
differences have not been resolved, then the Seller Representative and Buyer
shall jointly select a nationally recognized accounting firm not currently
engaged by Buyer, Sellers or any Affiliate of any of them, to perform a review
of the Closing Balance Sheet. Such reviewing firm's conclusions shall be final,
binding and conclusive as to such matters. Sellers and Buyer will share equally
the fees and expenses of such review.
2.3.2. Tax Reserve. The Holdback Amount may be used to satisfy all
-----------
liabilities of the Company relating to Taxes for each tax year of the Company
ending on or prior to the Closing Date that is not reflected and accounted for
on the Closing Balance Sheet (the "Tax Adjustment"). The intent of this
provision is that Sellers shall bear all economic responsibility for Taxes
relating to periods ending on or prior to the Closing Date and that are
unrecorded on the Closing Balance Sheet, even though Buyer shall be responsible
for filing all of the Company's tax returns due after October 31, 1997.
2.3.3. Additional Payments Resulting from the Purchase Price Adjustment. The
----------------------------------------------------------------
Purchase Price shall be subject to a dollar for dollar reduction if and to the
extent that the total value of the equity interest held by the shareholders of
the Company, determined by subtracting all liabilities (except the current tax
liabilities for the period from January 1, 1997 through October 31, 1997,
executive bonuses not greater than $100,000, disability payments, legal fees and
other fees related to collection of bad debts, and professional (legal and
accounting fees) incurred through August 31, 1997 and related to the
transactions contemplated by this Agreement) from all assets ("Shareholder Net
Worth") at the Closing Date, as reflected on the Closing Balance Sheet, is less
than the Shareholder Net Worth at July 31, 1997, as reflected on
9
<PAGE>
the Interim Balance Sheet, excluding the cash value of the life insurance
policies being distributed and the net book value of the Vehicle being
distributed to Leonard A. Siems. No adjustment shall be made for accrued
vacation and/or sick pay that is less than or equal to $155,000. Additionally,
Sellers are permitted an increase of up to $45,000 in the allowance for bad
debts from that reflected in the Interim Balance Sheet, which increase shall not
decrease Shareholder Net Worth for purposes of calculating the Purchase Price.
In the event of any such Purchase Price reduction, then at such time as the
Closing Balance Sheet becomes final pursuant to Section 2.3.1 hereof Buyer shall
be entitled to a prompt distribution of the amount of such reduction from the
Holdback Amount under the Escrow Agreement.
2.3.4. Missing or Non-Operating Equipment. The Purchase Price shall be
----------------------------------
subject to reduction for any equipment reported on the Rental and Non-Rental
Asset Listing that is missing, non-operating or not Rental Ready on October 31,
1997, and is in excess of $50,000 in original cost. To determine the reduction
of Purchase Price, the aggregate book value of such missing or non-operating
equipment will be divided by the aggregate cost of such equipment and the
resulting factor shall be applied to the aggregate original cost of missing and
inoperative equipment in excess of $50,000. The determination of missing, non-
operating or non-Rental Ready Equipment and reduction in the Purchase Price
resulting therefrom shall be made on or before seven (7) business days after the
Closing Date. The Rental and Non-Rental Asset Listing attached as Schedule 4.6
sets forth the asset description, make, model and original cost of all Equipment
which, on the Closing Date, will be fully operable, accounted for and Rental
Ready. For purposes of this Agreement, an item of Equipment is "Rental Ready"
only if it is free of deferred maintenance requiring any repairs in excess of
$100 for any item having an original cost of $5,000 or less or $200 for any item
having an original cost in excess of $5,000. Repairs shall be performed in the
Company's facilities on a basis consistent with past practice. In the event of
any Purchase Price reduction pursuant to this Section 2.3.4, Buyer shall be
entitled to a prompt distribution of the amount of such reduction from the
Holdback Amount under the Escrow Agreement.
2.4. Transfer Taxes and Fees. Sellers shall be responsible for any
-----------------------
documentary and transfer taxes and any sales, use or other taxes imposed by
reason of the transfer of Shares provided hereunder and any deficiency, interest
or penalty asserted with respect thereto. Sellers shall pay the fees and costs
of recording or filing all UCC termination statements and other releases of
Encumbrances to the extent not set forth on Schedule 2.4.
2.5. Closing of Books, Benefits and Risks of Ownership. The transactions
-------------------------------------------------
contemplated by this Agreement shall be deemed effective as of October 31, 1997
and all profits and losses of the Company from and after November 1, 1997 shall
be solely for the account of, and inure solely to the benefit or detriment of,
Buyer. The accounting books and records of the Company will be closed as of the
close of business on October 31, 1997. Sellers shall operate the business
subject to and pursuant to the requirements set forth in Section 6.5 of this
Agreement by, from and after November 1, 1997 until such time as this Agreement
is terminated or closed. Without the consent of Buyer, until the Closing Date
the Company or Seller shall not repurchase, sell or transfer any shares, make or
declare any dividends (except as expressly contemplated by this
10
<PAGE>
Agreement), or otherwise take any action restricted under Section 6.5 of this
Agreement. If this transaction does not close for any reason on or prior to
December 30, 1997 and is not extended by agreement of the parties, then (i)
Buyer shall pay to Sellers a fee of $165,000 provided that the failure to close
the transaction is not due to Seller's failure to perform their obligations
under this Agreement and (ii) either (A) the Company shall pay within ten days
to the Buyer net after tax profits accumulated during the period from November
1, 1997 to the date that the closing is deemed not to occur or to the date the
Agreement is terminated, but not later than December 30, 1997, or (B) the Buyer
shall within ten days pay to the Company all losses accumulated (offset by any
non-refundable contributions made by Buyer to the Company) by the Company during
the period from November 1, 1997 to the date that the closing is deemed not to
occur, but not later than December 30, 1997.
ARTICLE III.
CLOSING
-------
3.1. Closing. The Closing of the transactions contemplated herein (the
-------
"Closing") shall be held on the Closing Date at a time and place
as the parties shall mutually agree.
3.2. Conveyances at Closing.
----------------------
3.2.1. Sellers' Delivery Obligations. To effect the sale and transfer
-----------------------------
referred to in Section 2.1 hereof, Sellers will, at the Closing, execute and
deliver to Buyer:
3.2.1.1. certificates evidencing the Shares, free and clear of any
Encumbrances of any nature whatsoever, duly endorsed in blank for transfer or
accompanied by stock powers duly executed in blank;
3.2.1.2. all Ancillary Agreements required to be executed by
any of the Sellers;
3.2.1.3. all certificates, opinions of counsel and other
documents described in Article VIII; and
3.2.1.4. all Permits and any other third party consents required for
the valid transfer of the Shares as contemplated by this Agreement, or for the
continued operation of the Business following such transfer.
3.2.2. Buyer's Delivery Obligations. To effect the sale and transfer
----------------------------
referred to in Section 2.1 hereof, Buyer will, at the Closing, execute and
deliver to Sellers:
3.2.2.1. all Ancillary Agreements required to be executed by
Buyer; and
3.2.2.2. all certificates described in Article VII.
11
<PAGE>
3.2.2.3. all opinions of counsel and other documents described
in Article VII;
3.2.2.4. the Purchase Price, as required by Section 2.2.1.1
hereof.
3.2.3. Form of Instruments. To the extent that a form of any document to be
-------------------
delivered hereunder is not attached as an Exhibit hereto, such documents shall
be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to the recipient.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
---------------------------------------------------------
Sellers and the Company hereby, jointly and severally, represent and warrant
to Buyer as follows, which representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct:
4.1. Organization of the Company. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Maryland. Copies of the Articles of Incorporation and Bylaws of the Company, and
all amendments thereto, heretofore delivered to Buyer are accurate and complete
as of the date hereof. The Company is duly qualified or licensed to do business
as a foreign corporation in good standing in the States of Delaware and West
Virginia, the Commonwealths of Pennsylvania and Virginia and the District of
Columbia which are the only jurisdictions in which ownership of property or the
conduct of its business requires such qualification, except for those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. The Company has no subsidiaries and no direct or indirect stock
or other equity or ownership interest (whether controlling or not) in any
corporation, association, partnership, joint venture or other entity which
engages in the equipment rental business.
4.2. Authorization. Each of the Sellers and the Company has full power and
-------------
authority (corporate or other) to enter into this Agreement and the Ancillary
Agreements, as the case may be, and to carry out the transactions contemplated
hereby and thereby, and the Board of Directors of the Company and each of the
Sellers has taken all action required by law, its charter documents, as the case
may be, or otherwise, to be taken by it to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements, as the case may be,
and the consummation of the transactions contemplated hereby and thereby. This
Agreement and the Ancillary Agreements, as the case may be, are the legal, valid
and binding obligations of each of the Sellers and the Company, enforceable
against each of them in accordance with their respective terms. A copy of the
resolutions of the Company's board of directors and stockholders authorizing
this Agreement and the related transactions is attached hereto as Schedule 4.2.
12
<PAGE>
4.3. No Violation
------------
. None of the execution, delivery and performance of this Agreement and the
Ancillary Agreements nor the consummation of the transactions contemplated
hereby and thereby will (i) violate any provision of the Articles of
Incorporation or Bylaws of the Company, (ii) except as set forth on Schedule 4.3
attached hereto, violate, result in a breach of, conflict with, or constitute a
default (or an event which, with the giving of notice or lapse of time or both,
would constitute a default) under, require any consent under, or give to others
any rights of termination, amendment, acceleration, suspension, revocation or
cancellation of any note, bond, mortgage, or indenture, contract, agreement,
lease, sublease, license, permit, franchise or other instrument or arrangement
to which any Seller or the Company is a party or by which any of the Shares or
any of the assets or properties of the Company or any Seller are bound or
affected, (iii) except as set forth on Schedule 4.3 attached hereto, result in
the creation or imposition of any Encumbrance upon any of the Shares or any
property or Assets of the Company or any Seller under, any agreement or
commitment to which the Company or any Seller is a party or by which the Company
or any Seller is bound or affected, or to which the property of the Company or
any Seller is subject, or (iv) except as set forth on Schedule 4.3 attached
hereto, violate, conflict with or result in the breach of (or cause an event
which could have a Material Adverse Effect as a result of) any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority to which any Seller, the Company, the Business or any of the
properties or Assets of any of the foregoing is subject. Except as set forth on
Schedule 4.3, no action, consent, approval or authorization by or filing with
any person or entity, including, without limitation, any governmental authority,
is required in connection with the execution, delivery and performance by each
of the Sellers and the Company of this Agreement and the Ancillary Agreements,
as the case may be, or the consummation by each of the Sellers and the Company
of the transactions respectively contemplated by each of them herein and
therein.
4.4. Capitalization.
--------------
4.4.1. The authorized equity securities of the Company consist solely of
150,000 shares of common stock, par value $.01 per share, of which 145,579
shares are issued and outstanding and constitute the Shares. Sellers are and
will be on the Closing Date the record and beneficial owners and holders of the
Shares as set forth on Schedule 4.4.1 (which schedule also sets forth the
address of each such Seller and the certificate numbers of the certificates
representing the Shares), free and clear, as of the Closing Date, of all
Encumbrances (other than (a) a legend indicating only that the Shares have not
been registered under the Securities Act or (b) any rights under applicable law
that participants in the ESOP may have with respect to the Shares allocated to
their accounts in the ESOP).
4.4.2. There are no other shares of capital stock of the Company issued and
outstanding and no shares of treasury stock. All Shares are validly issued,
fully paid and nonassessable. None of the issued and outstanding shares of
common stock of the Company was issued in violation of any preemptive rights.
Except as set forth on Schedule 4.4.2, there are no outstanding (i) securities
convertible into or exchangeable or exercisable for any of the Company's capital
stock; (ii) options, warrants, calls or other rights, including, without
limitation, rights to demand registration or to sell in connection with any
registration by the
13
<PAGE>
Company under the Securities Act, with respect to the issued capital stock of
the Company, or to purchase or subscribe to capital stock of the Company or
securities convertible into or exchangeable or exercisable for capital stock of
the Company; (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale, transfer, and/or
assignment of any capital stock of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights; or (iv) Shares
pledged as collateral to secure any agreement or obligation. There are no voting
trust agreements or other contracts, agreements, arrangements, commitments,
plans, proxies or understanding restricting or otherwise relating to conveyance,
voting or dividend rights with respect to the Shares. Upon consummation of the
transactions contemplated by this Agreement and registration of the Shares in
the name of Buyer in the stock records of the Company, the Buyer will own all of
the issued and outstanding equity securities of the Company of every sort
whatsoever, free and clear of all Encumbrances.
4.5. Related Entities.
----------------
4.5.1. Schedule 4.5(a) sets forth a complete and accurate list of all of the
Related Entities, all of which are, directly, wholly-owned by any or all of the
Sellers. Schedule 4.5(a) also sets forth the jurisdiction of incorporation of
each of the Related Entities, each jurisdiction in which each such Related
Entity is qualified to do business, the number of shares of such Related
Entities outstanding, and the ownership thereof.
