W.R. Carpenter Final Stock Purchase Agreement.rtf
AN INDEX OF DEFINED TERMS APPEARS AFTER THE TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT
among
HORIZON HIGH REACH, INC.,
W.R. CARPENTER NORTH AMERICA, INC.
and
UNITED RENTALS (NORTH AMERICA), INC.
SEPTEMBER 28, 2000
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22
W.R. Carpenter Final Stock Purchase Agreement.rtf
W.R. Carpenter Final Stock Purchase Agreement.rtf
TABLE OF CONTENTS
PAGE
ARTICLE 1 Purchase and Sale....................................1
1.1 Purchase and Sale of the Stock..............1
1.2 Consideration for Purchase and Sale of the Stock1
(a) Closing Payment.....................1
(b) Promissory Notes...................2
(c) Post-Closing Audit; Adjustments.....2
(d) Adjustment Dispute Resolution.......4
ARTICLE 2 Deliveries...........................................6
2.1 Sellers' Deliveries.........................6
(a) Closing Payment Certificate.........6
(b) Stock Certificates..................6
(c) Consents and Approvals..............6
(d) Pay-Off Letters.....................6
(e) Account Transfer Documents..........6
(f) Title Documents.....................6
(g) Proceedings and Documents...........6
(h) Good Standing Certificates..........6
(i) Release.............................6
(j) Resignations........................7
(k) Opinion of Sellers' Counsel.........7
(l) Minute Books........................7
(m) 401(k) Termination..................7
2.2 Buyer's Deliveries..........................7
(a) Closing Payment.....................7
(b) Notes...............................7
(c) Opinion of Buyer's Counsel..........7
2.3 Related Agreements..........................7
(a) Leases..............................7
(b) Settlement Agreement................7
ARTICLE 3 Representations and Warranties of Sellers............8
3.1 Sellers; Entry Into Agreements..............8
(a) Organization and Good Standing......8
(b) Validity and Authorization; Corporate Power
and Authority...............................8
(c) Subsidiaries........................8
(d) No Conflict.........................9
(e) Seller Consents Required............9
3.2 Financial Information.......................9
(a) Financial Statements; Books and Records 9
(b) Conduct of Business................10
(c) No Material Adverse Change.........10
3.3 Stock..........................................11
(a) Capitalization.....................11
(b) Ownership and Transfer by Shareholder and the
Company 11
3.4 Assets.........................................11
(a) Personal Property..................11
(i) Title..........................11
(ii) Inventory......................12
(iii) Facilities and Equipment.......12
(iv) Notes and Accounts Receivable..12
(v) Bank Accounts..................13
(b) Real Property......................13
(i) Fee Simple.....................13
(ii) Leases; Easements and Other Interests
13
(iii) Ingress and Egress; Eminent Domain
14
(iv) Improvements...................14
(v) Leased Premises Taxes..........14
(c) Intellectual Property..............14
(d) Contracts..........................15
(e) Necessary Assets...................16
3.5 Liabilities....................................16
(a) No Liabilities.....................16
(b) Tax Matters........................16
(c) Litigation.........................18
(d) Employee Liabilities...............18
(e) Product Quality, Warranty Claims, Product
Liability..................................19
3.6 Business.......................................19
(a) Customers and Suppliers............19
(b) Insurance..........................19
(c) Employees..........................20
(d) Worker's Compensation..............20
(e) Benefit Plans and Union Contracts..20
(f) Affiliated Transactions............22
(g) Legal Requirements.................22
(i) Compliance with Laws...........23
(ii) Licenses.......................23
(iii) Certain Acts...................23
(h) Environmental Matters..............23
(i) Compliance.....................23
(ii) Environmental Permits..........24
(iii) Environmental Claims...........24
(iv) Environmental Releases.........24
(v) Underground Storage Tanks......25
(vi) Environmental Assessments......25
(vii) Environmental Disclosure.......26
3.7 Acquisition of Notes...........................26
(a) Purchase Entirely for Own Account..26
(b) Buyer's Reliance...................26
(c) Receipt of Information.............26
(d) Investment Experience..............26
(e) Accredited Investor................26
(f) Restricted Security................27
3.8 Other..........................................27
(a) Documents Delivered................27
(b) No Brokers Fees; No Commissions....27
ARTICLE 4 Representations and Warranties of Buyer..............27
4.1 Entry Into Agreements..........................27
(a) Organization and Good Standing.....27
(b) Corporate Power and Authority; Validity and
Authorization..............................27
4.2 No Brokers Fees; No Commissions................28
4.3 Acquisition of Stock...........................28
ARTICLE 5 Post-Closing Agreements..............................28
5.1 Further Actions................................28
5.2 Cooperation....................................28
5.3 Tax Administration.............................29
5.4 Restrictive Covenants..........................32
(a) Noncompete.........................32
(b) Confidential Information...........33
(c) Non-Solicitation...................33
(d) Rights and Remedies Upon Breach....33
(i) Specific Performance........33
(ii) Accounting..................34
(iii) Severability of Covenants...34
(iv) Enforceability in Jurisdiction
34
5.5 401(k) Termination..........................34
5.6 UCC Termination Statements..................34
5.7 338(h)(10) Election.........................35
5.8 Subsidiaries................................36
ARTICLE 6 Indemnification....................................37
6.1 Survival; Etc.............................37
(a) No Effect on Liability............37
(b) Breach............................37
(c) Survival..........................37
6.2 Indemnification of Buyer..................37
6.3 Indemnification of Shareholder............38
6.4 Indemnification...........................38
6.5 Limitation on Shareholder's Indemnity.....39
(a) Basket............................39
(b) Maximum Indemnity.................39
6.6 Notice and Opportunity to Defend..........39
(a) Notice, Etc.......................39
(b) Defense Costs.....................40
(c) Third Party Claims................40
6.7 Delays or Omissions, Etc..................40
ARTICLE 7 Miscellaneous......................................40
7.1 Governing Law; Attorneys' Fees............40
7.2 Successors and Assigns....................41
7.3 Entire Agreement; Amendment...............41
7.4 Notices, Etc..............................41
7.5 No Third Party Beneficiary, Etc...........42
7.6 Reformation; Severability.................42
7.7 Counterparts..............................42
7.8 Titles and Subtitles.......................42
7.9 Expenses...................................42
7.10 Sellers' Knowledge.........................43
EXHIBITS
Exhibit A Closing Payment Certificate
Exhibit B Opinion of Seller's Counsel
Exhibit C Opinion of Haynes and Boone, LLP
DISCLOSURE SCHEDULES
Disclosure Schedule 1.2(c) (Equipment Held for Salvage)
Disclosure Schedule 3.1(a) (Foreign Corporation Jurisdictions)
Disclosure Schedule 3.1(e) (Seller Consents)
Disclosure Schedule 3.2(a) (Financial Statements)
Disclosure Schedule 3.2(b) (Conduct of Business)
Disclosure Schedule 3.3(a) (Capitalization)
Disclosure Schedule 3.4(a)(i) (Personal Property)
Disclosure Schedule 3.4(a)(ii) (Location of Inventory)
Disclosure Schedule 3.4(a)(iii) (Maintenance)
Disclosure Schedule 3.4(a)(iv) (Accounts Receivable Aging)
Disclosure Schedule 3.4(a)(v) (Bank Accounts)
Disclosure Schedule 3.4(b)(i) (Real Property Owned)
Disclosure Schedule 3.4(b)(ii) (Leased Premises and Real Estate Contracts)
Disclosure Schedule 3.4(b)(iv) (Improvements)
Disclosure Schedule 3.4(c) (Intellectual Property)
Disclosure Schedule 3.4(d) (Contracts)
Disclosure Schedule 3.5(c) (Litigation)
Disclosure Schedule 3.5(d) (Employee Liabilities)
Disclosure Schedule 3.5(e) (Product Quality and Warranty Claims)
Disclosure Schedule 3.6(b) (Insurance Policies)
Disclosure Schedule 3.6(c) (Employee Matters)
Disclosure Schedule 3.6(d) (Worker's Compensation)
Disclosure Schedule 3.6(e) (Benefit Plans and Union Contracts)
Disclosure Schedule 3.6(f) (Affiliated Transactions)
Disclosure Schedule 3.6(g)(ii) (Licenses)
Disclosure Schedule 3.6(h)(ii) (Environmental Equipment)
Disclosure Schedule 3.6(h)(v) (Storage Tanks)
Disclosure Schedule 3.6(h)(vi) (Environmental Assessments)
Disclosure Schedule 3.6(h)(vii) (Environmental Disclosure)
Disclosure Schedule 5.6 (UCC Termination Statements)
<PAGE>
INDEX OF DEFINED TERMS
Page
AAA.......................................................................5
Accounts.................................................................13
Accounts Receivable......................................................12
Adjusted Principal Amount.................................................2
Adjustment Notice.........................................................2
Adjustments...............................................................2
Affiliate................................................................22
Aggregate Deemed Sales Price.............................................35
Agreement.................................................................1
Amortizing Note...........................................................2
Asserted Liability.......................................................39
Breach...................................................................37
Business..................................................................1
Buyer.....................................................................1
Buyer Indemnitees........................................................37
CERCLA...................................................................25
CLCFC.....................................................................9
Closing Date..............................................................1
Closing Payment...........................................................1
Closing Payment Adjustment................................................4
Closing Payment Certificate...............................................2
Code.....................................................................18
Company...................................................................1
Company Financial Statements..............................................9
Company's 401(k) Plan.....................................................7
Confidential Information.................................................33
Contracts................................................................15
Corporate Records........................................................27
Deemed Sales Price Allocation............................................35
Defense Costs............................................................40
Disclosure Schedules......................................................1
Disputed Amounts..........................................................3
Election.................................................................35
Election Forms...........................................................35
Election Tax Cost........................................................35
Environment..............................................................24
Environmental Claim......................................................24
Environmental Laws......................................................23
Environmental Permits...................................................24
Environmental Releases..................................................24
Equipment...............................................................12
Equipment Adjustment.....................................................3
Equipment Leases........................................................11
ERISA...................................................................21