4.5.2. Schedule 4.5(b) sets forth a list of all agreements among the Company,
any of the Sellers and the Related Entities.
4.6. Equipment and Other Assets; Absence of Encumbrances. All of the Assets
---------------------------------------------------
are owned by the Company free and clear of all Encumbrances, other than (i)
Encumbrances reflected or reserved against on the Interim Balance Sheet or the
Closing Balance Sheet, (ii) Encumbrances that do not materially affect the value
of the Assets or the Company's ability to conduct the Business, (iii)
Encumbrances for taxes not delinquent or for taxes being diligently contested in
good faith by the Company by appropriate proceedings, (iv) mechanics, workmens,
materialmens, landlords, lessors, carriers and other similar liens arising in
the ordinary course of business with respect to obligations which are not due or
which are being diligently contested in good faith by the Company by appropriate
proceedings, (v) the perfection of purchase money security interests as provided
by law by vendors of property to the Company, and (vi) Uniform Commercial Code
Financing Statements which have not yet been terminated, as long as the
obligation which was secured by such statements has been fully paid by the
Company.
4.7. Facilities.
----------
4.7.1. Real Property. The only Leased Real Property are the parcels located
-------------
at 3683 Clipper Mill Road, Baltimore, Maryland; 3925 Washington Boulevard,
Elkridge, Maryland; 11104 Industrial Road, Manassas, Virginia; Route 1, Box
4082, Delmar, Delaware; 9430 Earley Drive, Hagerstown, Maryland and; Route 30,
Rd. 1, Box 117, Thomasville, Pennsylvania and; the real property which the
Company intends to lease from Sellers and improvements to be built
14
<PAGE>
thereon known as Parcel No. 14 on Kaverton Road in Forestville, Maryland; all as
described on Schedule 4.7,. The Buyer agrees to negotiate in good faith with the
owners of the Forestville property to enter into a lease for that property. The
Sellers and the Company have delivered to Buyer an accurate copy of the Leases
covering the Leased Real Property. Neither the Company nor any lessor under the
Leases is in material breach or default of its obligations thereunder. The
Company enjoys peaceful and undisturbed possession of the Leased Real Property.
Except as set forth on Schedule 4.7.1, there are no leases, subleases,
licenses, occupancy agreements, options, rights, concessions or other agreements
or arrangements, written or oral, granting to any person the right to purchase,
use or occupy the Facilities or any portion thereof. The Facilities are
supplied with utilities and other services necessary for the operation of the
Business.
4.7.2. Improvements, Fixtures and Equipment. The Facilities and the
------------------------------------
improvements thereon, including without limitation all Equipment (including all
fixtures) and other tangible assets owned, leased or used by the Company at the
Facilities are (i) insured to the extent and in a manner customary in the
industry, (ii) structurally sound with no known material defects, (iii) in good
operating condition and repair, subject to ordinary wear and tear, (iv) not in
need of maintenance or repair except for ordinary routine maintenance and
repair, the cost of which would not be material, (v) sufficient for the
operation of the Business as presently conducted and (vi) in conformity, in all
material respects, with all applicable laws, ordinances, orders, regulations and
other requirements relating thereto currently in effect. None of the
improvements is subject to any commitment or other arrangement for their sale or
use by any Affiliate of the Company or third parties.
4.7.3. Conformity. All Facilities have received all required approvals of
----------
governmental authorities (including without limitation, Permits and a
certificate of occupancy or other similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof.
To the best knowledge of the Company, the Facilities are (and have been)
operated and maintained in accordance with applicable laws, rules, regulations
and state, county, municipal or other local ordinances, and conform to all other
conditions necessary for the lawful conduct of the Business as currently
conducted at each such Facility.
4.8. Contracts and Commitments.
-------------------------
4.8.1. Contracts. Schedule 4.8 sets forth a complete and accurate list of
---------
all Contracts of the following categories:
4.8.1.1. Contracts not made in the ordinary course of the
Company's conduct of the Business;
4.8.1.2. Employment contracts, bonus agreements and severance
agreements;
15
<PAGE>
4.8.1.3. Supply, purchase, distribution, franchise, license, sales
or commission contracts related to the Business;
4.8.1.4. Contracts involving expenditures or liabilities, actual or
potential, in excess of $25,000 or otherwise material to the Business, and not
cancelable (without liability) within 30 calendar days;
4.8.1.5. Contracts or commitments relating to commission
arrangements with others;
4.8.1.6. Promissory notes, loans, agreements, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating to an
obligation to pay money, whether the Company shall be the borrower, lender or
guarantor thereunder or whereby any Equipment or Inventory are pledged
(excluding credit provided by the Company in the ordinary course of the Business
to its customers);
4.8.1.7. Leases of personal property not cancelable (without
liability) within 30 calendar days; and
4.8.1.8. Contracts containing covenants limiting the freedom of the
Company or any officer, director or shareholder of the Company to engage in any
line of business or compete with any person.
Sellers have delivered to Buyer true, correct and complete copies of all of the
Contracts listed on Schedule 4.8, including all amendments and supplements
thereto.
4.8.2. Absence of Breaches or Defaults. All of the Contracts are valid and
-------------------------------
in full force and effect. The Company has duly performed all of its obligations
under the Contracts to the extent those obligations to perform have accrued, and
no violation of, or default or breach under any Contracts by the Company or any
other party has occurred and neither the Company nor any other party has
repudiated any provisions thereof. All of the Contracts will be enforceable by
the Company after the Closing to the same extent as if the transactions
contemplated by this Agreement had not been consummated.
4.9. Permits. The Company has all Permits required to conduct the Business,
-------
except where the failure to obtain such Permits would not have a Material
Adverse Effect on the Business. All Permits of the Company related to the
Business are valid and in full force and effect and are listed on Schedule 4.9.
4.10. Financial Statements. The Company has heretofore delivered to Buyer
the Financial Statements. The Financial Statements (a) are true, correct and
complete and (b) are in accordance with the underlying books and records of the
Company. The Year-End Financial Statements (i) have been prepared in accordance
with GAAP consistently applied throughout the periods covered thereby and (ii)
fairly and accurately present the assets, liabilities (including all reserves)
and financial position of the Business as of the respective dates thereof and
the results
16
<PAGE>
of operations and changes in cash flows for the periods then ended (subject, in
the case of the Interim Financial Statements, to normal year-end adjustments).
At the respective dates of the reviewed Closing Balance Sheet and the audited
1996 Year-End Financial Statements, there were no liabilities of the Company,
which, in accordance with GAAP, should have been shown or reflected in the
Closing Balance Sheet or in the audited 1996 Year-End Financial Statements, or
the notes thereto, which are neither accrued or reserved, nor shown or reflected
in the Closing Balance Sheet or in the audited 1996 Year-End Financial
Statements, or the notes thereto and which if shown or reflected would have had
a Material Adverse Effect on the Closing Balance Sheet or on the audited 1996
Year-End Financial Statements.
4.11. Books and Records. The Company has made and kept (and given Buyer
-----------------
access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of the Company. The minute books of
the Company previously delivered to Buyer accurately and adequately reflect all
action previously taken by the shareholders, board of directors and committees
of the board of directors of the Company. The stock book records of the Company
previously delivered to Buyer are true, correct and complete, and accurately
reflect all transactions effected in the Company's stock through and including
the date hereof.
4.12. Litigation. Except as set forth on Schedule 4.12, there is no action,
----------
order, writ, injunction, judgment or decree outstanding, or, to the best of the
Company's knowledge, any claim, suit, litigation, proceeding, labor dispute,
arbitral action, governmental audit or investigation (collectively, "Actions")
pending, or threatened or anticipated (a) against, related to or affecting the
Company or the Business or (b) seeking to delay, limit or enjoin the
transactions contemplated by this Agreement. Except as set forth on Schedule
4.12, the Company is not in default with respect to or subject to any judgment,
order, writ, injunction or decree of any court or governmental agency, and there
are no unsatisfied judgments against the Company or the Business.
4.13. Labor Matters. The Company is not a party to any labor agreement with
-------------
respect to its employees with any labor organization, union, group or
association and there are no employee unions (nor any other similar labor or
employee organizations) under local statutes, custom or practice. The Company
has not experienced any attempt by organized labor or its representatives to
make the Company conform to demands of organized labor relating to its employees
or to enter into a binding agreement with organized labor that would cover the
employees of the Company.
4.14. Compliance with Law. The Company, the conduct of the Business and the
-------------------
operation of the Facilities have not violated and are in compliance with all
laws, statutes, ordinances, regulations, rules and orders of any foreign,
federal, state or local government and any other governmental department or
agency, and any judgment, decision, decree or order of any court or governmental
agency, department or authority, including without limitation Environmental
Laws, relating to the Assets, Facilities or Business or operations of the
Company, except where the violation or failure to comply, individually or in the
aggregate, would not have a Material Adverse Effect on the Facilities, the
Equipment, Inventory or the Business. The Company and
17
<PAGE>
the conduct of the Business and the operation of the Facilities are in
conformity with all energy, public utility, zoning, building and health codes,
regulations and ordinances, the Americans with Disabilities Act, ERISA, OSHA and
Environmental Laws and all other foreign, federal, state, and local governmental
and regulatory requirements, except where any nonconformity would not have a
Material Adverse Effect on the Facilities, Assets or the Business. The Company
has not received any notice to the effect that, or otherwise been advised that,
it is not in compliance with any such statutes, regulations, rules, judgments,
decrees, orders, ordinances or other laws, and the Company has no reason to
anticipate that any existing circumstances are likely to result in violations of
any of the foregoing, which non-compliance or violation could, in any one case
or in the aggregate, have a Material Adverse Effect on the Facilities, the
Assets or the Business.
4.15. No Brokers. Except for the fees and expenses of Middleton Limburg &
----------
Co., Inc. payable by Sellers, which are not and will not be an obligation of the
Buyer, none of the Sellers, the Company or any of the Company's officers,
directors, employees or Affiliates has employed or made any agreement with any
broker, finder or similar agent or any person or firm which will result in an
obligation on the part of the Company or Buyer to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.
4.16. No Other Agreements to Sell the Company. None of the Sellers has any
---------------------------------------
commitment or legal obligation, absolute or contingent, to any other person or
firm other than the Buyer to sell, assign, transfer or effect a sale of any of
the Shares or the Assets or to effect any merger, consolidation, liquidation,
dissolution or other reorganization of the Company.
4.17. Proprietary Rights.
------------------
4.17.1. Proprietary Rights. Schedule 4.17 lists all of the Company's
------------------
federal, state and foreign registrations of trademarks, service marks and other
marks, trade names or other trade rights, and all pending applications for any
such registrations, all other trademarks and other marks, trade names and other
trade rights or in which the Company has any interest whatsoever, and all other
trade secrets and other proprietary rights, whether or not registered, and all
computer software created or used by or on behalf of the Company, in each case
relating to the Business (collectively, "Proprietary Rights"). The Proprietary
Rights listed in Schedule 4.17 are all those used by the Company in connection
with the Business.
4.17.2. Royalties and Licenses. No person has a right to receive a royalty or
----------------------
similar payment in respect of any Proprietary Rights. Except as set forth on
Schedule 4.17, the Company has no licenses granted, sold or otherwise
transferred by or to it or other agreements to which it is a party, relating in
whole or in part to any of the Proprietary Rights.
4.17.3. Ownership and Protection of Proprietary Rights. Except as set forth
----------------------------------------------
on Schedule 4.17, the Company owns or licenses, and has the sole right to use or
(if it so elects) to sublicense each of the Proprietary Rights. None of the
Proprietary Rights is involved in any pending or threatened litigation. The
Company has not received any notice of invalidity or infringement of any rights
of others with respect to such Proprietary Rights. The Company has taken all
reasonable and prudent steps to protect the Proprietary Rights from infringement
by any
18
<PAGE>
other firm, corporation, association or person. The Company's use of the
Proprietary Rights is not infringing upon or otherwise violating the rights of
any third party in or to such Proprietary Rights, nor has such infringement been
alleged by any third party. All of the Proprietary Rights are valid and
enforceable rights of the Company and will not cease to be valid and in full
force and effect by reason of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated by this
Agreement.
4.18. Tax Matters.
-----------
4.18.1. Filing of Tax Returns. The Company has timely filed with the
---------------------
appropriate taxing authorities all returns (including without limitation,
information returns and other material information) in respect of Taxes required
to be filed through the date hereof and will timely file any such returns
required to be filed on or prior to the Closing Date. The returns and other
information filed are complete and accurate in all material respects. Except as
specified in Schedule 4.18, neither the Company, nor any group of which the
Company now or was a member, has outstanding any request for an extension of
time within which to file its current returns (including without limitation
information returns) in respect of any taxes. The Company has delivered to
Buyer complete and accurate copies of the Company's federal, state and local tax
returns for its fiscal years ended December 31, 1994, 1995 and 1996.
4.18.2. Payment of Taxes. All Taxes, in respect of taxable periods ending
----------------
on or before the Closing Date, have been timely paid, or will be timely paid
prior to Closing, or to the extent not paid prior to Closing, the Company's
liability for such Taxes will be fully reserved against in the Tax Reserve
included on the Closing Balance Sheet. Any liability of the Company for Taxes in
excess of the amounts so paid or the Tax Reserve so established will be subject
to indemnification by Sellers in accordance with Section 10.3 hereof.
4.18.3. Audits, Investigations or Claims. Except as set forth in Schedule
--------------------------------
4.18, the federal income tax returns and any required state tax returns of the
Company have not been examined by the Internal Revenue Service or any applicable
state taxing authority for the 1992 through 1996 tax years, inclusive, and
except to the extent shown therein, no material deficiencies for Taxes, have
been claimed, proposed or assessed by any taxing or other governmental authority
against the Company for those years. Except as set forth in Schedule 4.18, there
are no pending or, to the best of the Company's knowledge, threatened audits,
investigations or claims for or relating to any material additional liability in
respect of Taxes, and there are no matters under discussion with any
governmental authorities with respect to Taxes that in the reasonable judgment
of the Company, or its counsel, is likely to result in a material additional
liability for Taxes. The Company has not been notified that any taxing authority
intends to audit a return for any period. Except as set forth in Schedule 4.18,
no extension of a statute of limitations relating to Taxes is in effect with
respect to the Company.
4.18.4. Lien. There are no liens for Taxes (other than as could be
----
asserted for current Taxes not yet due and payable) on the Assets.
19
<PAGE>
4.19. Accounts Receivable. The accounts receivable reflected in the Interim
-------------------
Balance Sheet, and all accounts receivable arising since the Interim Balance
Sheet Date, represent bona fide claims of the Company against debtors for sales,
services performed or other charges arising on or before the date hereof, and
all the goods delivered and services performed which gave rise to said accounts
were delivered or performed in accordance with the applicable orders, Contracts
or customer requirements. As of the date of the Closing Balance Sheet, all of
such accounts receivables are collectible in the ordinary course of business
except to the extent reserved against on the Interim Balance Sheet or as will be
reserved against on the Closing Balance Sheet. Except as set forth on Schedule
4.19, the Company owns all such accounts receivable, free and clear of all
Encumbrances. If, during the three years in which the Escrow Agreement is in
effect, Buyer is able to collect accounts receivables that had been written off
as "bad debts" and charged against the Holdback Amount, the amount collected,
less any reasonable costs associated with collecting such amount, shall be added
back to the Holdback Amount. Buyer shall be responsible, during such three year
period, for attempting to collect such accounts receivables for the six month
period after such accounts receivables are classified as "bad debts." If Buyer
is unsuccessful in its collection efforts during such three year period, Sellers
shall have the right to attempt to collect such accounts receivable, provided,
however, that Sellers shall not damage the Company's, Buyer's or Parent's
reputation or interfere with the operation of the Business.
4.20. Inventory. All the Inventory is located at the Facilities, at the
---------
Company's job sites or is being transported from or to the Facilities and the
job sites. Other than in the ordinary course of business, there has been no
material decrease in the book value or fair value of the Inventory since the
Interim Balance Sheet Date. The values at which the Inventory is shown on the
Interim Balance Sheet have been determined at lower of cost or market in
accordance with GAAP, consistently applied throughout the periods covered by the
Financial Statements, with adequate provisions or adjustments for excess
Inventory, slow-moving Inventory and Inventory obsolescence and shrinkage.
Schedule 4.20 sets forth a complete and accurate list of all Inventory as of the
date hereof.
4.21. Employees and Employee Benefits.
-------------------------------
4.21.1. As used in this Section 4.21, the following terms have the
meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting, severance or
other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any selfinsured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit sharing bonuses, stock options,
stock appreciation rights, stock purchases or other forms of incentive
compensation or post retirement insurance, compensation or benefits which (A) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into,
20
<PAGE>
maintained, contributed to or required to be contributed to, as the case may be,
by the Company or an ERISA Affiliate or under which the Company or any ERISA
Affiliate may incur any liability, and (C) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant time was)
a member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, the Company as defined
in Section 414(b), (c), (m) or (o) of the Code, or under "common control" with
the Company, within the meaning of Section 4001(b)(1) of ERISA.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined in
Section 4001(a)(3) of ERISA, (A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability and (B) which covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
entities).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the Company or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to, or under which
the Company or any ERISA Affiliate may incur any liability; (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities); and (C) is not a Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which the
Company or any ERISA Affiliate may incur any liability; (B) covers any employee
or former employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities); and (C) is not a Multiemployer Plan.
4.21.2. Schedule 4.21(a): (i) contains a list of all employees of the
----------------
Company, and their wage rates or salaries, as of the date of this Agreement,
(ii) sets forth the dates of employment for such employees, (iii) the date of
the last wage increase for each employee, (iv) unused vacation and (v) accrued
sick leave.
21
<PAGE>
4.21.3. Disclosure; Delivery of Copies of Relevant Documents and Other
--------------------------------------------------------------
Information. Schedule 4.21(b) contains a complete list of Employee Plans. True
- -----------
and complete copies of each of the following documents have been delivered by
the Company to Buyer: (i) each Welfare Plan, Pension Plan and Multiemployer
Plan (and, if applicable, related trust agreements) and all amendments thereto,
all written interpretations thereof and written descriptions thereof which have
been distributed to the Company's employees and all annuity contracts or other
funding instruments; (ii) each Benefit Arrangement including written
interpretations thereof and written descriptions thereof which have been
distributed to the Company's employees (including descriptions of the number and
level of employees covered thereby) and a complete description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan; (iv) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and each Welfare Plan; (v) all actuarial reports
prepared for the last three plan years for each Pension Plan; (vi) a description
of complete age, salary, service and related data as of the last day of the last
plan year for employees and former employees of the Company; and (vii) a
description setting forth the amount of any liability of the company as of the
Closing Date for payments more than thirty (30) calendar days past due with
respect to each Welfare Plan.
4.21.4. Representations.
---------------
4.21.4.1. Pension Plans. Neither the Company nor any ERISA Affiliate
-------------
sponsors or has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any Pension Plan that is subject to the minimum
funding requirements of Title IV of ERISA or Section 412 of the Code. Neither
the Company nor any ERISA Affiliate is required to provide security to a Pension
Plan under Section 401(a)(29) of the Code. Each Pension Plan which is intended
to be qualified (and each related trust agreement, annuity contract or other
funding instrument) is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a), has received a favorable
determination letter from the Internal Revenue Service to that effect, and has
been operated in a manner consistent with such qualification requirements during
the period from its adoption to date. Neither the Company nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an entity
that has engaged in, a transaction described in Section 4069 of ERISA.
4.21.4.2. Multiemployer Plans. Neither the Company nor any ERISA
-------------------
Affiliate sponsors or has previously sponsored, maintained or contributed to or
incurred any obligation to contribute to any Multiemployer Plans.
4.21.4.3. Welfare Plans. None of the Company, any ERISA Affiliate or
-------------
any Welfare Plan has any present or future obligation to make any payment to, or
with respect to any present or former employee of the Company or any ERISA
Affiliate pursuant to, any retiree medical benefit plan, or other retiree
Welfare Plan, and no condition exists which would prevent the Company from
amending or terminating any such benefit plan or Welfare Plan. Each Welfare
Plan which is a "group health plan," as defined in Section 607(1) of ERISA, has
been
22
<PAGE>
operated in compliance with provisions of Part 6 of Title I, Subtitle B of
ERISA and Section 4980B of the Code at all times.
4.21.4.4. Compliance with Law. Each Employee Plan has been maintained
-------------------
in compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Employee
Plan, including without limitation ERISA and the Code. Any Pension Plan subject
to the requirements of Section 401(a)(28) of the Code has been operated in
compliance therewith for all plan years of such Pension Plan from its adoption
to date, including the requirements of Section 401(a)(28)(C) of the Code. No
further contribution to any of the Company's Employee Stock Ownership Plan or
any other Pension Plan intended to be qualified under Code Section 401(a) shall
be made or is required to be made on or before the Closing Date or the earlier
termination of this Agreement
4.21.4.5. Employment at Will. Except as provided by law, the
------------------
employment of all persons presently employed or retained by the Company is
terminable at will.
4.21.4.6. Unrelated Business Taxable Income. No Employee Plan (or
---------------------------------
trust or other funding vehicle pursuant thereto) is subject to any tax under
Code Section 511.
4.21.4.7. Deductibility of Payments. There is no contract, agreement,
-------------------------
plan or arrangement covering any employee or former employee of the Company
(with respect to its relationship with such entities) that, individually or
collectively, provides for the payment by the Company of any amount (i) that is
not deductible by the Company under Section 162(a)(1) or 404 of the Code,
whichever is applicable, (ii) for which the deduction by the Company would be
disallowed under Section 162(m) of the Code, or (iii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
4.21.4.8. Fiduciary Duties and Prohibited Transactions. No "prohibited
--------------------------------------------
transaction," as defined in Section 4975(c)(1) of the Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Code, has occurred with respect to any Welfare Plan or Pension Plan of the
Company, nor has any Plan fiduciary otherwise violated the provisions of Part 4
of Title I, Subtitle B of ERISA. The Company has not knowingly participated in
a violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of
any Welfare Plan or Pension Plan (or other employee benefit plan subject to
ERISA) and has not been assessed any civil penalty under Section 502(l) of
ERISA. All Employee Plans that cover or have covered employees or former
employees of Company have been maintained and operated, and currently are, in
compliance in all material respects with their terms, the requirements
prescribed by any and all applicable laws (including ERISA and the Code),
orders, or governmental rules and regulations in effect with respect thereto,
and Company and the ERISA Affiliates have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or in violation of, and have no knowledge of any default or
violation by any other party to, any of the Employee Plans. The Company and the
ERISA Affiliates have made full and timely payment of all amounts required to be
contributed under the terms of each Employee Plan and applicable law or required
to be paid as
23
<PAGE>
expenses under such Employee Plan. No employee, former employee, director or
agent of the Company will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Employee Plan or become
entitled to severance, termination allowance or similar payments as a direct
result of the transactions contemplated by this Agreement, except upon
termination of the ESOP and Profit Sharing Plan, the Company's employees will be
entitled to such rights under law applicable to such termination.
4.21.4.9. Validity and Enforceability. Each Welfare Plan, Pension
---------------------------
Plan, related trust agreement, annuity contract or other funding instrument and
Benefit Arrangement is legally valid and binding and in full force and effect.
4.21.4.10. Litigation. There is no action, order, writ,
----------
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or investigation relating to or
seeking benefits under any Employee Plan that is pending, threatened or
anticipated against the Company, any ERISA Affiliate or any Employee Plan.
4.21.4.11. No Amendments. Neither the Company nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create any
additional Employee Plans or to amend or modify any existing Employee Plan.
4.21.4.12. No Other Material Liability. No event has occurred in
---------------------------
connection with which the Company or any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating to any Employee Plans or (B)
pursuant to any obligation of the Company to indemnify any person against
liability incurred under any such statute, regulation or order as they relate to
the Employee Plans.
4.21.4.13. Unpaid Contributions. Neither the Company nor any
--------------------
ERISA Affiliate has any liability for unpaid contributions under Section 515 of
ERISA with respect to any Pension Plan or Welfare Plan.
4.21.4.14. Insurance Contracts. Neither the Company nor any
-------------------
Employee Plan holds as an asset of any Employee Plan any interest in any annuity
contract, guaranteed investment contract or any other investment or insurance
contract issued by an insurance company that is the subject of bankruptcy,
conservatorship or rehabilitation proceedings.
4.21.4.15. No Acceleration or Creation of Rights. Neither the
-------------------------------------
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will result in the acceleration or creation
of any rights of any person to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting or exercisability of any
stock options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any severance, parachute or
change in control agreement), except that the termination of the Company's
Profit Sharing Plan and ESOP shall afford the participants
24
<PAGE>
in said plans the rights and benefits which the law requires on termination of
said plans, including, but not limited to, all of the participants' account
balances becoming 100% vested.
4.22. Compliance With Environmental Laws.
----------------------------------
4.22.1. Definitions. The following terms, when used in this Section 4.21,
-----------
shall have the following meanings. Unless the context otherwise requires, any of
these terms may be used in the singular or the plural depending on the
reference.
4.22.1.1. "Company". For purposes of this Section 4.22 only, the term
-------
"Company" shall include (i) all Related Entities of the Company, including,
without limitation the Sellers, (ii) all partnerships, joint ventures and other
entities or organizations in which the Company was at any time or is a partner,
joint venturer, member or participant and (iii) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been acquired or assumed by
the Company or to which the Company has succeeded.