Established Loss........................................................38
ETC Disagreement Notice.................................................36
Exhibits.................................................................1
GAAP.....................................................................9
Golden Parachute Payment................................................22
Hazardous Materials.....................................................25
Indemnified Party.......................................................38
Indemnifying Party......................................................38
Indemnitee..............................................................38
Indemnitor..............................................................38
Independent Accountant...................................................4
Intellectual Property...................................................14
Interim Period..........................................................31
Inventory...............................................................12
knowledge...............................................................12
Leased Premises.........................................................13
Legal Requirements......................................................23
Licenses................................................................23
Liens...................................................................11
Losses..................................................................37
Notes....................................................................2
Objection Notice.........................................................3
Orders..................................................................18
Outside Confidentiality Agreement.......................................20
PCBs....................................................................29
Permitted Liens.........................................................11
Personal Property.......................................................11
Policies................................................................19
Post-Closing Audit.......................................................2
Pre-Closing Date Tax Returns............................................29
Prior Policies..........................................................20
Proceedings.............................................................18
Real Estate Contracts...................................................12
Recipient...............................................................22
Related Agreements.......................................................7
Releases.............................................................6, 24
Rental Ready.............................................................4
Re-Rent Equipment.......................................................13
Resolution Date..........................................................3
Restricted Period.......................................................32
Restrictive Covenants...................................................33
Sections................................................................42
Seller Consents..........................................................9
Sellers..................................................................1
Shareholder..............................................................1
Shareholder Indemnitees.................................................38
Significant Customer....................................................19
Significant Supplier....................................................19
Statement...............................................................30
Stock....................................................................1
Subsidiaries.............................................................8
Target Area.............................................................33
Tax.....................................................................18
Tax Indemnified Party...................................................30
Tax Indemnifying Party..................................................30
Tax Indemnitee..........................................................30
Tax Indemnitor..........................................................30
Tax Returns.............................................................18
Taxes...................................................................18
Transferrable Licenses..................................................23
UST.....................................................................25
<PAGE>
STOCK PURCHASE AGREEMENT
.........THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into on
September 28, 2000 (the "Closing Date"), by and among United Rentals (North
America), Inc. a Delaware corporation ("Buyer"), on the one hand, and Horizon
High Reach, Inc., a Delaware corporation (the "Company"), and the Company's
sole shareholder, W.R. Carpenter North America, Inc. (the "Shareholder"), on
the other hand. The Company and the Shareholder are sometimes collectively
referred to herein as the "Sellers."
R E C I T A L S
1........The Company's business operations are composed of the sale and rental
on a retail basis of aerial work platforms, telescopic material
handlers and forklifts, scaffolding and general rental equipment (as
currently conducted by the Company and the Subsidiaries (as defined
below), the "Business").
2. The Shareholder owns all of the issued and outstanding shares of
capital stock of the Company (collectively, the "Stock"). The
Shareholder desires to sell, and Buyer desires to purchase, all of the
Stock.
3. Sellers have delivered to Buyer certain Disclosure Schedules (herein so
called) of even date with this Agreement referred to herein. The
Disclosure Schedules and the Exhibits (herein so called) referred to in
this Agreement are hereby incorporated into this Agreement as a part
hereof.
A G R E E M E N T
Based on the recitals set forth above and the promises contained
herein, and for other good and valuable consideration, the parties agree as
follows:
<PAGE>
ARTICLE 1.........
Purchase and Sale
1.1. Purchase and Sale of the Stock. Upon the terms contained herein, and
on the basis of the representations, warranties, covenants and agreements set
forth herein, the Shareholder hereby sells, conveys, transfers, assigns and
delivers to Buyer all of the Stock, and Buyer hereby purchases the Stock from
the Shareholder. The shares constituting the Stock are free and clear of any
Liens (as defined in Section 3.4(a)(i)), claims or encumbrances of any nature
whatsoever.
1.2. Consideration for Purchase and Sale of the StockError! Bookmark not
defined.. As consideration for the purchase and sale of the Stock, Buyer
hereby delivers to the Shareholder the following:
.........(a) Closing Payment. $351,799 (the "Error! Bookmark not
defined.Closing Payment"), by wire transfer of immediately-available funds to
the account(s) previously designated in writing by the Shareholder to Buyer.
The parties acknowledge that the Closing Payment has been determined based on
information furnished by the Shareholder. Simultaneously with the execution and
delivery of this Agreement, the Shareholder has delivered to Buyer a written
certificate in the form attached to this Agreement as Exhibit A (the "Closing
Payment Certificate") signed by the Shareholder, certifying the amount of the
Closing Payment and the accuracy of certain other amounts relied on by the
parties in connection with determining the amount of the Closing Payment.
.........(b) Promissory Notes. Buyer hereby issues to the
Shareholder two senior unsecured promissory notes of Buyer (the "Notes"),
having an aggregate original principal amount equal to $40,000,001. One of the
Notes (the "Amortizing Note") has an original principal amount equal to
$20,000,001 (the "Original Adjustable Note Amount"). The Original Note Amount
shall be adjusted as provided in Section 1.2(c), and the Shareholder shall
execute and deliver a written certificate amending the Amortizing Note (as
provided in the Amortizing Note) to reflect the Adjusted Principal Amount (as
defined below) of the Amortizing Note not later than the tenth business day
after the Resolution Date (as defined below).
........."Adjusted Principal Amount" shall mean an amount equal to the
remainder of the Original Adjustable Note Amount, minus the lesser of (A) sum
of (x) the Equipment Adjustment (defined below) plus (y) the Closing Payment
Adjustment (defined below) or (B) $500,000.
.........(c) Post-Closing Audit; Adjustments. As soon as
practicable after the date of this Agreement, Buyer shall commence an audit of
the Company (including, where applicable, partial or complete inventories of
tangible items), together with such further analysis and review of the Company,
its assets and books and records, as Buyer shall deem prudent (the
"Post-Closing Audit"). The Shareholder and its Affiliates shall cooperate with
Buyer in connection with the Post-Closing Audit. Buyer shall use commercially
reasonable efforts to complete the Post-Closing Audit and to determine the
amounts, if any, of any Equipment Adjustment and Closing Payment Adjustment on
or before January 19, 2001. Upon completion of the Post-Closing Audit and the
determination of the applicable Equipment Adjustment and Closing Payment
Adjustment, Buyer shall deliver a written notice (the "Adjustment Notice") to
the Shareholder of the amount of the aggregate adjustment to the principal
amount of the Note and the proposed Adjusted Principal Amount, and the
respective amounts of the Equipment Adjustment and Closing Payment Adjustment
(the sum of such adjustments being referred to in this Agreement as the
"Adjustments") and briefly describing the basis for such Adjustments. Buyer
shall (and shall cause its Affiliates to) provide the Shareholder and its
representatives copies of or access to reasonably requested information and
documents as necessary for the Shareholder and its representatives to verify
the calculation of any Adjustments and, upon request by the Shareholder, shall
(and shall cause Buyer's Affiliates to) make reasonably available personnel of
Buyer (or its Affiliates) for such purposes.
.........In conducting the Post-Closing Audit, Buyer shall determine
all relevant accounting issues in accordance with GAAP (as defined below);
provided, however, that items of spare parts that constitute equipment or
inventory (whether held for sale or for use in service or repair operations)
shall be deemed obsolete if such part has been held by the Company or
Subsidiary for more than twelve months from the date it was delivered to the
Company or Subsidiary, determined as of the date on which Buyer delivers the
Adjustment Notice to the Shareholder. Any item determined under this paragraph
to be obsolete (and for which an Adjustment actually is made) shall be returned
to the Shareholder promptly after the Resolution Date.
.........The Shareholder may reasonably object to all or any portion of
the Adjustments by delivering written notice (the "Objection Notice") to Buyer
not later than the 30th day after the Shareholder's receipt of the Adjustment
Notice. The Objection Notice must be timely, must identify each amount of the
Equipment Adjustment, the Accounts Receivable Adjustment, the Inventory
Adjustment and the Closing Payment Adjustment to which the Shareholder objects
and must briefly describe the basis for such objection (such disputed amounts
being referred to herein as the "Disputed Amounts"). Any portion of the
Adjustments not specifically identified and objected to on a timely basis in
the Objection Notice shall be deemed final and binding on the parties hereto.
.........After Buyer receives the Objection Notice, Buyer and the
Shareholder shall use commercially reasonable efforts to resolve their
disagreements about the Disputed Amounts. Notwithstanding anything to the
contrary in this Section 1.2(c), if Buyer and the Shareholder have not resolved
all their disagreements regarding the Disputed Amounts by the 30th day after
Buyer's receipt of the Objection Notice, then either Buyer or the Shareholder
may submit such disagreements to arbitration pursuant to Section 1.2(d).