4.22.1.2. "Release" shall mean and include any spilling, leaking,
-------
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the work place
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
4.22.1.3. "Hazardous Substance" shall mean any quantity of asbestos in
-------------------
any form, urea formaldehyde, PCBs, radon gas, crude oil or any fraction thereof,
all forms of natural gas, petroleum products or by-products, any radioactive
substance, any toxic, infectious, reactive, corrosive, ignitable or flammable
chemical or chemical compound and any other hazardous substance, material or
waste (as defined in or for purposes of any Environmental Law), whether solid,
liquid or gas.
4.22.2. Compliance With Environmental Laws. Except as set forth on Schedule
----------------------------------
4.22, the Facilities have been owned, leased, operated and maintained in
material compliance with all federal, state, local or foreign laws, statutes,
ordinances, regulations, rules, judgments, orders, notice requirements, court
decisions, agency guidelines or principles of law, restrictions or licenses,
which (i) regulate or relate to the protection or clean-up of the environment,
the use, treatment, storage, transportation, handling or disposal of hazardous,
toxic or otherwise dangerous substances, wastes or materials (whether gas,
liquid or solid), the preservation or protection of waterways, groundwater,
drinking water, air, wildlife, plants or other natural resources, or the health
and safety of persons or property, including without limitation protection of
the health and safety of employees or (ii) impose liability with respect to any
of the foregoing, including without limitation the Federal Water Pollution
Control Act (33 U.S.C. (S) 1251 et seq.), Resource Conservation & Recovery Act
(42 U.S.C. (S) 6901 et seq.) ("RCRA"), Safe Drinking Water Act (21 U.S.C. (S)
349, 42 U.S.C. (S)(S) 201, 300f), Toxic Substances Control Act (15 U.S.C. (S)
2601 et seq.), Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. (S) 9601 et
25
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seq.) ("CERCLA"), or any other similar federal, state or local law of similar
effect, each as amended (collectively, "Environmental Laws").
4.22.3. Facilities. The Facilities are, and at all times have been, owned,
----------
leased and operated in material compliance with all Environmental Laws and in a
manner that will not give rise to any liability under any Environmental Laws.
4.22.4. Permits. The Company has, and at all times has had, all Permits
-------
required under any Environmental Law and the Facilities are, and at all times
have been, in compliance with all such Permits.
4.22.5. Permits Required. The consummation of any of the transactions
----------------
contemplated by this Agreement will not require an application for issuance,
renewal, transfer or extension of, or any other administrative action regarding,
any Permit required under any Environmental Law.
4.22.6. Notice of Violation. The Company has not received any notice at any
-------------------
time that it or the Facilities is or were claimed to be in violation of the
provisions of any Environmental Law or in non-compliance with the conditions of
any Permit, and there is no pending or threatened lawsuit, governmental or other
legal action to that effect.
4.22.7. Pending Actions. There is not now pending or threatened, nor any
---------------
basis for, nor has there ever been, any Action against the Company, nor any
basis for any Action, under any Environmental Law or otherwise with respect to
any Release or mishandling of any Hazardous Substance.
4.22.8. Judgments. There are no consent decrees, judgments, judicial or
---------
administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect the Company or the Facilities.
4.22.9. Hazardous Substances. There is not and has not been any Hazardous
--------------------
Substance used, generated, treated, stored, transported, disposed of, handled or
otherwise existing on, under, about or from any Facility, except for quantities
of any such Hazardous Substances stored or otherwise held on, under or about any
such Facility in full compliance with all Environmental Laws and necessary for
the operation of the Business.
4.22.10. Handling of Hazardous Substances. The Company has at all times
--------------------------------
used, generated, treated, stored, transported, disposed of or otherwise handled
its Hazardous Substances in compliance with all Environmental Laws and in a
manner that will not result in liability of the Company or Buyer under any
Environmental Law. Schedule 4.22.10 sets forth a complete list of all
contractors and other third parties who, within the five year period prior to
the date hereof, have hauled, handled, stored, transported or disposed of any
Hazardous Substance (i) on behalf of the Company or the Business, or (ii)
generated by the Company or the Business.
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4.22.11. Environmental Conditions. There are no present or past
------------------------
Environmental Conditions (as defined below) in any way relating to the Business
or Facilities. "Environmental Conditions" means the introduction into the soil,
groundwater or environment of the Facilities (through leak, spill, release,
discharge, escape, emission, dumping, disposal or otherwise) of any pollution,
including without limitation any contaminant, irritant or pollutant or Hazardous
Substance (whether or not upon the property of the Business and whether or not
such pollution constituted at the time thereof a violation of any Environmental
Law) as a result of which either the Company or, after the Closing, Buyer has or
may become liable to any person or by reason of which any of the Assets may
suffer or be subjected to any lien.
4.22.12. CERCLA or RCRA. No current or past use, generation, treatment,
--------------
transportation, storage, disposal or handling practice of the Company with
respect to any Hazardous Substance has or will result in any liability under the
CERCLA or RCRA or any state or local law of similar effect.
4.22.13. Storage Tank or Pipeline. Except as set forth on Schedule 4.22,
------------------------
there is not now and has not been at any time in the past any underground or
above-ground storage tank or pipeline at any Facility where the installation,
use, maintenance, repair, testing, closure or removal of such tank or pipeline
was not in material compliance with all Environmental Laws and there has been no
Release from or rupture of any such tank or pipeline, including without
limitation any Release from or in connection with the filling or emptying of
such tank.
4.22.14. Environmental Audits or Assessments. True, complete and correct
-----------------------------------
copies of the written reports, and all parts thereof, including any drafts of
such reports if such drafts are in the possession or control of the Company, of
all environmental audits or assessments which have been conducted at any
Facility within the past five years, either by the Company or any attorney,
environmental consultant or engineer engaged for such purpose, have been
delivered to Buyer or its Representatives and a list of all such reports, audits
and assessments and any other similar report, audit or assessment of which the
Company or Sellers have knowledge is included on Schedule 4.22.
4.22.15. Indemnification Agreements. Except as set forth on Schedule
--------------------------
4.22.15, the Company is not a party, whether as a direct signatory or as
successor, assign or third party beneficiary, or otherwise bound, to any lease
or other Contract under which the Company is obligated by or entitled to the
benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions.
4.22.16. Releases or Waivers. The Company has not released any other person
-------------------
from any claim under any Environmental Law or waived any rights concerning any
Environmental Condition.
4.22.17. Notices, Warnings and Records. The Company has given all notices
-----------------------------
and warnings, made all reports, and has kept and maintained all records required
by and in compliance with all Environmental Laws.
27
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4.22.18. Operation of Facilities. The Company owns and/or operates only
-----------------------
those Facilities set forth on Schedule 4.22.18(a) and has never owned, leased or
operated any Facility other than those set forth on Schedule 4.22.18(b).
4.23. Liabilities. The Company has no liabilities or obligations (absolute,
-----------
accrued, contingent or otherwise) except (i) liabilities which are reflected on
the Closing Balance Sheet or which are not required under GAAP to be reflected
on the Closing Balance Sheet such as warranty and deposit obligations, (ii)
liabilities incurred in the ordinary course of the Business and consistent with
past practice since the Interim Balance Sheet Date, and (iii) liabilities
arising under Contracts identified in Schedule 4.8 to which the Company is a
party.
4.24. Insurance
---------
4.24.1. Schedule 4.24 describes all policies of insurance (including the
insurer, type of insurance, period of coverage and contact name and telephone
number) to which the Company is a party and under which the Company, any Related
Entity or any employee, officer or director of the Company or any Related Entity
(in his or her capacity as such) is or has been insured at any time within the
five years preceding the date of this Agreement; and any self-insurance
arrangement by or affecting the Company or any Related Entity, including any
reserves established thereunder. All such policies, together with such self-
insurance, (i) provide adequate insurance coverage for the Assets and the
operations of the Company for all risks normally insured against by a person or
entity carrying on the same business or businesses as the Company, (ii) are
sufficient for compliance with all legal requirements and Contracts to which the
Company is a party or by which it is bound, and (iii) will continue in full
force and effect following the Closing except for the life insurance policies to
be distributed to Leonard A. Siems.
4.24.2. Schedule 4.24 sets forth, by year, for the current policy year
and each of the five preceding policy years, a summary of the loss experience
under each policy, and summary of the loss experience for all claims that were
self-insured, including the number and aggregate cost of such claims.
4.24.3. None of the Sellers, the Company or a Related Entity has received,
with respect to any Company insurance policy, (i) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights, or (ii) any
notice of cancellation or any other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations thereunder.
4.24.4. The Company and any Related Entity has paid all premiums due, and has
otherwise performed all of its respective obligations, under each insurance
policy to which the Company is a party and is described above.
28
<PAGE>
4.25. Conduct of the Business. Since the Interim Balance Sheet Date, the
-----------------------
Company has conducted its operations in the ordinary course of the Business and
substantially in accordance with past practice, and has not taken any action
that, if taken after the date hereof, would violate Section 6.5.
4.26. Securities Law Matters. For purposes of this Section 4.26 only, the
----------------------
term "Sellers" shall not refer to the Trustees.
4.26.1. Each Seller confirms that it is acquiring the Parent Common Stock
for its own account as principal, for investment purposes only, and not with a
view to, or for, resale or distribution thereof, and no other person has or will
have a direct or indirect beneficial interest in such Parent Common Stock.
4.26.2. Each Seller understands that the offering and sale of the Parent
Common Stock is intended to be a transaction by an issuer not involving any
public offering exempt from registration under the Securities Act by virtue of
Section 4(2) of the Securities Act and the rules and regulations of the
Commission thereunder;
4.26.3. Each Seller represents that it is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act;
4.26.4. Each Seller understands and acknowledges that there are
substantial risks of loss of investment involved in an investment in the Parent
Common Stock, and that the investment in the Parent Common Stock is an illiquid
investment subject to transfer restrictions, and Sellers represent and warrant
that they have the financial ability to bear the economic risk of such
investment;
4.26.5. Each Seller has such knowledge and experience in financial and
business matters, including investments of the type represented by the Parent
Common Stock, as to be capable of evaluating the merits of investment in
therein;
4.26.6. Each Seller has been furnished with a copy of the recent periodic
reports filed by Parent with the Commission and any documents that may have been
made available otherwise or upon its request, have carefully read and understand
such materials and have evaluated the risks of an acquisition of the Parent
Common Stock;
4.26.7. Each Seller has been given the opportunity to ask questions of,
and receive answers from, representatives of Parent in order for it to evaluate
the merits and risks of investment in the Parent Common Stock; and
4.26.8. No Seller has been furnished with or has relied upon any oral or
written representation, warranty or information in connection with the offering
of the Parent Common Stock except for that set forth in this Agreement.
29
<PAGE>
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
Buyer and Parent hereby represent and warrant to Sellers as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
5.1. Organization of Buyer and Parent. Buyer is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Alabama. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Copies of the Certificate of
Incorporation and By-Laws of the Buyer and Parent and all amendments thereto,
heretofore delivered to Sellers are accurate and complete as of the date hereof.
The Buyer and Parent are duly qualified and are licensed to do business as
foreign corporations in good standing in all of the jurisdictions in which
ownership of property or the conduct of their businesses requires such
qualification, except for those jurisdictions in which the failure to so qualify
would not have a Material Adverse Effect.
5.2. Authorization. Each of Buyer and Parent has all requisite corporate
-------------
power and authority, and has taken all corporate action necessary, to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party,
to consummate the transactions contemplated hereby and thereby and to perform
its respective obligations hereunder and thereunder. This Agreement and the
transactions contemplated hereby have been approved by the Boards of Directors
of both Buyer and Parent. This Agreement has been duly executed and delivered by
Buyer and Parent and is, and (following their execution and delivery by Buyer,
Parent, the Company, the Seller Representative or the Sellers, as applicable,
each of the Ancillary Agreements will be) a legal, valid and binding obligation
of Buyer or Parent, as applicable, enforceable against Buyer or Parent, as
applicable, in accordance with its terms.
5.3. No Conflict or Violation. Neither the execution, delivery or
------------------------
performance of this Agreement or the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby, nor compliance by Buyer or
Parent with any of the provisions hereof or thereof, will (a) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws of
Buyer or Parent, (b) except as set forth on Schedule 5.3 attached hereto,
violate, result in a breach of, conflict with, or constitute a default (or an
event which, with the giving of notice or lapse of time or both, would
constitute a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of any note, bond, mortgage, or indenture, contract, agreement,
lease, sublease, license, permit, franchise or other instrument or arrangement
to which any of Buyer or Parent is a party or by which any of the assets or
properties of Buyer or Parent are bound or affected, or (c) violate any statute,
rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction,
decree or award binding upon Buyer or Parent.