Notwithstanding anything in this Agreement to the contrary, the arbitrators may
not in any arbitration of any disagreement over the Disputed Amounts determine
that the amount of the Adjustments shall be less than the excess of the
aggregate amount of the Adjustments (as set forth in the Adjustment Notice)
over the aggregate amount of the Disputed Amounts (as set forth in the
Objection Notice).
.........If the Shareholder does not timely deliver the Objection
Notice to Buyer, then the Resolution Date shall be deemed to be the 30th day
after the date of the Shareholder's receipt of the Adjustment Notice and the
amount of the proposed Adjusted Principal Amount shall be the amount reflected
as such in the Adjustment Notice. If the Shareholder timely delivers the
Objection Notice to Buyer, then the Resolution Date shall be deemed to be the
10th business day after the resolution of all disagreements regarding the
Disputed Amounts either by agreement by Buyer and the Shareholder (before or
after any analysis by an Independent Accountant (as defined below))or by
arbitration pursuant to Section 1.2(d) (with the Adjusted Principal Amount
reflecting such agreement or arbitration determination). The date on which
(i) the disagreements about the Disputed Amounts are resolved (whether by
agreement or by written award of the arbitrators pursuant to Section 1.2(d)) or
(ii) the Objection Notice was due (if the Shareholder fails to timely deliver
the Objection Notice), is referred to herein as the "Resolution Date" as
applicable.
.........Notwithstanding anything in this Agreement to the contrary,
Buyer shall not be required to deliver the Adjustment Notice until Buyer
receives (A) the Tax Returns required to be delivered by the Shareholder
pursuant to Section 5.3, (B) evidence reasonably satisfactory to Buyer that
the termination statements identified on Disclosure Schedule 5.6 have been
filed, (C) the Tax information described in Section 5.7(a), and (D) a
certificate of existence and good standing for each Subsidiary, issued by the
Secretary of State, Comptroller or other appropriate officer of the State under
whose laws such Subsidiary is organized.
........."Equipment Adjustment" shall mean the aggregate cost of
(i) replacing any equipment that is reflected in the Company's books and records
as an asset of the Company as of the date of this Agreement, but that is
determined after the date of this Agreement to be missing or non-existing (for
any reason other than that such item has been sold by the Company or a
Subsidiary in the ordinary course of business; provided, that for each such
item that is sold by the Company or a Subsidiary in the ordinary course of
business but that is reflected in the Company's book and records as an asset of
the Company or a Subsidiary as of the date hereof, the Equipment Adjustment
shall be increased by the greater of (x) the fair market value of such item as
of the date hereof or (y) the net proceeds to the Company or a Subsidiary
received from the sale of such item) and (ii)repairing (other than as part of
routine maintenance) or replacing (as determined by Buyer based on prudent
business practices in the Company's and the Subsidiaries' industry, but limited
to the lesser of the cost of such repair (if repair is practicable) or the cost
of such replacement) items of equipment that Buyer reasonably determines are
not Rental Ready (defined below); provided, that if the aggregate cost under
items (i) and (ii) of this paragraph is less than $100,000, then the Equipment
Adjustment shall be deemed to be zero. The Equipment Adjustment shall not
include the cost of making Rental Ready the items listed on Disclosure Schedule
1.2(c), which lists and describes each item of equipment held by the Company or
a Subsidiary that is not utilized for rental purposes, but instead is held for
salvage, as a source of used replacement parts or for similar purposes.
........."Closing Payment Adjustment" shall mean the aggregate amount
of errors (if any) on the Closing Payment Certificate that are reasonably
determined by Buyer after the date of this Agreement to have caused the Closing
Payment to have been greater than the amount that should have been reflected on
the Closing Payment Certificate. The Closing Payment Adjustment shall not be
duplicative of adjustments pursuant to the Equipment Adjustment.
........."Rental Ready" shall mean, with respect to each item of
equipment held by the Company for rental, that all required maintenance
(consistent with industry practices in the Company's and Subsidiaries'
industry) has been performed with respect to such item and that such item does
not require repairs (other than as part of routine maintenance).
.........(d) Adjustment Dispute Resolution. The parties shall use
commercially reasonable efforts to resolve any disputes or controversies
arising out of or in connection with the Adjustments. If such disputes and
controversies are not so resolved within 30 days after the parties' first
meeting regarding such matters (or if a party does not use commercially
reasonable efforts to schedule and attend such a meeting), then such disputes
and controversies shall be submitted to an independent accounting firm with a
national reputation jointly selected by Buyer and the Shareholder (the
"Independent Accountant") who shall attempt to resolve the parties'
disagreements about the Disputed Amounts by providing the parties with their
written judgment and analysis of the appropriate Adjusted Principal Amount. If
Buyer and the Shareholder still have not resolved all their disagreements
regarding the Disputed Amounts by the 30th day after Buyer's and Shareholder's
receipt of this written judgment and analysis by the Independent Accountant
(which shall be delivered to the parties within 30 days after submission to
such Independent Accountant), the parties may submit such disagreements to
arbitration pursuant to the following procedures (all other disputes and
controversies arising in connection with this Agreement or the Related
Agreements shall be resolved by agreement of the parties or by a court of law
as described in Section 7.1:
......... (i) After a dispute or controversy arises,
either party may, in a written notice delivered to the other party, demand such
arbitration. Such notice shall designate the name of the arbitrator (who shall
be an impartial person) appointed by such party demanding arbitration, together
with a statement of the matter in controversy.
......... (ii) Within 30 days after receipt of such demand,
the other party shall, in a written notice delivered to the other party, name
such party's arbitrator (who shall be an impartial person). If such party
fails to name an arbitrator, then the second arbitrator shall be named by the
American Arbitration Association (the "AAA"). The two arbitrators so selected
shall name a third arbitrator (who shall be an impartial person) within 30
days, or in lieu of such agreement on a third arbitrator by the two arbitrators
so appointed, the third arbitrator shall be appointed by the AAA. If any
arbitrator appointed hereunder shall die, resign, refuse, or become unable to
act before an arbitration decision is rendered, then the vacancy shall be
filled by the methods set forth in this Section for the original appointment of
such arbitrator.
......... (iii) Each party shall bear its own arbitration
costs and expenses. The arbitration hearing shall be held in Dallas, Texas at
a location designated by a majority of the arbitrators. The Commercial
Arbitration Rules of the American Arbitration Association shall be incorporated
by reference at such hearing, and the substantive laws of the State of Texas
(excluding conflict of laws provisions) shall apply.
......... (iv) The arbitration hearing shall be concluded
within ten days unless otherwise ordered by the arbitrators and the written
award thereon shall be made within 15 days after the close of submission of
evidence. The arbitrators shall determine whether one of the parties is the
prevailing party in such arbitration and shall include in the award a cash
assessment against the non-prevailing party equal to all reasonable
out-of-pocket costs and expenses of the prevailing party and the costs and
expenses of the arbitrators. If no party is the prevailing party, then each
party shall bear its own costs and expenses and Buyer and the Shareholder each
shall pay 50% of the costs and expenses of the arbitrators. An award rendered
by a majority of the arbitrators appointed pursuant hereto shall be final and
binding on all parties to the proceeding, shall resolve the question of costs
of the arbitrators and all related matters, and judgment on such award may be
entered and enforced by either party in any court of competent jurisdiction.
......... (v) The parties stipulate that the provisions of
this Section shall be a complete defense to any suit, action or proceeding
instituted in any federal, state or local court or before any administrative
tribunal with respect to any controversy or dispute arising out of the Second
Payment. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination or expiration of this Agreement
or the Related Agreements.
Neither any party hereto nor the arbitrators may disclose the existence
or results of any arbitration hereunder without the prior written consent of
the other party; nor will any party hereto disclose to any third party any
confidential information disclosed by any other party hereto in the course of
an arbitration hereunder without the prior written consent of such other
party. Notwithstanding the foregoing, the parties acknowledge that Buyer may
disclose the existence or results of an arbitration hereunder, as well as
information otherwise required to be disclosed by deposition, subpoena or other
court or governmental action in connection with Buyer's obligations under the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder and in connection with Buyer's registration of offerings of
securities under the Securities Act of 1933 and the rules and regulations
promulgated thereunder.
ARTICLE 2.........
Deliveries
2.1. Sellers' Deliveries. Sellers hereby deliver to Buyer the following
items:
.........(a) Closing Payment Certificate. A certificate
substantially in the form attached as Exhibit A.
.........(b) Stock Certificates. Certificates representing all of
the shares of the Stock accompanied by stock powers duly executed in blank,
with signatures guaranteed by a commercial bank or member firm of the New York
Stock Exchange, and with any required transfer stamps, acquired at the
Shareholder's expense, affixed, and affidavits of lost stock certificates for
the outstanding capital stock of the Subsidiaries.
.........(c) Consents and Approvals. Copies of all Seller
Consents (defined below) obtained by Sellers, including without limitation the
consent of the holders of the 10.625% senior subordinated notes of the
Shareholder.
.........(d) Pay-Off Letters. Pay-off letters accompanied by
wire transfer instructions from all parties to whom the Company or any
Subsidiary has any liability to be repaid on the Closing Date or to be assumed
by Buyer (directly or indirectly pursuant to its purchase of the Stock),
including bank or other debt, floor planning indebtedness or obligations,
operating and capital leases and all similar obligations;
.........(e) Account Transfer Documents. All such instruments as
may be necessary to authorize Buyer to become a signatory on each of the
Company's and its Subsidiaries' bank accounts listed on Disclosure Schedule
3.4(a)(v).
.........(f) Title Documents. Certificates and other documents of
title with respect to all assets of the Company and its Subsidiaries for which
documents of title have been issued, free and clear of any liens, claims or
encumbrances of any nature whatsoever.
.........(g) Proceedings and Documents. Copies, certified to
Buyer's satisfaction, of (i) the resolutions of the board of directors of the
Company and the Shareholder, dated on or before the date hereof to authorize
this Agreement, the Related Agreements (defined below) and the transactions and
other acts contemplated either by this Agreement or the Related Agreements,
(ii) the Certificate of Incorporation of the Company certified by the Secretary
of State of the State of Delaware, and (iii) the Bylaws of the Company.
.........(h) Good Standing Certificates. Certificates (i) from
the Secretary of State of the State of Delaware evidencing that the Company is
existing and in good standing under the laws of such jurisdiction, and
(ii) from each state listed on Disclosure Schedule 3.1(a) evidencing that the
Company is qualified to do business and is in good standing as a foreign entity
in each such state.
.........(i) Release. An executed release (the " Release"), which
releases any and all claims held by the Shareholder against the Company, the
Subsidiaries, Buyer and their respective successors, assigns, officers,
directors, employees and agents, but excluding any claims in respect of any
breach by Buyer of its obligations hereunder or under any Related Agreement.
.........(j) Resignations. Executed resignations of each officer
and director of the Company and each Subsidiary.
.........(k) Opinion of Sellers' Counsel. An opinion of Heller
Ehrman White & McAuliffe LLP, counsel to Sellers, dated as of the date hereof,
regarding the matters set forth in Exhibit B.
.........(l) Minute Books. The original minute book and all of
the original contents thereof of the Company and each Subsidiary.
.........(m) 401(k) Termination. A duly adopted resolution of
the Company's board of directors terminating the Horizon High Reach 401(k) Plan
(the "Company's 401(k) Plan") and the High Trak Equipment Company, Inc. Profit
Sharing Plan and Trust prior to the Closing Date in accordance with the terms
of the plan documents for such plans.
2.2. Buyer's Deliveries. Buyer hereby delivers the following items to the
Shareholder:
.........(a) Closing Payment. The Closing Payment.
(b) Notes. The Notes.
(c) Opinion of Buyer's Counsel. An opinion of Haynes and
Boone, LLP, counsel to Buyer, dated as of the date hereof, regarding the
matters set forth in Exhibit C hereto.
2.3. Related Agreements. The parties, as appropriate, hereby deliver the
following executed documents (collectively with the Notes and the Closing
Payment Certificate, the " Related Agreements"):
(a) Leases. A lease for each of the following
facilities:
(1) Brea, CA;
(2) Napa, CA;
(3) Arlington, TX; and
(4) Houston, TX (Tacoma Drive).
(b) Settlement Agreement. A Release and Settlement
Agreement relating to the claims by and among Buyer, U.S. Rentals, Inc.,
Sellers and UpRight, Inc., as reflected in the cross-complaint filed by U.S.
Rentals, Inc., against UpRight, Inc., in the Superior Court of California for
the County of Alameda, Case Number 789267-9 (consolidated with 781233-0).
ARTICLE 3 Representations and Warranties of Sellers
The Sellers jointly and severally make to Buyer the representations and
warranties set forth in this Article. Except as specifically provided in any
particular representation and warranty, the following representations and
warranties are made and effective as of August 10, 2000.
3.1. Sellers; Entry Into Agreements.
(a) Organization and Good Standing. The Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. A.I.M. Rentals, Inc. was
organized under the laws of the State of Texas. Contractor's Equipment Company
of Colorado, Inc. was organized under the laws of the State of Colorado. High
Trak Equipment Co., Inc. was organized under the laws of the State of
California. A.I.M. Rentals, Inc., Contractor's Equipment Company of Colorado,
Inc. and High Trak Equipment Co., Inc. are sometimes collectively referred to
as the "Subsidiaries." As of the date of this Agreement, the Company and the
Subsidiaries have all requisite corporate power and authority to own, lease and
operate all properties and assets that they own or lease and to conduct the
Business as previously and currently conducted. The Company and each
Subsidiary is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which it is required to be so qualified,
except where the failure to be so qualified would not constitute a material
adverse effect on the condition (financial or other), results of operations,
cash flows or prospects, of the Company. Disclosure Schedule 3.1(a) lists all
jurisdictions in which the Company and the Subsidiaries are qualified to do
business as a foreign corporation.
(b) Validity and Authorization; Corporate Power and
Authority. As of the date of this Agreement, the Company has full corporate
power and authority to execute, deliver and perform this Agreement, the Related
Agreements and the other instruments called for hereby to which it is a party.
As of the date of this Agreement, this Agreement and each Related Agreement to
which the Company is a party has been duly authorized, executed and delivered
by the Company and each such agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
As of the date of this Agreement, the Shareholder has full power and
authority to execute, deliver and perform this Agreement, the Related
Agreements and the other instruments called for hereby to which the Shareholder
is a party. As of the date of this Agreement, this Agreement and each Related
Agreement to which the Shareholder is a party have been duly executed and
delivered by the Shareholder and each such agreement constitutes the legal,
valid and binding obligation of each Shareholder who is a party to such
agreement, enforceable against each such Shareholder in accordance with its
terms.
(c) Subsidiaries. As of the date of this Agreement,
neither the Company (other than with respect to the Subsidiaries) nor any
Subsidiary owns, controls, or has voting rights with respect to, directly or
indirectly, any interest in any other corporation, partnership, association or
other business entity and neither the Company nor any Subsidiary is a party to
any agreement relating to the acquisition or disposition of such an interest.
(d) No Conflict. As of the date of this Agreement,
neither the execution, delivery or performance of this Agreement or the Related
Agreements, nor the consummation of the transactions contemplated hereby or
thereby will (i) result in any violation of the terms of, (ii) contravene or
conflict with, (iii) accelerate the performance of the obligations required
under, (iv) constitute a default under, (v) give any right of termination or
cancellation under or (vi) give any right to make any change in any of the
liabilities or obligations under, the certificate of incorporation or bylaws of
the Company or any Subsidiary, any Order (defined below), or any material
agreement, contract, note, bond, debenture, indenture, mortgage, deed of trust,
lease, license, judgment, decree, order, law, rule or regulation or other
restriction applicable to any Seller or Subsidiary or to which any Seller or
Subsidiary is a party or by which any Seller or Subsidiary or its property or
assets are bound or affected. As of the date of this Agreement, neither the
execution, delivery and performance of this Agreement or the Related
Agreements, nor the consummation of the transactions contemplated hereby or
thereby will result in the creation of any Lien (defined below) upon any of the
properties or assets of the Company or any Subsidiary or the Stock.
(e) Seller Consents Required. Disclosure Schedule
3.1(e) lists all consents, approvals or authorizations of third parties required
in connection with each party's (other than Buyer's) valid execution, delivery
or performance of this Agreement and the Related Agreements or the consummation
of any of the transactions contemplated hereby or thereby on the part of any of
them (collectively, the " Seller Consents"), including but not limited to the
consents required under the Contracts (defined below) and consents required in
connection with Licenses (defined in Section 3.6(g) below).
3.2. Financial Information.
(a) Financial Statements; Books and Records. Included in
Disclosure Schedule 3.2(a) are true and correct copies of (i) the audited
consolidated balance sheets for the Company and the Subsidiaries as of June 25,
2000, and the related statements of income, changes in Shareholder's equity and
cash flows for the one year fiscal periods then ended (together with related
notes to financial statements) and (ii) the unaudited consolidated balance
sheets for the Company and the Subsidiaries as of August 27, 2000, and the
related statements of income, changes in Shareholder's equity and cash flows
for the two-month period then ended (collectively, the "Company Financial
Statements").
The Company Financial Statements have been prepared on an accrual basis
and fairly present the financial position of the Company and the Subsidiaries
as of the dates thereof and the results of the Company's and the Subsidiaries'
operations and cash flows for the periods then ended, in accordance with GAAP
(defined below) as consistently applied by the Company and the Subsidiaries,
except for the variances from GAAP set forth in the notes to the Company
Financial Statements. The Company and the Subsidiaries maintain a standard
system of accounting, including without limitation internal controls,
established and administered in accordance with GAAP as consistently applied by
the Company and the Subsidiaries, except for the variances from GAAP set forth
in the notes to the Company Financial Statements.
"GAAP" shall mean those generally accepted accounting principles and
practices which are used in the United States and recognized as such by the
American Institute of Certified Public Accountants acting through its
Accounting Principles Board or by the Financial Accounting Standards Board or
through other appropriate boards or committees thereof.
The Company's and each Subsidiary's books and records (including
without limitation, all financial records, business records, minute books,
stock transfer records, client lists, referral source lists and records
pertaining to services or products delivered to clients) (i are complete and
correct in all material respects and all transactions to which the Company or
any Subsidiary is or has been a party are accurately reflected therein on an
accrual basis, (ii) reflect all discounts, returns and allowances granted by
the Company or any Subsidiary with respect to the periods covered thereby,
(iii) have been maintained in accordance with customary and sound business
practices in the Company's and the Subsidiaries' industry, and (iv) form the
basis for the Company Financial Statements. The Company's and the
Subsidiaries' management information systems are adequate for the preservation
of relevant information and the preparation of accurate reports.