30
<PAGE>
5.4. Consents and Approvals. No notice to, declaration, filing or
----------------------
registration with, or authorization, consent or approval of, or permit from, any
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by Buyer or Parent in connection with the
execution, delivery and performance of this Agreement or the Ancillary
Agreements and the consummation of the transactions contemplated hereby or
thereby, except (a) as may be required by Buyer to operate the Business after
the Closing, (b) as has been obtained on or prior to the date hereof or (c) as
set forth in Schedule 5.4.
5.5. Capitalization
--------------
5.5.1. The authorized equity securities of the Parent consist solely of
20,000,000 shares of common stock, par value $.01 per share, of which 14,939740
shares are issued and outstanding (the "Parent Shares"). The authorized equity
securities of Buyer consist solely of 1,000 shares of common stock, par value
$.01 per share, of which 100 shares are issued and outstanding, ( the "Buyer
Shares").
5.5.2. All Buyer Shares are duly authorized, validly issued, fully paid and
nonassessable.
5.6. Parent Common Stock.
-------------------
When duly countersigned by the Parent's transfer agent and registrar and
delivered to the Sellers, the Parent Common Stock issuable to the Sellers will
be duly authorized and validly issued, will be fully paid and nonassessable,
will be free and clear of any security interest, liens, claims or other
encumbrances, will not have been issued or sold in violation of any preemptive
or other similar rights of the holder of any securities of the Parent and will
not subject the holders thereof to personal liability by reason of being such
holders.
5.7. SEC Filings; Parent Financial Statements. Parent has filed all forms,
----------------------------------------
reports and documents required to be filed with the SEC and has made available
to Sellers such forms, reports and documents as Sellers have requested. All such
required forms, reports and documents are referred to herein as the "Parent SEC
Reports." As of their respective dates, the Parent SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act or the Securities and
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
31
<PAGE>
ARTICLE VI.
COVENANTS OF BUYER, THE COMPANY AND SELLERS
-------------------------------------------
Buyer, the Company and Sellers each covenant with the others as follows:
6.1. Further Assurances. Upon the terms and subject to the conditions
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from third parties;
provided, however, that Buyer shall not be required to make any payments,
commence litigation or agree to modifications of the terms of Contracts or
Leases in order to obtain any such waivers, consents or approvals, (B) to obtain
all necessary Permits as are required to be obtained under any federal, state,
local or foreign law or regulations, (C) to effect all necessary registrations
and filings, including without limitation required filings under the HSR Act and
all other submissions of information requested by governmental authorities, and
(D) to fulfill all conditions to this Agreement.
6.2. No Solicitation. From the date hereof through the Closing or the
---------------
earlier termination of this Agreement, each of the Company and the Sellers shall
not, and shall cause their Representatives (including without limitation
investment bankers, attorneys and accountants) not to, directly or indirectly,
enter into, solicit, initiate or continue any discussions or negotiations with,
or encourage or respond to any inquiries or proposals by, or participate in any
negotiations with, or provide any information to, or otherwise cooperate in any
other way with, any corporation, partnership, person or other entity or group,
other than Buyer and its Representatives, concerning any sale of all or a
portion of the Assets, the Shares or the Business, or any merger, consolidation,
liquidation, dissolution or similar transaction involving the Company (each such
transaction collectively being referred to herein as a "Proposed Acquisition
Transaction"). The Company and the Sellers shall not, directly or indirectly,
through any Representative or otherwise, solicit, initiate or encourage the
submission of any proposal or offer from any person or entity relating to any
Proposed Acquisition Transaction or participate in any negotiations regarding,
or furnish to any other person any information with respect to the other party
for the purposes of, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to seek or effect a Proposed Acquisition Transaction. The Company and the
Sellers each hereby represents that it is not now engaged in discussions or
negotiations with any party (other than Buyer) with respect to any of the
foregoing. The Company or Sellers shall promptly notify Buyer (orally and in
writing) of any offer, inquiry or contact with any person with respect to a
Proposed Acquisition Transaction, including the terms thereof and the identity
of the prospective purchaser or soliciting party.
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6.3. Notification of Certain Matters. From the date hereof through the
-------------------------------
Closing, the Company and Sellers shall give prompt notice to Buyer of (a) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty of the Company or Sellers
contained in this Agreement or in any exhibit or schedule hereto to be untrue or
inaccurate in any material respect and (b) any failure of the Company, or any of
its Related Entities, Affiliates, Sellers or Representatives, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement or any exhibit or schedule hereto; provided, however,
that such disclosure shall not be deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any condition.
6.4. Access to Information. From the date hereof through the Closing, the
---------------------
Company shall, and shall cause its Representatives to, afford the
Representatives of Buyer and its Affiliates complete access at all reasonable
times to the Assets and the Facilities for the purpose of inspecting and
conducting appropriate tests upon the same, and to the officers, employees,
agents, attorneys, accountants, properties, Books and Records and Contracts of
the Company, and shall furnish Buyer and its Representatives all financial,
operating and other data and information as Buyer or its Affiliates, through
their respective Representatives, may reasonably request, including but not
limited to data relating to operating procedures, workers' compensation history,
legal, tax and environmental, zoning and other legal compliance.
6.5. Conduct of Business. From the date hereof through the Closing or the
-------------------
earlier termination of this Agreement, the Company shall, except as contemplated
by this Agreement or as consented to by Buyer in writing, operate the Business
in the ordinary course of the Business and substantially in accordance with past
practice and will not take any action inconsistent with this Agreement or with
the consummation of the Closing. Without limiting the generality of the
foregoing, the Company shall not, except as specifically contemplated by this
Agreement:
6.5.1. issue or repurchase any shares of capital stock or warrants, options
or other rights to acquire any such shares;
6.5.2. enter into, extend, materially modify, terminate or renew any
Contract, except in the ordinary course of the Business;
6.5.3. purchase or enter into any agreement to purchase any item of Inventory
or Equipment outside of the ordinary course of business;
6.5.4. make any material increase in compensation or benefits payable to any
employee of the Company, or adopt any new employee benefit plan or policy;
6.5.5. sell, assign, transfer, convey, lease, mortgage, pledge or otherwise
dispose of or encumber any of the Assets, or any interests therein, except in
the ordinary course of the Business;
33
<PAGE>
6.5.6. accelerate the collection of accounts receivable, extend the payment
of accounts payable, or reduce inventories in a manner inconsistent with the
ordinary course of the Business's operation; or
6.5.7. fail to pay its accounts payable and any debts owed or obligations due
by it, or pay or discharge when due any liabilities, in the ordinary course of
the Business.
6.6. Environmental Assessments and Remediation
-----------------------------------------
6.6.1. Buyer has retained Brown & Caldwell (the "Consultant") to
perform Phase 1 environmental assessments with respect to each of the
Facilities. Upon its availability, Consultant will deliver such assessments to
Buyer and the Company. In the event any such assessment recommends the
performance of additional investigation (including, without limitation, Phase 2
environmental assessments), such additional investigation shall, if requested by
Buyer, be undertaken promptly and delivered to each of the Company and Buyer.
The environmental assessments and investigations undertaken pursuant to this
Section 6.6.1 are collectively referred to herein as the "Environmental
Assessments." Buyer shall be solely responsible for the cost of the
Environmental Assessments.
6.6.2. In the event any of the Environmental Assessments reveals any
remediation work which must be completed in order to bring the Facilities into
compliance with applicable Environmental Laws or eliminate any potential
environmental liability, the Consultant shall be directed to prepare and to
deliver to each of the Sellers, Company and Buyer a written report setting forth
in reasonable detail the scope of required remediation and an estimate of the
cost of completing such remediation. For the purposes of Section 6.6, "required
remediation" shall mean any action necessary to (i) comply with any governmental
order, (ii) comply with any Environmental Law effective at the Closing, (iii)
eliminate a potential environmental liability (the "Remediation Standard") or
(iv) any required installation of wash-racks, as applicable to the Facilities or
the operation thereof by the Company as of the Closing Date. The Consultant's
final written report shall become final and binding on the parties unless within
ten (10) days following delivery of the report to Sellers, Sellers notify Buyer
in writing that Sellers object thereto. If Sellers so object, the Buyer and
Sellers shall use their best efforts to resolve any differences with respect to
the remediation required by the Consultant's report. If within ten (10) days
after such notice by the Sellers such differences have not been resolved, then
Sellers and Buyer shall submit the dispute to arbitration as provided in Section
11.12. The owner of each Facility shall be responsible for all costs and
expenses related to required remediation or the installation of wash-racks up to
a total cost of $35,000 per site. If the cost of required remediation and the
installation of wash-racks at any single site exceeds $35,000 the parties agree
to negotiate such excess costs in good faith.
6.6.3. Promptly upon the Consultant's report referred to in Section
6.6.2 becoming final or otherwise accepted by Sellers, but in any event, within
60 days thereof, the Company shall engage a reliable environmental engineering
firm reasonably acceptable to Buyer to perform any required remediation,
including removal of any underground storage tanks as may
34
<PAGE>
be necessary, and perform all required remediation in connection therewith. The
Company shall use its best efforts to cause such required remediation to be
completed on or before the Closing Date, and the Company shall bear the costs of
such required remediation to the limits set forth in Section 6.6.2 above;
provided that the completion of all such required remediation shall be a
condition to Buyer's obligations to consummate the transactions contemplated by
this Agreement. Buyer may, in its sole discretion, authorize Sellers to defer
any portion of the required remediation which the Company and its contractors
are unable to complete prior to Closing, in which case Sellers shall cause the
portion of the required remediation so deferred to be completed as promptly as
practicable, but in no event later than 60 days following Closing, at the
Sellers' sole expense to the limits of the amounts set forth in Section 6.6.2
above (which may be satisfied from the Holdback Amount pursuant to the Escrow
Agreement if Sellers do not satisfy such obligations within 30 days after
completion of the remediation). Buyer may monitor the performance of the
required remediation and application of the Remediation Standard, and at its
election may cause the Consultant to review the performance of the required
remediation. If Buyer directs the Consultant to undertake such review, the
required remediation shall be deemed completed only upon certification of its
completion by the Consultant. If, however, there is a dispute as to the
performance of the required remediation or the application of the Remediation
Standard, any such dispute shall be settled by a mutually agreed-upon
environmental expert not otherwise involved in the required remediation, whose
determination shall be final and binding on the parties.
6.7. The Holdback. Amount placed in escrow under the Escrow Agreement shall
secure the Sellers responsibility to pay for the costs of any required
remediation as set forth in Section 6.6.2 which has not been completed by the
Closing Date pursuant to this Section 6.6. Upon the completion of the required
remediation, certification of such completion by the Consultant or mutually
agreed-upon third party expert, and payment by Sellers of expenses of such
remediation as set forth in Section 6.6.2 and certification, all in accordance
with the standards set forth in this Section 6.6, no further claims may be made
against the Holdback Amount on account of Sellers' obligations under this
Section 6.6. However, if such required remediation has not been completed by
Sellers and so certified on or prior to the date which is 60 days following the
Closing Date, Buyer shall be entitled to engage its own environmental
engineering firm to complete such required remediation, and to distribute from
escrow such portion of the Holdback Amount as is necessary to pay the fees and
costs of such firm, or other costs incurred, in completing such required
remediation, all in accordance with the Escrow Agreement, but any such
distribution from escrow of a portion of the Holdback Amount shall be limited to
the total amount of such costs the Sellers are responsible for, pursuant to
Section 6.6.2 above which the Sellers have not paid.
6.8. Registration Rights. In the event that, at any time prior to the first
-------------------
anniversary of the Closing Date, Parent files a registration statement under the
Securities Act covering shares of Parent Common Stock, other than a registration
statement on Form S-4 or Form S-8, or a registration statement filed pursuant to
"demand" or similar contractual registration rights of any other stockholders of
Parent, then Sellers shall have the right to include in such registration
statement (on a "piggyback" basis) any or all of their shares of Parent Common
Stock, and to
35
<PAGE>
receive the benefit of any representations, indemnities, opinions or comfort
letters given by Parent (or its counsel or underwriters) to any underwriter in
connection with such registration; provided, however, that if the managing
underwriter or underwriters in the registered offering advise the Company that
the inclusion in the offering of shares owned by Sellers would have a material
adverse effect on the marketability or price of the offering, then the number of
shares to be included by Sellers shall be reduced on a pro rata basis in
proportion to the number of shares requested to be included by each Seller and
by any other stockholder of the Company. The terms, conditions, representations
and covenants of the registration rights granted herein shall be as set forth in
the Registration Rights Agreement attached hereto and incorporated herein by
reference as Exhibit 8.8.
6.9. Key Man Life Insurance; Vehicle. Prior to the Closing Date, the
-------------------------------
Company shall (i) distribute to the insured parties thereunder all life
insurance policies owned by the Company as set forth on Schedule 4.24, and (ii)
distribute the Vehicle to Leonard A. Siems, provided there will be no tax
liability to the Company as a result of such distributions. Leonard Siems shall
be able to purchase, for its fair value, the insurance plan owned by the ESOP
provided such purchase is in accordance with all applicable laws and does not
result in a liability to the Company or Buyer.
6.10. Termination of Plans
--------------------
. On or before the Closing Date, the Board of Directors of the Company
shall adopt a resolution pursuant to which the Company's Profit Sharing and
Employee Stock Ownership Plans will be terminated as of the Closing Date. Prior
to the Closing Date, the Company shall take all steps necessary to ensure that
(i) no distribution of account balances shall be made under the Employee Stock
Ownership Plan prior to the receipt of a determination by the Internal Revenue
Service that the termination of the Employee Stock Ownership Plan does not
adversely affect its qualification under Section 401(a) of the Code and, (ii)
pending any distributions on account of plan termination, the Employee Stock
Ownership Plan shall continue to be administered in accordance with its terms,
the Code and ERISA in a manner consistent with its status as a plan that is
intended to be qualified under Code Section 401(a) and intended to constitute an
"employee stock ownership plan" within the meaning of Code Section 4975(e)(7).
After the Closing, the Buyer shall cause the Company to take all steps necessary
to complete the termination of said plans, including but not limited to, filing
with the Internal Revenue Service an application for a determination that the
termination of the ESOP does not adversely affect its qualification under Code
Section 401(a). The expenses associated with the termination of the plans shall
be borne by the Buyer, provided such costs shall not exceed $10,000 in the
aggregate, and shall not reduce Shareholder Net Worth for purposes of
calculation of the Purchase Price.
36
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ARTICLE VII.
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
The obligations of Sellers and the Company to consummate the transactions
provided for hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by
Sellers:
7.1. Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Buyer and
Parent shall have performed and satisfied all agreements and covenants required
hereby to be performed by them prior to or on the Closing Date.
7.2. No Proceedings, Litigation or Laws. No Action by any governmental
----------------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Sellers if the
transactions contemplated hereunder are consummated. The waiting period under
the HSR Act shall have expired or been terminated, and there shall not be any
statute, rule or regulation that makes the purchase and sale of the Shares
contemplated hereby illegal or otherwise prohibited.
7.3. Certificates. Buyer and Parent shall furnish Sellers with such
------------
certificates of their officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Sellers, including a Certificate of Buyer's and Parent's respective Secretaries
attaching resolutions authorizing the execution of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby.
7.4. Material Changes. Since the Interim Balance Sheet Date there shall not
----------------
have been any Material Adverse Change with respect to the business or assets of
the Buyer or Parent.
7.5. Opinion of Counsel.
------------------
7.5.1. Buyer shall have delivered to Sellers an opinion of Capell,
Howard, Knabe & Cobbs, P.A., special Alabama counsel to Buyer, dated as of the
Closing Date, stating that.
7.5.1.1. Incorporation. The Buyer has been duly incorporated and is
-------------
validly existing and in good standing under the laws of the State of Alabama
and, based solely on certificates from public officials, the Buyer is qualified
to do business and in good standing as a foreign corporation in the states set
forth on Schedule A attached to such opinion;
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7.5.1.2. Corporate Power and Authority. The Buyer has the necessary
-----------------------------
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby;
7.5.1.3. Corporate Action. The execution, delivery and performance
----------------
of this Agreement and the Ancillary Agreements to which the Buyer is a party
have been duly authorized by all necessary corporate action of the Buyer, and
this Agreement and the Ancillary Agreements have been duly executed and
delivered by the Buyer.
7.5.2. Parent shall have delivered to Sellers an opinion of Latham & Watkins,
counsel to Parent, dated as of the Closing Date, stating that:
7.5.2.1. Incorporation. Parent has been duly incorporated and is
-------------
validly existing and in good standing under the laws of the State of Delaware
and, based solely on certificates from public officials, Buyer is qualified to
do business and in good standing as a foreign corporation in the states set
forth on Schedule A attached to such opinion;
7.5.2.2. Corporate Power and Authority. Parent has the necessary
-----------------------------
corporate power and authority to enter into this Agreement and the Registration
Rights Agreement and to consummate the transactions contemplated hereby and
thereby;
7.5.2.3. Corporate Action. The execution, delivery and performance
----------------
of this Agreement and the Registration Rights Agreement have been duly
authorized by all necessary corporate action of Parent, and this Agreement and
the Registration Rights Agreement have been duly executed and delivered by the
Parent;
7.5.2.4. Obligation of the Parent. This Agreement and the
------------------------
Registration Rights Agreement, constitute legally valid and binding obligations
of Parent, enforceable against Parent in accordance with their terms, except as
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally or by equitable principles
(whether considered in an action at law or in equity), (ii) limitations imposed
by federal or applicable state law or equitable principles upon the availability
of specific performance, injunctive relief or other equitable remedies, or (iii)
other customary limitations reasonably satisfactory to Seller's counsel;
7.5.2.5. Parent Common Stock. When duly countersigned by the
-------------------
Parent's transfer agent and registrar and delivered to the Sellers, the Parent
Common Stock issuable to the Sellers will be duly authorized and validly issued
and will be fully paid and nonassessable.
7.6. Escrow Agreement
----------------
. The Company, the Sellers and Buyer shall have entered into the Escrow
Indemnification Agreement in the form attached as Exhibit 8.6.
7.7. Employment and Non-Competition Agreements. Buyer, the Company and
-----------------------------------------
Marvin W. Abbott shall have entered into an Employment and Non-Competition
Agreement in the form
38
<PAGE>
attached as Exhibit 8.7.1 hereto and the Company and Leonard A. Siems shall have
entered into a Non-Competition Agreement in the form attached as Exhibit 8.7.2
hereto.
7.8. Registration Rights Agreement. The Buyer and Parent shall have entered
-----------------------------
into the Registration Rights Agreement in the form attached hereto as Exhibit
6.7
7.9. New Leases. The owners of the Facilities and the Buyer, Parent and
----------
Company shall have entered into the Leases in the form attached hereto as
Exhibit 7.10.
7.10. Payoffs. The Buyer will cause all of the Company's obligations set
forth on Schedule 7.10 to be paid in full.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to consummate the transactions provided for hereby
are subject, in the discretion of Buyer, to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which may be waived by
Buyer:
8.1. Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Sellers and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Sellers
and the Company shall have performed and satisfied all agreements and covenants
required hereby to be performed by them prior to or on the Closing Date.
8.2. Consents. All Permits and waivers necessary to the consummation by
--------
Buyer and Parent of the transactions contemplated hereby and for the continued
operation of the Business after the Closing (including, without limitation, all
required waivers of Parent's lenders) shall have been obtained.
8.3. No Proceedings or Litigation. No Action by any governmental authority
----------------------------
or other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer materially if the transactions
contemplated hereby are consummated, including without limitation any material
adverse effect on the right or ability of the Company to own, operate, possess
or transfer the Assets after the Closing. The waiting period under the HSR Act
shall have expired or been terminated, and there shall not be any statute, rule
or regulation that makes the purchase and sale of the Shares contemplated hereby
illegal or otherwise prohibited.
39
<PAGE>
8.4. Opinion of Counsel. The Company shall have delivered to Buyer an
------------------
opinion of Offit & Kurman, P.A., counsel to the Company and the Sellers (the
"Law Firm"), dated as of the Closing Date, stating that:
8.4.1. Incorporation. The Company has been duly incorporated and is validly
-------------
existing and in good standing under the laws of the State of Maryland and, based
solely on certificates from public officials, the Company is qualified to do
business and in good standing as a foreign corporation in the States of Delaware
and West Virginia, the District of Columbia and the Commonwealths of
Pennsylvania and of Virginia;
8.4.2. Corporate Power and Authority. The Company has the necessary
-----------------------------
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and to own, lease and operate the Assets and its
other properties and to conduct the Business as presently conducted;
8.4.3. Corporate Action. The execution, delivery and performance of this
----------------
Agreement and the Ancillary Agreements to which the Company is a party have been
duly authorized by all necessary corporate action of the Company, and this
Agreement and the Ancillary Agreements have been duly executed and delivered by
the Company or the Sellers, as applicable;
8.4.4. Obligation of the Company or Sellers. This Agreement and each
------------------------------------
Ancillary Agreement constitutes a legally valid and binding obligation of the
Company or the Sellers, as applicable, enforceable against the Company or the
Sellers in accordance with its terms, except as limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or by equitable principles (whether considered in an
action at law or in equity), (ii) limitations imposed by federal or applicable
state law or equitable principles upon the availability of specific performance,
injunctive relief or other equitable remedies, (iii) rights granted by law to
participants in the ESOP, or (iv) other customary limitations reasonably
satisfactory to Buyer's counsel;
8.4.5. No Breach. Neither the execution and delivery of this Agreement or
---------
the Ancillary Agreements by the Company or the Sellers, as applicable, nor the
consummation of the transactions contemplated hereby or thereby will (i) violate
or conflict with any provision of the Articles of Incorporation or Bylaws of the
Company, or of the charter documents or other organizational instrument of any
Seller that is not a natural person, (ii) assuming payment by Buyer of all
obligations listed on Schedule __ hereto, breach, or cause a default under, any
term or provision of any material contract listed on a schedule to such opinion
to which contract the Company or the Sellers are a party or by which the Assets
are bound, or (iii) based upon a certificate of Sellers and/or the Company,
violate any judgment, decree, injunction, writ or order applicable to the
Company or the Sellers;
8.4.6. No Permits Required. No Permit of, or filing with, any governmental
-------------------
authority or, to the best knowledge of such counsel, any other person, is
required for the execution and delivery of this Agreement or the Ancillary
Agreements by the Company or the
40
<PAGE>
Sellers, as applicable, or the consummation by the Company or the Sellers of the
transactions contemplated hereby or thereby, except as set forth in this
Agreement or the schedules or exhibits hereto; and except for permits or filings
with any governmental agency which are required for the Company's operations,
but not specifically required for the approval and consummation of the
transactions contemplated by this Agreement.
8.4.7. No Actions Pending. Except as set forth in this Agreement or the
------------------
schedules hereto, to the knowledge of such counsel, no Action is pending or
threatened (i) against the Company or the Business, (ii) against any of the
officers or directors of the Company as such, (iii) in which the Company is a
plaintiff, or (iv) which questions the validity or legality of the transactions
contemplated hereby;
8.4.8. No Violation of Law. Neither the execution and delivery of this
-------------------
Agreement or the Ancillary Agreement by the Company or the Sellers, as
applicable, nor the consummation of the transactions contemplated hereby or
thereby will violate or result in a failure to comply with any (i) statute, law,
ordinance, regulation, rule or order of any federal, state or local government
or any other governmental department or agency, or (ii) based solely on a
certificate of the Company and/or Sellers, any judgment, decree or order of any
court, applicable to the Company, the Sellers or the Business; and, to the
knowledge of such counsel, the Company has all licenses, franchises and other
authority required to conduct the Business as it is now being conducted; which,
if the Company did not have, would have a Material Adverse Effect on the
Company.
8.4.9. Title to Shares. The authorized capital stock of the Company consists
---------------
solely of 150,000 shares of common stock, $.01 par value per share. Based solely
upon such counsel's review of the Company's stock ledger, the issued and
outstanding common stock of the Company consists solely of the Shares, all of
which are owned of record and beneficially by the Sellers, to such counsel's
knowledge, free and clear of all Encumbrances. To the knowledge of such
counsel, there are no outstanding warrants, options or other rights to acquire,
or securities convertible into or exercisable or exchangeable for, shares of
capital stock of the Company, nor any commitments or agreements by the Company
to issue any such rights or securities or shares of capital stock; and upon
Closing, Buyer will acquire good and valid title to all of the Shares, free and
clear of all Encumbrances subject to ESOP participants' rights under applicable
law.
In rendering such opinions, such counsel may rely as to factual matters upon
certificates and assurances of public officials, Sellers, and officers of the
Company. In addition, such opinions may be subject to such additional
qualifications and exceptions as are reasonably acceptable to counsel to Buyer.
8.5. Certificates. Sellers and the Company shall furnish Buyer with such
------------
certificates of Sellers, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.6. Escrow Agreement. The Company, the Sellers and Buyer shall have
----------------
entered into the Escrow Agreement in the form attached as Exhibit 8.6.
41
<PAGE>
8.7. Employment and Non-Competition Agreements. Buyer and Marvin W. Abbott
-----------------------------------------
shall have entered into an Employment and Non-Competition Agreement in the form
attached as Exhibit 8.7.1 hereto and Buyer and Leonard A. Siems shall have
entered into a Non-Competition Agreement in the form attached as Exhibit 8.7.2
hereto.
8.8. Registration Rights Agreement. Buyer, Parent, the Company and Sellers
-----------------------------
shall have entered into the Registration Rights Agreement substantially in the
form attached as Exhibit 8.8 hereto.
8.9. New Leases. Buyer shall have entered into leases with the appropriate
----------
landlord for each of the Facilities (the "New Leases") in the form attached
hereto as Exhibits 8.9.