(b) Conduct of Business. Except as set forth on
Disclosure Schedule 3.2(b), during the period from June 25, 2000, through the
date of this Agreement, neither the Company nor any Subsidiary has (i) changed
its authorized or issued capital stock; granted any stock option or right to
purchase shares of capital stock; issued any security convertible into such
capital stock; granted any registration rights; purchased, redeemed, retired or
otherwise acquired any shares of any such capital stock; or declared or paid
any dividend or other distribution or payment in respect of shares of capital
stock; (ii) amended its organizational documents; (iii)sold or transferred any
material assets at less than fair market value; (iv) incurred or become subject
to any debt, liability or lease obligation outside of the ordinary course of
business; (v) suffered any damage, destruction or loss of any material assets;
(vi) waived or relinquished any material rights or canceled or compromised any
material debt or claim owing to it, in either case, without adequate
consideration or not in the ordinary course of business; (vii) made any change
in its accounting methods or practices or increased any reserves for Taxes
(defined below); (viii) made any change in its billing and collection practices
and procedures; (ix) paid any bonuses or made any increase in the compensation,
commissions or benefits payable or to become payable to any of its officers,
directors, employees or agents over the amounts paid or payable as of such
date, or entered into or terminated any employment, deferred compensation,
severance or bonus agreement with any of such parties, or made any loan, or
commitment to loan, monies to any such parties; (x) declared or made any
dividend, payment or distribution to the Shareholder other than ordinary
employment compensation; (xi) entered into any transaction with any Affiliate
(defined below) of the Company (including without limitation by paying,
distributing or transferring any funds or assets to the Shareholder, whether in
its capacity as Shareholder or in any other capacity) required to be disclosed
on Disclosure Schedule 3.6(f); or (xii) agreed to do any of the foregoing.
Disclosure Schedule 3.2(b) lists each item of rental equipment purchased,
leased or otherwise acquired by the Company or any Subsidiary since August 9,
2000, to the extent that the purchase price, aggregate lease payments or fair
market value of such item exceeds $50,000.
(c) No Material Adverse Change. During the period from
the date of the most recent Company Financial Statements delivered prior to the
date hereof through the date of this Agreement, the Business has been conducted
only in the ordinary course consistent with past practice and there has been no
material adverse change in the condition (financial or other), results of
operations, cash flows or prospects, of the Company and the Subsidiaries, taken
as a whole, or any developments that may have a material adverse effect on the
condition (financial or other), results of operations, cash flows or prospects
of the Company and the Subsidiaries, taken as a whole.
3.3. Stock.
(a) Capitalization. As of the date of this Agreement, the
authorized capital stock and outstanding capital stock of the Company and each
Subsidiary is set forth on Disclosure Schedule 3.3(a). As of the date of this
Agreement, all of the issued and outstanding shares of the Stock and capital
stock of the Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are free and clear of any preemptive rights.
As of the date of this Agreement, no preemptive, conversion or other rights, or
other options, warrants or agreements, are outstanding that were granted or
issued by, or are binding upon, the Company or any Subsidiary for the issuance,
purchase, redemption or acquisition of its capital stock.
(b) Ownership and Transfer by Shareholder and the
Company. As of the date of this Agreement and immediately prior to the
consummation of the transactions contemplated by this Agreement, the
Shareholder has record and beneficial ownership of the Stock, and the Company
has record and beneficial ownership of the capital stock of the Subsidiaries,
free and clear of any Liens. Consummation of the transactions contemplated
hereby will transfer to Buyer good, valid and marketable title to the Stock and
the capital stock of the Subsidiaries, free and clear of any Liens. As of the
date of this Agreement, no legend or other reference to any Lien or purported
Lien appears on any certificate representing any shares of the Stock or the
capital stock of the Subsidiaries. As of the date of this Agreement, none of
the Company, the Shareholder or the Subsidiaries is a party to any contract,
agreement or understanding (other than this Agreement) relating to the
issuance, sale, redemption, repurchase or other transfer of any shares of the
Stock or any other equity security of the Company or any Subsidiary.
3.4. Assets.
(a) Personal Property.
(i) Title. The Company and the Subsidiaries are
the sole owners of the assets reflected in the Company Financial Statements and
have good and marketable title to all assets that are personal (the "Personal
Property") (other than the leased Personal Property described below), in each
case free and clear of all Liens, except for (A) liens for non-delinquent taxes
and assessments and (B) liens of lessors arising under statute ("Permitted
Liens"). For purposes hereof, "Liens" shall mean security interests, liens
(choate or inchoate), encumbrances, mortgages, pledges, equities, charges,
assessments, easements, covenants, restrictions, reservations, defects in
title, encroachments and other burdens, whether arising by contract or under
law, other than inchoate statutory liens for amounts not yet payable. With
respect to any Personal Property that is leased, the Company and each
Subsidiary is in compliance with each such lease and is the sole holder of a
valid and subsisting leasehold interest, free and clear of any Liens, other
than Permitted Liens. Disclosure Schedule 3.4(a)(i) lists each lease
agreement, service agreement or other agreement related to the leased Personal
Property (the "Equipment Leases").
Disclosure Schedule 3.4(a)(i)-2 lists all items of furniture,
fixtures, furnishings, machinery, automobiles, trucks, spare parts, tools,
supplies, rental and other equipment and other tangible personal property owned
or leased by the Company or the Subsidiaries and used in connection with the
Business with an original cost of $5,000.00 or more (collectively, the
"Equipment"). Disclosure Schedule 3.4(a)(i)-2 includes a brief description
(including without limitation, if applicable, the make and model number),
original cost and net book value of each item of Equipment owned by the Company
or the Subsidiaries and listed on Disclosure Schedule 3.4(a)(i)-2 pursuant to
the immediately-preceding sentence and identifies whether such item of
Equipment is owned or leased by the Company or a Subsidiary. Each item of
Equipment owned or leased by the Company or a Subsidiary is merchantable, fit
for the purpose for which it was procured, is usable in the ordinary course of
the Business, is in good working order and condition (normal wear and tear
excepted) or, for equipment held for rental, is Rental Ready, and is in
conformity with all applicable laws, rules and regulations.
Disclosure Schedule 3.4(a)(i)-3 lists all items of furniture,
fixtures, furnishing, machinery, automobiles, trucks, spare parts, tools,
supplies, rental or other equipment rented by the Company or a Subsidiary to
customers, or otherwise used by the Company or a Subsidiary in the operation of
the Business, that are not owned or leased by the Company or a Subsidiary
(collectively, the "Re-Rent Equipment").
Disclosure Schedule 3.4(a)(i)-4 lists all items of Equipment
or Re-Rent Equipment that the Company or a Subsidiary has delivered or made
available to any person or entity other than an employee of the Company or a
Subsidiary (other than the Company or a Subsidiary) for rent or lease to a
third party.
(ii) Inventory. The inventory of parts and
supplies held on the date hereof and reflected on the Company Financial
Statements (the "Inventory"), consists of items of a quantity, type and quality
usable, saleable or leasable, as appropriate, in the ordinary course of the
Business and are valued at cost, determined using the weighted average
accounting method, except for obsolete and slow-moving items and items which
are below standard quality, all of which have been written down to estimated
net realizable value on an item-by-item basis. With the exception of items of
below standard quality, each item of Inventory is covered by an effective
warranty from a third-party manufacturer or is free from defects in materials
or workmanship. The Inventory is not excessive in kind or amount, or slow
moving, in light of the Business done or expected to be done. Except as set
forth on Disclosure Schedule 3.4(a)(ii), all Inventory is located at the Leased
Premises (defined below), with customers under rental arrangements, or on
service vehicles of the Company or the Subsidiaries.
(iii) Facilities and Equipment. Except as set
forth on Disclosure Schedule 3.4(a)(iii), all buildings, facilities, offices,
improvements on real estate, fixtures, machinery, equipment, computer hardware
and software, vehicles or other properties, owned or leased by the Company or
the Subsidiaries for the conduct of the Business have been maintained in
accordance with maintenance practices that are standard for the Company's and
the Subsidiaries' industry, are prudent, and are in compliance with all
applicable laws and regulations.
(iv) Notes and Accounts ReceivableError! Bookmark
not defined.. All notes payable to, and accounts receivable of, the Company
and the Subsidiaries (the "Accounts Receivable") were created in the ordinary
course of business and have been collected or, to Sellers' knowledge are
collectible, in the amounts thereof reflected in the books and records of the
Company and the Subsidiaries, net of reserves or contractual allowances
reflected in the Company Financial Statements. For purposes of this Agreement
and the Related Agreements, Accounts Receivable shall be deemed to be
uncollectible if payment is not collected by Buyer through Buyer's utilization
of ordinary collection efforts on or before the 120th day after the applicable
payment date. The reserves for doubtful accounts reflected in the Company
Financial Statements are based on the Company's and Subsidiaries' historical
collection results and reflect all doubtful amounts reasonably anticipated by
Sellers. Payments to the Company or the Subsidiaries in respect of Accounts
Receivable are deposited, upon receipt, directly into the Accounts (defined
below) and such amounts can only be withdrawn therefrom by the Company, the
Subsidiaries, or their duly authorized agents. To Sellers' knowledge, none of
the Accounts Receivable is or was subject to any counterclaim or set off. All
of such Accounts Receivable arose out of bona fide, arms-length transactions.