8.10. Release of Encumbrances. The Company shall have filed (where
-----------------------
necessary) and delivered to Buyer all documents necessary to release the Assets
from all Encumbrances (except for Encumbrances permitted under Section 4.6),
which documents shall be in a form reasonably satisfactory to Buyer's counsel.
8.11. Material Changes. Since the Interim Balance Sheet Date, there shall
----------------
not have been any Material Adverse Change with respect to the Business.
8.12. Corporate Documents. Buyer shall have received from the Company
-------------------
resolutions adopted by its board of directors approving this Agreement and the
Ancillary Agreements to which it will be a party, and the transactions
contemplated hereby and thereby.
8.13. Due Diligence Review. For a period to extend three weeks from the date
--------------------
Buyer or its Representatives shall receive all due diligence materials from
Sellers or their Representatives, which were listed on the letter dated
September 19, 1997 from Parent's counsel to Sellers' counsel. Buyer and its
Representatives shall conduct a due diligence review of the Company's Books and
Records, Financial Statements, and other records and accounts of the Business,
and in the sole discretion of Buyer, Buyer shall be satisfied on the basis of
such review that there has been no breach of the representations and warranties
or the pre-closing covenants of Sellers or the Company made pursuant to this
Agreement. Such review shall have no effect whatsoever on the liability of
Sellers or the Company to Buyer under this Agreement or otherwise for breach of
any representations, warranties, or covenants of Sellers or the Company or
hereunder.
42
<PAGE>
8.14. Completion of Environmental Remediation. The Company or its agents
---------------------------------------
shall have completed any "required remediation" within the meaning of Section
6.6, subject to the procedures set forth in Section 6.6 with respect to the
certification of such completion and the resolution of any disputes relating
thereto.
ARTICLE IX.
RISK OF LOSS; CONSENTS TO ASSIGNMENT
------------------------------------
9.1. Risk of Loss. From the date hereof through the Closing, all risk of
loss or damage to the property included in the Business shall be borne by the
Company, and thereafter shall be borne by Buyer. If any portion of the Business
is destroyed or damaged by fire or any other cause on or prior to the Closing,
other than use, wear or loss in the ordinary course of the Business, the Company
shall give written notice to Buyer as soon as practicable after discovery of
such damage or destruction, the amount of insurance, if any, covering such
Business and the amount, if any, which the Company is otherwise entitled to
receive as a consequence. Prior to the Closing, Buyer shall have the option,
which shall be exercised by written notice to the Company within ten (10)
calendar days after receipt of the Company's notice or if there is not ten (10)
calendar days prior to the Closing, as soon as practicable prior to the Closing,
of (a) accepting such Business in its destroyed or damaged condition in which
event Buyer shall be entitled to the proceeds of any insurance or other proceeds
payable with respect to such loss and to such indemnification for any uninsured
portion of such loss pursuant to Section 10.3, and the full Purchase Price shall
be paid for such Business, (b) excluding such portion of the Business from this
Agreement, in which event the Purchase Price shall be reduced by the amount
allocated to such Business, as mutually agreed between the parties or (c)
terminating this Agreement in accordance with Section 11.1. If Buyer accepts
such Business, then after the Closing, any insurance or other proceeds shall
belong to the Company.
9.2. Consents to Assignment. Anything in this Agreement to the contrary
----------------------
notwithstanding, this Agreement shall not constitute an agreement to assign or
to effect a change of control with respect to any Contract, lease, license,
sales order, purchase order or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment or change of
control thereof, without the consent of a third party thereto, would constitute
a breach thereof or in any way adversely affect the rights of Buyer thereunder.
If such consent is not obtained, or if an attempted assignment or change of
control thereof would be ineffective or would affect the rights thereunder so
that Buyer would not receive all such rights, the Company will cooperate with
Buyer, in all reasonable respects, to provide to Buyer the benefits under any
such Contract, lease, license, sales order, purchase order, claim or right
including without limitation enforcement for the benefit of Buyer of any and all
rights of the Company against a third party thereto arising out of the breach or
cancellation by such third party or otherwise.
43
<PAGE>
ARTICLE X.
ACTIONS BY SELLERS AND BUYER
----------------------------
AFTER THE CLOSING
-----------------
10.1. Books and Records; Tax Examinations.
-----------------------------------
10.1.1. Books and Records. Each party agrees that it will cooperate with and
-----------------
make available to the other party, during normal business hours, all Books and
Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing Date which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
10.1.2. Cooperation and Records Retention. Sellers and Buyer shall (i) each
---------------------------------
provide the other with such assistance as may reasonably be requested by any of
them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and provide the other with any
records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the other for any period. Without limiting the generality of the foregoing,
Sellers and the Company shall each retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all tax returns,
supporting work schedules, and other records or information that may be relevant
to such returns for all tax periods or portions thereof ending on or before the
Closing Date and shall not destroy or otherwise dispose of any such records
without first providing the other parties with a reasonable opportunity to
review and copy the same.
10.2. Survival of Representations, Etc. All statements contained in any
--------------------------------
certificate, schedule, exhibit, instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations, warranties, covenants
and agreements of Sellers, the Company, Parent and Buyer contained herein shall
survive the consummation of the transactions contemplated hereby and the Closing
Date, without regard to any investigation made by any of the parties hereto. All
such representations and warranties and all claims and causes of action with
respect thereto (other than the provisions of Sections 4.4, 4.18, 4.21, 4.22 and
this Section 10.2, and all claims and causes of action with respect thereto)
shall terminate upon expiration of two years after the Closing Date. The
representations and warranties in Sections 4.18, 4.21 and 4.22 shall survive
until the expiration of three years or until the expiration of the applicable
statute of limitations (with extensions), whichever occurs later, with respect
to the matters addressed in such sections and Section 4.4 shall survive in
perpetuity. The termination of the representations and warranties provided
44
<PAGE>
herein shall not affect the rights of a party in respect of any Claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
10.3. Indemnifications.
----------------
10.3.1. By Sellers. For purposes of this Section 10.3.1 only, the term
----------
"Sellers" shall not include the Trustees. Sellers shall indemnify, defend, save
and hold harmless Buyer, its Affiliates and subsidiaries (including the Company
from and after the Closing Date), and its and their respective Representatives,
from and against any and all claims, damages, costs, losses (including without
limitation diminution in value), Taxes, liabilities, judgments, penalties,
fines, obligations, lawsuits, deficiencies, demands and expenses (whether or not
arising out of third-party claims), including without limitation interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including without limitation any clean-up or remedial action), lost profits and
other losses resulting from any shutdown or curtailment of operations, damages
to the environment, attorneys' fees, experts' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any representation or warranty, or the inaccuracy
of any representation or warranty, made by the Company or Sellers in or pursuant
to this Agreement; (ii) any breach of any covenant or agreement made by the
Company or Sellers in or pursuant to this Agreement; (iii) any liability imposed
upon Buyer by reason of improper transfer of the Shares; (iv) any liability
arising under any Environmental Law on account of the conduct of the Company or
any Seller or prior owners or users of the Facilities or other persons, or on
account of the operation of the Business or the Facilities, or related to any
Environmental Condition existing, in each case on or at any time prior to the
Closing Date; or (v) any Post-Closing Environmental Liability or (vi) any
liability for Taxes in respect of taxable periods ending on or before the
Closing Date not recorded on the Closing Balance Sheet. Without limiting the
generality of the foregoing, the indemnification provided herein, insofar as it
relates to any Environmental Law or Environmental Condition, shall specifically
cover costs incurred in connection with any investigation of site conditions
(excepting the cost of the Environmental Assessments) or any clean-up, remedial,
removal or restoration work required by any federal, state or local governmental
agency or political subdivision or by the provisions of Section 6.6 hereof. For
purposes of this Section 10.3.1, "Post-Closing Environmental Liability" shall
mean any liability imposed on Buyer or the Company arising out of or related to
events occurring on or after the Closing Date and prior to the completion of all
required remediation in accordance with Section 6.6 hereof, and resulting from
any Environmental Condition described in the Environmental Assessments,
including without limitation those Environmental Conditions described therein
but not identified as being in violation of any Environmental Law and those
related to the absence of any Permits, but excluding any liability to the extent
such liability results in whole or in part from the acts or misconduct of Buyer
or its Representatives. Notwithstanding anything contained in this Agreement to
the contrary, including in Section 10.3.1 hereof, Seller's shall not be required
to indemnify, defend, save and hold harmless Buyer, its affiliates and
subsidiaries from and against all costs arising out of liability under
subsections
45
<PAGE>
10.3.1(iv) and (v) to the extent that Buyer has agreed to be responsible for
such costs pursuant to Section 6.6 hereof.
10.3.2. By Parent and Buyer. Parent and Buyer shall jointly and severally
-------------------
indemnify and save and hold harmless Sellers, their Affiliates and their
Representatives from and against any and all Damages incurred in connection
with, arising out of, resulting from or incident to (i) any breach of any
representation or warranty, or the inaccuracy of any representation or warranty,
made by Parent or Buyer in or pursuant to this Agreement; or (ii) any breach of
any covenant or agreement made by Parent or Buyer in or pursuant to this
Agreement and (iii) the operations of the Company's business on and after the
Closing Date.
10.3.3. Cooperation. The indemnified party shall cooperate in all reasonable
-----------
respects with the indemnifying party and such attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall cooperate with each other in any
notifications to insurers.
10.3.4. Defense of Claims. If a claim for Damages (a "Claim") is to be made
-----------------
by a party entitled to indemnification hereunder against the indemnifying party,
the party claiming such indemnification shall, subject to Section 10.2, give
written notice (a "Claim Notice") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.3. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys or
accountants of its own choice (which shall be reasonably acceptable to the
indemnified party) to handle and defend the same, at the indemnifying party's
cost, risk and expense unless the named parties to such action or proceeding
include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such indemnified party that are different
from or additional to those available to the indemnifying party, and (iii) to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the indemnified party, such consent not to be
unreasonably withheld; provided, however, if the remediation or resolution of
any such Claim will occur on or at any Facility or is reasonably expected to
have a material adverse effect on the indemnified party's business operations,
then, notwithstanding the foregoing, the indemnified party shall be entitled to
control such remediation or resolution,
46
<PAGE>
including without limitation to take control of the defense and investigation of
such lawsuit or action, to employ and engage attorneys of its own choice to
handle and defend the same, at the indemnifying party's cost, risk and expense,
and to compromise or settle such Claim. If the indemnifying party fails to
assume the defense of such claim within fifteen (15) calendar days after receipt
of the Claim Notice, the indemnified party against which such claim has been
asserted will (upon delivering notice to such effect to the indemnifying party)
have the right to undertake, at the indemnifying party's cost and expense, the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party. In the event the indemnified party assumes
the defense of the claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
action effected pursuant to and in accordance with this Section 10.3 and for any
final judgment (subject to any right of appeal), and the indemnifying party
agrees to indemnify and hold harmless an indemnified party from and against any
Damages by reason of such settlement or judgment.
10.3.5. Buyer's Right to Distribution of Holdback Amount. Buyer and its
------------------------------------------------
Affiliates and Representatives may collect any amount due from Sellers pursuant
to Seller's indemnification obligations under this Section 10.3 by distribution
of an applicable portion of the Holdback Amount from the Escrow, subject to the
terms and in accordance with the procedures set forth in the Escrow Agreement.
10.3.6. Limitations. Neither Buyer or Parent on the one hand, nor Sellers on
-----------
other hand, shall be liable to the other under this Section 10.3 for any Damages
until the amount otherwise due the party being indemnified exceeds $50,000 in
the aggregate, in which case such indemnifying party will be liable to the
indemnified party for all such amounts, including the first $50,000.
Notwithstanding the preceding sentence, this limitation shall not apply with
respect to Damages arising out of a breach of a representation or warranty
contained in Sections 4.18 or 4.22.
10.3.7. Liability and Remedies, etc. Except as set forth below, no individual
----------------------------
Representative of any party shall be personally liable for any Damages under the
provisions contained in this Section 10.3. Nothing herein shall relieve either
party of any liability to make any payment expressly required to be made by such
party pursuant to this Agreement. The term "Damages" as used in this Section
10.3 is not limited to matters asserted by third parties against Sellers or
Buyer, but includes Damages incurred or sustained by an indemnified party in the
absence of third party claims. Payments by an indemnified party of amounts for
which such party is indemnified hereunder shall not be a condition precedent to
recovery. Sellers' obligations to indemnify Buyer, and Parent and Buyer's
obligation to indemnify Sellers, shall not limit any other rights, including
without limitation rights of contribution which either party may have under
statute or common law. Buyer and Sellers agree and acknowledge that collection
under the Escrow Agreement shall not be Buyer's exclusive method of receiving
indemnification from Sellers pursuant to Section 10.3; rather, Buyer and its
Affiliates and Representatives will have all other remedies provided by law or
in this Agreement.