The Company or applicable Subsidiary has taken all actions (including without
limitation by filing lien notices, job or worksite notices or other notices)
that a reasonably prudent operator of a business similar to the Business would
take, to secure the Company's and the Subsidiaries' rights to collect the
Accounts Receivable. Neither the Company nor any Subsidiary has any
outstanding sales on consignment, sales on approval, or guaranteed sales.
Disclosure Schedule 3.4(a)(iv) includes an aging report for all Accounts
Receivable (excluding accrued but unbilled revenues) as of a date not earlier
than three days prior to the Closing Date.
(v) Bank Accounts. Disclosure Schedule
3.4(a)(v) sets forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which the
Company or any Subsidiary maintains accounts of any nature (collectively, the
"Accounts"), the numbers of such accounts and the names of all persons
authorized to draw thereon or to make withdrawals therefrom.
(b) Real Property.
(i) Fee Simple. As of the date of this
Agreement, neither the Company nor any Subsidiary owns any real property.
(ii) Leases; Easements and Other Interests.
Disclosure Schedule 3.4(b)(ii) sets forth (A) a description of the land,
premises, buildings, structures and improvements covered by each lease of real
property used in the Business and (B) a list of all other material contracts
and instruments, whether or not in writing, relating to or affecting real
property or any interest therein to which the Company or a Subsidiary is a
party or by which the assets of the Company, a Subsidiary or the Business is
bound or affected (including without limitation any such contract or instrument
that is an option or other contractual right to purchase, acquire, sell, assign
or dispose of any interest in any real property). The interests described in
items (A) and (B) above are collectively referred to herein as the "Leased
Premises" and the leases, easements, concessions, contracts and instruments
described in items (A) and (B) above are referred to herein as the "Real Estate
Contracts."
The Company or the Subsidiaries are the sole holders of valid and
subsisting leasehold interests in the Leased Premises leased thereby free and
clear of any Liens, other than Permitted Liens. All lease or rental payments
and other amounts due and payable in connection with the Real Estate Contracts
are current and, to Sellers' knowledge, neither the Company nor any Subsidiary
is in default with respect thereto and no event has occurred that with the
passing of time or the giving of notice or both would constitute a default
thereunder. All options in favor of the Company or a Subsidiary to purchase
any of the Leased Premises, if any, are in full force and effect. The Company
or the Subsidiaries have the right to quiet enjoyment of the Leased Premises
for the full term of the related Real Estate Contract and any renewal option
related thereto, and no leasehold or other interest of the Company or the
Subsidiaries in such real property is subject or subordinate to any Lien, other
than Permitted Liens.
(iii) Ingress and Egress; Eminent DomainError!
Bookmark not defined.. The Company or the Subsidiaries have all easements and
rights of ingress and egress necessary for utilities and services and for all
operations of the Business in the manner and to the extent previously
conducted. To Sellers' knowledge, neither the whole nor any portion of any
Leased Premises has been condemned, taken by right of eminent domain,
requisitioned or otherwise taken by any public authority, and no such
condemnation, taking by right of eminent domain, requisition or taking is
overtly threatened or contemplated, and neither of the Sellers nor any
Subsidiary has received, or knows of, any written notice regarding any such
action.
(iv) Improvements. Except as set forth on
Disclosure Schedule 3.4(b)(iv), none of the improvements included in the Leased
Premises, and no previous or current use or uses of the Leased Premises by the
Company or a Subsidiary, are (A) in violation of any building line or use or
occupancy restriction, limitation, condition or covenant of record or any
zoning or building law, code or ordinance or public utility or other easement
or (B) encroaches on the property rights of any other person or entity. Except
as set forth on Disclosure Schedule 3.4(b)(iv), each facility located on the
Leased Premises currently is served by gas, electricity, water, sewage and
waste disposal and rail and other utilities adequate to operate such facility,
and, to Sellers' knowledge, none of the utility companies serving any such
facility has threatened the Company or a Subsidiary with any reduction in
service. Neither the Company nor any Subsidiary shares facilities with any
other entity, including without limitation the Shareholder or any Affiliate of
the Shareholder.
(v) Leased Premises Taxes. To Sellers'
knowledge, no challenges or appeals are pending regarding the amount of the
Taxes on, or the assessed valuation of, the Leased Premises, and no special
arrangements or agreements exist with any governmental authority with respect
thereto (the representations and warranties contained in this paragraph (v)
shall not be deemed to be breached by any prospective general increase in real
estate tax rates). To the extent the Company or a Subsidiary is liable for
payment therefor, no tax assessment (other than normal, annual general real
estate tax assessments) is pending or overtly threatened with respect to any
portion of the Leased Premises.
(c) Intellectual Property. Disclosure Schedule 3.4(c)
lists all patents, trade names, fictitious business names, trademarks, service
marks, and copyrights owned by the Company or a Subsidiary or which the Company
or a Subsidiary is licensed to use (other than licenses to use software for
personal computer operating systems that were provided when the computers were
purchased and licenses to use software for personal computers that are granted
to retail purchasers of such software). No patents, trade secrets, know-how,
intellectual property, trademarks, trade names, assumed names, copyrights or
designations used by the Company or a Subsidiary (the "Intellectual Property")
infringe on any patents, trademarks, copyrights or other intellectual property
rights of any person or entity. No claims of third parties are pending (or to
the Shareholder's knowledge threatened) to the use of the Intellectual Property
and neither Seller has any reason to believe that any basis exists for any such
claim or claims.
(d) Contracts.
(i) Disclosure Schedule 3.4(d)(i) lists all
agreements, contracts, notes, bonds, debentures, indentures, mortgages, deeds
of trust, leases, licenses, obligations, promises, settlements and other such
agreements and understandings (whether written or oral and whether express or
implied) that are material to the Business (together with the Equipment Leases
and the Real Estate Contracts the "Contracts"), including without limitation
all the foregoing (A) hat provide, or could provide, for future payments,
claims or obligations to or from the Company or a Subsidiary of $100,000 or
more per year or $100,000 or more over the term thereof or (B) that are (1)
collective bargaining agreements or other agreements with any labor union, (2)
joint venture agreements, partnership agreements or other similar agreements
involving a sharing of profits, losses, costs or liabilities, (3) agreements
containing covenants that in any way purport to restrict the business activity
of the Company or a Subsidiary or limit the freedom of the Company or a
Subsidiary to engage in any line of business or to compete with any other
person, (4) standard forms of agreements providing for payments to or for any
person based on sales, originations, closings, purchases or profits (other than
direct payments for goods), (5) material powers of attorney, (6) agreements
providing for the payment of special or consequential damages by the Company or
a Subsidiary, (7) agreements relating to capital expenditures in excess of
$100,000 by the Company or a Subsidiary, (8) warranties, guarantees or other
similar undertakings by the Company or a Subsidiary that provide, or could
provide, for future payments, claims or obligations to or for the Company or a
Subsidiary of $50,000 or more over the term thereof, (9) agreements involving
indemnification that provide, or could provide, for future payments, claims or
obligations to or for the Company or a Subsidiary of $50,000 or more over the
term thereof, (10) employment, secrecy or confidentiality agreements, (11)
requirements or output contracts that provide, or could provide, for future
payments, claims or obligations to or for the Company or a Subsidiary of
$50,000 or more over the term thereof, (12) business alliance or joint
marketing agreements, (13) agreements by which the Company or a Subsidiary
licenses Intellectual Property to third parties and agreements by which third
parties license to, or otherwise permit the use of its intellectual property
by, the Company or a Subsidiary, (14) dealership, distributorship, dealer,
franchisor or franchisee, licensee, authorized service person or other similar
agreements pursuant to which the Company or a Subsidiary is entitled (whether
or not on an exclusive basis) to sell, represent, service or otherwise transact
business in connection with one or more brands or product lines of a third
party or (15) amendments, modifications or supplements to any of the
foregoing. As used herein, the term "Contracts" also shall be deemed to refer
to all agreements between the Company or a Subsidiary, on the one hand, and the
Shareholder, any Affiliate of the Shareholder, or any director or executive
officer of the Company or a Subsidiary, on the other hand.
(ii) All of the Contracts are legal, valid and
binding on the parties thereto, are in full force and effect and represent
legitimate transactions. Neither the Company nor any Subsidiary is, and to
Sellers' knowledge, no other party to any of the Contracts is, in violation of
or default under any of the Contracts. No event, occurrence or condition
exists which, with the lapse of time, the giving of notice, or both, or the
happening of any further event or condition, would become a violation or
default by the Company or a Subsidiary or, to Sellers' knowledge, any other
party thereto, under any Contract. No disputes or disagreements are
outstanding, and to the Sellers' knowledge, none are threatened, with respect
to any of the Contracts. Neither the Company nor any Subsidiary has released
any rights under any Contract. Neither the Company nor any Subsidiary is
subject to any legal obligations to renegotiate, nor to Sellers' knowledge is
there any right to renegotiate, any Contract. Neither the Company nor any
Subsidiary is subject to any liability, or claim therefor, for or with respect
to price adjustment under any Contract with the United States Government or any
agency thereof, including any liability for defective pricing.
(iii) The Contracts constitute all of the
contracts, leases and agreements necessary for the conduct of the Business in
substantially the manner and to the extent currently conducted. Except as
listed on Disclosure Schedule 3.4(d)(iii), all rights of the Company or a
Subsidiary under the Contracts will be enforceable by it after the date hereof
without the consent or agreement of any other party.
(iv) The Sellers have delivered or made available
to Buyer true and complete copies of each Contract, including all amendments
thereto. No unwritten amendments or waivers exist to or under any Contract.
(v) Disclosure Schedule 3.4(d)(vi) lists every
contract, agreement, arrangement or understanding to which the Company or a
Subsidiary is a party and pursuant to which any customer of the Company or a
Subsidiary is entitled to purchase from the equipment leased by such customer
having an original book value of $5,000 or more. Except as listed on
Disclosure Schedule 3.4(d)(vi), no agreement, arrangement or understanding
permits or entitles any party thereto to purchase equipment from the Company or
a Subsidiary at less than the fair market value of such equipment on the date
of such purchase.
(e) Necessary Assets. The Company or a Subsidiary owns,
leases or otherwise rightfully possesses all assets, rights, and properties
necessary to conduct the Business in substantially the manner and to the extent
currently conducted, including without limitation all items of property located
on the Leased Premises, that are used as though owned, that the Company or a
Subsidiary purports to own, or that are reflected in the Company Financial
Statements.
3.5. Liabilities.
(a) No Liabilities. Neither the Company nor any
Subsidiary has any debt, guaranty, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, whether due or to become
due, and whether known or unknown, and no basis exists for the assertion
against it of any such debt, guaranty, liability or obligation except (i) to
the extent set forth or reserved against in full in the Company Financial
Statements and (ii) current liabilities incurred in the ordinary course of
business since June 25, 2000.
(b) Tax Matters. The representations and warranties in
this Section 3.5(b) are made as of the date of this Agreement.
(i) The Company and the Subsidiaries have filed
or will timely file all Tax Returns (defined below) that any of them were
required to file, (or for Federal Income tax purposes, the Shareholder has
included the Company within its consolidated Federal Income tax return). All
such Tax Returns were correct and complete in all respects and true and correct
copies thereof have been provided to Buyer. All Taxes due and owing by the
Company and the Subsidiaries (whether or not shown on any Tax Return, whether
known or unknown, asserted or unasserted) have been paid. Neither the Company
nor any Subsidiary is a party to any tax sharing or other agreement that will
require any payment by it with respect to Taxes. Neither the Company nor any
Subsidiary has any liability for the Taxes of any person other than the Company
and the Subsidiaries under Treas. Reg. Sec. 1.1502-6 or any similar provision
of state, local, or foreign law. Neither the Company nor any Subsidiary
currently is the beneficiary of any extension of time within which to file any
Tax Return. Neither the Company nor any Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency or the collection of Taxes.
(ii) Neither the Shareholder nor Company or any
Subsidiary expects any taxing authority or other governmental unit to assess
any additional Taxes against the Company or any Subsidiary. No taxing
authority or other governmental unit has claimed, raised, discussed, proposed
or threatened in writing any assessment, deficiency, adjustment, dispute or
claim concerning any Tax Return or any Tax liability of the Company or any
Subsidiary (or a Tax Return of the Shareholder to the extent it relates to the
Company or any Subsidiary). No unpaid assessment, deficiency or adjustment
exists concerning any Tax Return or Tax liability of the Company or any
Subsidiary (or a Tax Return of the Shareholder to the extent it relates to the
Company or any Subsidiary). None of the Tax Returns of the Company or any
Subsidiary has been selected for or is now under audit or examination by any
taxing authority or other governmental unit, and no suits, actions, proceedings
or investigations are pending or overtly threatened against the Company or any
Subsidiary (or the Shareholder to the extent such Taxes relate to the Company
or any Subsidiary) with respect to any Taxes.
(iii) The Company and the Subsidiaries have
withheld and timely deposited or paid all Taxes required to have been withheld
and deposited or paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party.
(iv) Neither the Company nor any Subsidiary has
filed a consent under Sec. 341(f) of the Code (defined below) concerning
collapsible corporations. Neither the Company nor any Subsidiary has made any
payments, is obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
would be characterized as "excess parachute payments" under Code Sec. 280G of
the Code. None of the assets of the Company or a Subsidiary (A) is property
which is required to be treated as being owned by any other person pursuant to
the so-called "safe harbor lease" provisions of former Code Sec. 168(f)(8) of
the Code, (B) directly or indirectly secures any debt the interest on which is
tax exempt under Code Sec. 103(a) of the Code, or (C) is "tax-exempt use
property" within the meaning of Code Sec. 168(h) of the Code.
(v) The Company and the Subsidiaries have
disclosed on their federal income Tax Returns (or the Shareholder has disclosed
on all consolidated income Tax Returns that include the Company) all positions
taken therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Code Sec. 6662. The Shareholder is not a
person other than a United States person within the meaning of the Code and the
transaction contemplated herein is not subject to the withholding provisions of
or subchapter A of Chapter 3 of the Code.
(vi) Any unpaid Taxes of the Company or a
Subsidiary, including all Taxes not yet due for any and all periods through the
date hereof, whether known or unknown, asserted or unasserted (A) do not exceed
the reserve for Tax liability (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax basis in assets
and liabilities) included in the Company Financial Statements and (B) do not
exceed those reserves as adjusted for the passage of time through the date
hereof.
As used herein, the term Taxes" means all federal, state, local,
foreign and other governmental net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, unemployment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatever, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto, and the term "Tax" means any one of the foregoing Taxes; the term "Tax
Returns" means all returns, information returns, declarations, reports,
statements and other documents required to be filed in respect of Taxes; the
term "Code" means the Internal Revenue Code of 1986, as amended (all citations
to the Code, or to the Treasury Regulations promulgated thereunder, shall
include any amendments or any substitute or successor provisions thereto).
(c) Litigation.
(i) Other than as set forth on Disclosure
Schedule 3.5(c), no action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative (including Equal
Employment Opportunity Commission and similar state or federal agencies),
investigative or informal) is pending (A) that has been commenced by or against
the Company or a Subsidiary or that otherwise relates to or may affect the
Company or a Subsidiary, the Stock, this Agreement, any Related Agreement or
the transactions contemplated herein or therein or (B) that has been commenced
by or against the Shareholder and that relates to the Company or a Subsidiary
or that otherwise relates to or may affect the Company or a Subsidiary, the
Stock, this Agreement, any Related Agreement or the transactions contemplated
herein or therein (collectively, the "Proceedings"). To the Sellers'
knowledge, no Proceeding has been overtly threatened and no event has occurred
or circumstance exists that may give rise to or serve as a basis for the
commencement of any Proceeding.
(ii) No award, decision, injunction, judgment,
order, ruling, subpoena, writ or verdict of any court, arbitrator or government
agency or instrumentality exists (A) to which the Company or a Subsidiary, the
Stock, this Agreement, any Related Agreement or the transactions contemplated
herein or therein is subject or by which any of the foregoing may be affected
or (B) to which the Shareholder is subject and that relates to or may affect
the Company or a Subsidiary, the Stock, this Agreement, any Related Agreement
or the transactions contemplated herein and therein (collectively, the
"Orders").
(iii) Disclosure Schedule 3.5(c) describes each
Proceeding pending or overtly threatened at the date hereof.
(iv) The Shareholder has no claim, or right to
initiate any Proceeding, against the Company or a Subsidiary.
(d) Employee Liabilities. Disclosure Schedule 3.5(d)
lists (i) the hire date of, and the base salary the Company or a Subsidiary
owes to, each employee or independent contractor of the Company or a Subsidiary
as of the date hereof, (ii) all accrued but unused vacation and sick time for
each such employee or independent contractor, (iii) all written employee
policies and (iv) all accrued and unpaid commissions or bonus payments due to
employees of the Company or a Subsidiary.
(e) Product Quality, Warranty Claims, Product
LiabilityError! Bookmark not defined.. All products and services sold, rented,
leased, provided or delivered by the Company or a Subsidiary to its customers
on or prior to the date hereof conformed to applicable contractual commitments,
express and implied warranties, product and service specifications and quality
standards, and neither the Company nor any Subsidiary has any liability (and no
basis exists for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company or a
Subsidiary giving rise to any liability) for replacement or repair thereof or
other damages in connection therewith. No product or service sold, leased,
rented, provided or delivered by the Company or a Subsidiary to its customers
on or prior to the date hereof is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale, rent or
lease. Except as set forth on Disclosure Schedule 3.5(e), neither the Company
nor any Subsidiary has any liability (and no basis exists for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against the Company which might give rise to any liability)
arising out of any injury to a person or property as a result of the ownership,
possession, provision or use of any equipment, product or service sold, rented,
leased, provided or delivered by the Company or a Subsidiary on or prior to the
date hereof. All product liability claims that have been asserted against the
Company or a Subsidiary since January 1, 1995, whether covered by insurance or
not and whether litigation has resulted or not, are listed on Disclosure
Schedule 3.5(e).