47
<PAGE>
10.4. Further Action. After the Closing, Sellers, the Company, Buyer and
--------------
Parent shall take all actions reasonably necessary to effect the transactions
contemplated herein, including the conveyance of the Shares to Buyer free and
clear of all Encumbrances and as may be otherwise required by Buyer's lenders.
ARTICLE XI.
MISCELLANEOUS
-------------
11.1. Termination.
-----------
11.1.1. Termination. This Agreement may be terminated at any time prior to
-----------
Closing:
11.1.1.1. By mutual written consent of Buyer and the Seller
Representative;
11.1.1.2. By Buyer or Sellers if the Closing shall not have occurred
on or before December 30, 1997; provided, however, that this provision shall not
be available to Buyer if Sellers have the right to terminate this Agreement
under Section 11.1.1.4, and this provision shall not be available to Sellers if
Buyer has the right to terminate this Agreement under Section 11.1.1.3;
11.1.1.3. By Buyer if there is a material breach of any representation
or warranty set forth in Article IV hereof or any covenant or agreement to be
complied with or performed by Sellers or the Company pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VIII to be
satisfied (and such condition is not waived in writing by Buyer) on or prior to
the Closing Date, or the occurrence of any event which results or would result
in the failure of a condition set forth in Article VIII to be satisfied on or
prior to the Closing Date, provided that Buyer may not terminate this Agreement
prior to the Closing if Sellers or the Company have not had an adequate
opportunity to cure such failure; or
11.1.1.4. By Sellers if there is a material breach of any
representation or warranty set forth in Article V hereof or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VII to be
satisfied (and such condition is not waived in writing by Sellers) on or prior
to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition set forth in Article VII to be satisfied on
or prior to the Closing Date; provided that Sellers may not terminate this
Agreement prior to the Closing Date if Buyer has not had an adequate opportunity
to cure such failure.
11.1.2. In the Event of Termination. In the event of termination of this
---------------------------
Agreement:
48
<PAGE>
11.1.2.1. Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same; and
11.1.2.2. No party hereto shall have any liability or further
obligation to any other party to this Agreement, except as stated in Sections
11.7, 11.10, 11.1.2.1 or this Section 11.1.2.2, and except for any breach of
this Agreement occurring prior to the proper termination of this Agreement that
is not cured within 10 days of notice of such breach. The foregoing provisions
shall not limit or restrict the availability of specific performance or other
injunctive relief to the extent that specific performance or such other relief
would otherwise be available to a party hereunder.
11.2. Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that (i) Parent or Buyer may, without such
consent, assign all such rights to any lender as collateral security, and Buyer
may assign all such rights to a wholly-owned subsidiary or subsidiaries of
Parent or Buyer (or a partnership controlled by Parent or Buyer) and (ii)
Sellers may assign their right to receive their pro rata portion of the Purchase
Price, for estate planning purposes, to immediate family members or to trusts,
the beneficiaries of which are immediate family members, provided (a) such
family members agree to be bound by this Agreement and the Escrow Agreement and
(b) any transfer of the Parent Stock comports with the Securities Act. If Buyer
wishes to assign its obligations to a wholly-owned Subsidiary or Subsidiaries of
a Parent or Buyer, it must first obtain the written consent of Sellers. Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns, and
no other person shall have any right, benefit or obligation under this Agreement
as a third party beneficiary or otherwise.
11.3. Notices. All notices, requests, demands and other communications which
-------
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to the Company, addressed to:
Siems Rental & Sales Co., Inc.
P.O. Box 5630
Baltimore, Maryland 21210
Attention: Leonard A. Siems
49
<PAGE>
with a copy to:
Glenn Solomon, Esq.
Offit & Kurman, P.A.
8 Park Center Court, Suite 200
Owings Mills, MD 21117
If to Sellers, addressed to:
P.O. Box 5630
Baltimore, Maryland 21210
Attention: Leonard A. Siems
with a copy to:
Glenn Solomon, Esq.
Offit & Kurman, P.A.
8 Park Center Court, Suite 200
Owings Mills, MD 21117
If to Parent or Buyer, addressed to:
Rental Service Corporation
14505 N. Hayden Road, Suite 322
Scottsdale, Arizona 85260
Attention: Chief Executive Officer
with a copy to:
Elizabeth A. Blendell, Esq.
Richard D. Strulson, Esq.
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4. Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
Maryland (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and
50
<PAGE>
as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
11.5. Entire Agreement; Amendments and Waivers. This Agreement, together
----------------------------------------
with all exhibits and schedules hereto and the Ancillary Agreements, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
11.6. Multiple Counterparts. This Agreement may be executed in one or more
---------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7. Expenses. Except as otherwise specified in this Agreement, each party
--------
hereto shall pay its own legal, accounting, out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
11.8. Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9. Titles. The titles, captions or headings of the Articles, Sections and
------
subsections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.10. Publicity; Confidentiality. None of Parent, Buyer, Sellers, the
--------------------------
Company or their respective Affiliates or Representatives shall issue any press
release or make any public statement regarding, or disclose to any third party
(except as required by law or legal process, and except to each party's lenders
if such lenders so require) any of the terms of, the transactions contemplated
hereby, without prior written approval of the other party, provided that Parent,
Buyers, Sellers and the Company may, if they mutually agree, issue or make an
appropriate press release or public announcement after the Closing Date. In the
event that this Agreement is terminated prior to Closing, Buyer agrees to return
to Sellers and the Company all correspondence and documents furnished by Sellers
or the Company's Representatives, and agrees not to disclose or use for its own
purposes any confidential or proprietary information of Sellers or the Company
that has been furnished to it by Sellers or the Company's Representatives.
51
<PAGE>
11.11. Cumulative Remedies. All rights and remedies of either party hereto
-------------------
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
11.12. Arbitration. Any controversy arising out of or relating to this
-----------
Agreement (including, without limitation, pursuant to Section 10.3, or relating
to the breach hereof, shall be settled by arbitration conducted in Baltimore,
Maryland in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect (except as otherwise expressly provided
in this Agreement). The award rendered by the arbitrator(s) shall be final and
judgment upon the award rendered by the arbitrator(s) may be entered upon it in
any court having jurisdiction thereof. The arbitrator(s) shall possess the
powers to issue mandatory orders and restraining orders in connection with such
arbitration. The expenses of the arbitration shall be borne by the losing party
unless otherwise allocated by the arbitrator(s). The agreement to arbitrate
shall be specifically enforceable under the prevailing arbitration law. During
the continuance of any arbitration proceedings, the parties shall continue to
perform their respective obligations under this Agreement. Notwithstanding
anything contained herein to the contrary, the parties may institute a court
proceeding for the purpose of obtaining injunctive relief.
11.13. Seller Representative.
---------------------
11.13.1. The Sellers irrevocably make, constitute and appoint Leonard
A. Siems as their agent (the "Seller Representative") and authorize and empower
him to fulfill the role of Seller Representative hereunder and under the Escrow
Agreement. In the event of the resignation, death or incapacity of a Seller
Representative, his successor shall be appointed within 14 days of his death or
incapacity by mutual agreement of the remaining Sellers, and such successor
either shall be a Seller or shall otherwise be acceptable to Buyer. If the
Sellers fail to appoint a successor within such 21-day period, then Buyer shall
have the right to appoint the successor from among the Sellers. The choice of a
successor Seller Representative appointed in any manner permitted above shall be
final and binding upon all of the Sellers. The decisions and actions of any
successor Seller Representative shall be, for all purposes, those of a Seller
Representative as if originally named herein.
11.13.2. Each Seller has made, constituted and appointed and by the
execution of this Agreement hereby irrevocably makes, constitutes and appoints
the Seller Representative as such person's true and lawful attorney in fact and
agent, for such person and in such person's name, (i) to execute and perform the
Escrow Agreement on behalf of each Seller, (ii) to receive all notices and
communications directed to such Seller under this Agreement or the Escrow
Agreement and to take any action (or to determine to take no action) with
respect thereto, as he may deem appropriate as effectively as such Seller could
act for himself or herself, including without limitation, the settlement or
compromise of any dispute or controversy, and (iii) to execute and deliver all
instruments and documents of every kind incident to the foregoing to all intents
and purposes and with the same effect as such Seller could do personally, and
each such Seller
52
<PAGE>
hereby ratifies and confirms as his or her own act, all that the Seller
Representative shall do or cause to be done pursuant to the provisions hereof.
11.13.3. The death or incapacity of any Seller shall not terminate the
authority and agency of the Seller Representative.
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement
to be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
SIEMS RENTAL & SALES CO., INC. ACME ALABAMA, INC.
(the "Company") ("Buyer")
By: /s/ Leonard A. Siems By: /s/ Robert M. Wilson
----------------------- ----------------------
Name: Leonard A. Siems Name: Robert M. Wilson
Its: Chairman of the Board Its: Senior V.P. & Secretary
SELLER STOCKHOLDERS RENTAL SERVICE CORPORATION
("Sellers") ("Parent")
/s/ Leonard A. Siems By: /s/ Robert M. Wilson
- --------------------------- ---------------------
Leonard A. Siems Name: Robert M. Wilson
Its: Senior V.P. & Secretary
/s/ Marvin W. Abbott
- ---------------------------
Marvin W. Abbott
TRUSTEES OF THE COMPANY'S EMPLOYEE
STOCK OWNERSHIP PLAN ("Trustees")
/s/ Leonard A. Siems
- ---------------------------
Leonard A. Siems, Trustee
/s/ Marvin W. Abbott
- ---------------------------
Marvin W. Abbott, Trustee
/s/ Porter Siems
- ---------------------------
Porter Siems, Trustee
/s/ Michael E. Mullen
- ---------------------------
Michael E. Mullen, Trustee
E-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1
RENTAL SERVICE CORPORATION
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
----------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding 14,921,192 6,121,963 12,930,581 5,573,790
Net effect of dilutive common stock
options - based on the treasury stock
method using the average market price 241,826 -- 157,020 --
Net effect of shares issuable in
conjunction with the Employee
Qualified Stock Purchase Plan 2,020 -- 673 --
Net effect of shares issuable in
conjunction with acquisitions 153,651 -- 61,348 --
Net effect of common stock, common
stock options and warrants issued at
less than IPO price within twelve
months, based on the treasury stock
method:
Common stock -- -- -- 6,615
Options -- 108,780 -- 132,336
Warrants -- 57,981 -- 59,895
----------------- ------------- ------------- ------------
15,318,689 6,288,724 13,149,622 5,772,636
================= ============= ============= ============
Income before extraordinary item $ 3,920,000 $ 952,000 $ 8,958,000 $2,179,000
Redeemable preferred stock accretion -- 524,000 -- 1,643,000
----------------- ------------- ------------- -------------
$ 3,920,000 $ 428,000 $ 8,958,000 $ 536,000
================= ============= ============= =============
Net income (loss) $ 3,920,000 $ (317,000) $ 8,424,000 $ 910,000
Redeemable preferred stock accretion -- 524,000 -- 1,643,000
----------------- ------------- ------------- -------------
$ 3,920,000 $ (841,000) $ 8,424,000 $ (733,000)
================= ============= ============= =============
Per share amount:
Income (loss) before extraordinary item $ .26 $ .07 $ .68 $ .09
Extraordinary item -- (.20) (.04) (.22)
----------------- --------------- ------------------ ------------
Net income (loss) $ .26 $ (.13) $ .64 $ (.13)
================= =============== ================== ============
</TABLE>
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF RENTAL SERVICE CORPORATION
RSC Holdings, Inc. (Delaware)
RSC Acquisition Corp. (Delaware)
Wholly owned subsidiaries of RSC Holdings, Inc.:
RSC Industrial Corporation (Delaware)
RSC Duval Inc. (Delaware)
RSC Rents, Inc. (California)
Wholly owned subsidiaries of RSC Acquisition Corp.:
RSC Alabama, Inc. (Alabama)
The Air & Pump Company (Texas)
Walker Jones Equipment, Inc. (Mississippi)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF RENTAL SERVICE CORPORATION AS OF AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,887,000
<SECURITIES> 0
<RECEIVABLES> 48,561,000
<ALLOWANCES> 4,867,000
<INVENTORY> 20,701,000
<CURRENT-ASSETS> 0
<PP&E> 312,567,000
<DEPRECIATION> 52,033,000
<TOTAL-ASSETS> 462,577,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 149,000
<OTHER-SE> 171,740,000
<TOTAL-LIABILITY-AND-EQUITY> 462,577,000
<SALES> 60,783,000
<TOTAL-REVENUES> 172,332,000
<CGS> 45,644,000
<TOTAL-COSTS> 127,643,000
<OTHER-EXPENSES> 19,696,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,863,000
<INCOME-PRETAX> 16,130,000
<INCOME-TAX> 7,172,000
<INCOME-CONTINUING> 8,958,000
<DISCONTINUED> 0
<EXTRAORDINARY> 534,000
<CHANGES> 0
<NET-INCOME> 8,424,000
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