3.6. Business.
(a) Customers and Suppliers. To the Sellers' knowledge,
no Significant Customer (as defined below) or Significant Supplier (as defined
below) of any branch office or the corporate office of the Company or any
Subsidiary has indicated an intention to terminate its business relationship
with the Company or a Subsidiary or to limit its business relationship with
such branch office or corporate office of the Company or a Subsidiary in any
material respect. As used herein, (i) Significant Customer" means any of the
10 largest customers of such branch office or corporate office of the Company
or any Subsidiary measured in terms of dollar sales volume for the two-year
period ended June 30, 2000, and (ii) "Significant Supplier" means any of the 10
largest suppliers (measured by dollar value of goods purchased) of such
corporate office of the Company or any Subsidiary for the two-year period ended
June 30, 2000. Disclosure Schedule 3.6(a) lists the name of each Significant
Customer and each Significant Supplier of each branch office and the corporate
office of the Company and each Subsidiary.
(b) Insurance. The Company and the Subsidiaries maintain
insurance with the companies listed on Disclosure Schedule 3.6(b) upon the
Company's and Subsidiaries' businesses and operations, against loss or damage,
risks, hazards and liabilities of the kinds customarily insured against by
corporations similarly situated and engaged in the same or similar businesses
in adequate amounts under valid and enforceable policies (the "Policies"). The
premiums due and owing with respect to the Policies have been paid, premiums
not yet due have been adequately accrued for, and no Seller has received any
notice of cancellation or of intention not to renew any such Policy.
Disclosure Schedule 3.6(b) contains a list of the Policies, copies of which
have been provided to Buyer, and lists their term and premium, as well as a
description of each claim currently pending under any Policy or any Prior
Policy (defined below). Disclosure Schedule 3.6(b) sets forth a description of
each other insurance policy or insurance contract relating to the Company or a
Subsidiary and the Business pursuant to which the Company or a Subsidiary is or
may hereafter be entitled to assert claims for insurance coverage (the "Prior
Policies"). The Company or a Subsidiary has timely pursued all rights to
recover (if any) under the Policies and the Prior Policies. The Company is
self-insured in the area of medical and dental insurance.
(c) Employees. No officer, employee or independent
contractor engaged by the Company or a Subsidiary is, or is expected to be, in
violation of any term of any contract, proprietary information agreement,
noncompetition agreement, or any other agreement or any restrictive covenant or
any other common law obligation to a former employer relating to the right of
any such person to be engaged by it or to the use of trade secrets or
proprietary information of others (an "Outside Confidentiality Agreement"), and
the engagement of such persons by the Company or a Subsidiary before or after
the date hereof does not subject the Company or a Subsidiary or Buyer to any
liability with respect thereto. No Proceedings are pending, nor to the
Sellers' knowledge threatened, and no basis exists therefor with respect to any
Outside Confidentiality Agreement. Disclosure Schedule 3.6(c) lists every
Outside Confidentiality Agreement known to any Seller.
Neither the Company nor any Subsidiary is delinquent in payments to any
of its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by them prior to the date hereof or
amounts required to be reimbursed to such employees. Disclosure Schedule
3.6(c) lists every retired employee entitled to receive compensation from the
Company or a Subsidiary or to participate in any benefit plan, and a
description of same if such benefits are provided other than pursuant to an
arrangement disclosed pursuant to Section 3.6(e). The books and records of the
Company and the Subsidiaries accurately reflect all changes in compensation
since June 30, 1997.
Except as may be provided in the employment agreements listed on
Disclosure Schedule 3.6(c), the employment of each of the Company's or a
Subsidiary's employees is terminable at will without cost to the Company or a
Subsidiary for severance obligations, except for payment of accrued salaries or
wages and vacation pay. No employee or former employee has any right to be
rehired by the Company or a Subsidiary prior to the hiring of a person not
previously employed by the Company or a Subsidiary. To Sellers' knowledge, no
officer, director or key employee intends to terminate employment with the
Company or a Subsidiary.
(d) Worker's CompensationError! Bookmark not defined..
The Company and the Subsidiaries subscribe to, or is otherwise insured under,
the worker's compensation or similar statute in California, Colorado, Georgia,
Illinois, New York, Maryland, New Jersey, North Carolina, Oklahoma, South
Carolina, Texas and Virginia. Disclosure Schedule 3.6(d) describes all claims
filed by employees of the Company or a Subsidiary in respect of
employment-related injury or illness since January 1, 1996. Neither the
Company nor any Subsidiary has received any report or notice from the
Occupational Safety and Health Administration.
(e) Benefit Plans and Union Contracts.
(i) Disclosure Schedule 3.6(e) includes a
complete list as of the date hereof, and includes complete copies (or, in the
case of oral arrangements, descriptions) of, all employee benefit plans and
agreements (written or oral) currently maintained or contributed to by the
Company or a Subsidiary, including employment agreements and any other
agreements containing "golden parachute" provisions, retirement plans, welfare
benefit plans and deferred compensation agreements, together with copies of
such plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the date hereof. Except for the employee
benefit plans described on Disclosure Schedule 3.6(e), neither the Company nor
any Subsidiary has any other pension, retirement, welfare, profit sharing,
deferred compensation, stock option, employee stock purchase or other employee
benefit plans or arrangements with any party. Except as disclosed on
Disclosure Schedule 3.6(e), all employee benefit plans listed on such
Disclosure Schedule are fully funded and in substantial compliance with all
applicable federal, state and local statutes, ordinances and regulations. All
such plans that are intended to qualify under Section 401(a) of the Code have
been determined by the Internal Revenue Service to be so qualified, and copies
of such determination letters are included as part of Disclosure Schedule
3.6(e). Except as disclosed on such Disclosure Schedule, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audits or tax returns) have been timely filed or distributed, and
copies thereof are included as part of Disclosure Schedule 3.6(e). All
employee benefit plans listed on such Disclosure Schedule have been operated in
accordance with the terms and provisions of the plan documents and all related
documents and policies. Neither the Company nor any Subsidiary has incurred
any liability for excise tax or penalty due to the Internal Revenue Service or
U.S. Department of Labor or any liability to the Pension Benefit Guaranty
Corporation for any employee benefit plan, nor have the Company, any
Subsidiary, party-in-interest or disqualified person, engaged in any
transaction or other activity which would give rise to such liability. No
employee pension benefit plan is under funded on a termination basis as of the
date hereof. No material "reportable event" (within the meaning of
section 4043 of the Employee Retirement Income Security Act of 1974, as amended,
"ERISA") has occurred with respect to any employee benefit plan described on
Disclosure Schedule 3.6(e) since the effective date of such section 4043. No
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of plan activities) have been brought against or with respect
to any employee benefit plans described on Disclosure Schedule 3.6(e).
(ii) Except as specifically set forth in
Disclosure Schedule 3.6(e), with respect to each employee benefit plan or other
plan or agreement listed on such Disclosure Schedule that is a multiemployer
plan (within the meaning of Section 3(37) of ERISA), (A) the Company or a
Subsidiary has, as of the date hereof, made all contributions as required by
the terms thereof or by any applicable collective bargaining agreement, and (B)
neither the Company nor any Subsidiary would be subject to any withdrawal
liability under Title IV of ERISA if, as of the date hereof, the Company or a
Subsidiary were to engage in a complete withdrawal (as defined in ERISA Section
4203) or a partial withdrawal (as defined in ERISA Section 4205) from any such
multiemployer plan, and neither the Company nor any Subsidiary currently has
nor previously has had any withdrawal liability to or in connection with any
multiemployer plan. Except as described on Disclosure Schedule 3.6(e), there
have been no changes which have or will affect the Company's or a Subsidiary's
obligation to any multiemployer plan, and no such changes have been agreed to
or are expected. Compliance with the requirements of ERISA, as in effect on
the date hereof, or with any collective bargaining agreement to which the
Company or a Subsidiary is a party, will not result in a change in the
obligations of the Company or a Subsidiary with respect to any multiemployer
plan.
(iii) Disclosure Schedule 3.6(e) includes a
complete list, as of the date hereof, and includes complete copies of all union
contracts and agreements between the Company or a Subsidiary and any collective
bargaining group. The Company and each Subsidiary is in compliance in all
respects with all applicable federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, and is not engaged in any unfair labor
practice. No charge is pending or, to any Seller's knowledge, threatened,
against the Company or a Subsidiary before any court or agency and alleging
unlawful discrimination in employment practices and no charge of or proceeding
with regard to any unfair labor practice is pending against it before the
National Labor Relations Board. No labor strike, dispute, slow down or
stoppage exists as of the Closing Date, nor is any threatened against the
Company or a Subsidiary; no union organizational activity exists respecting
employees of the Company or a Subsidiary not currently subject to a collective
bargaining agreement; the union contracts or other agreements delivered as part
of Disclosure Schedule 3.6(e) constitute all agreements with the unions or
other collective bargaining groups, and no other arrangements or established
practices exist relating to the employees covered by any collective bargaining
agreement; and Disclosure Schedule 3.6(e) contains as of the date hereof a list
of all arbitration or grievance proceedings that have occurred since January 1,
1996. No one has petitioned within the last five years, and no one is now
petitioning, for union representation of any employees of the Company or a
Subsidiary. Neither the Company nor any Subsidiary has experienced any labor
strike, slow-down, work stoppage, labor difficulty or other job action during
the last five years.
(iv) No payment made to any employee, officer,
director or independent contractor of the Company or a Subsidiary (the
"Recipient") pursuant to any employment contract, severance agreement or other
arrangement (the "Golden Parachute Payment") will be nondeductible by the
Company or the Subsidiary because of the application of Sections 280G and 4999
of the Code to the Golden Parachute Payment, nor will the Company or a
Subsidiary be required to compensate any Recipient because of the imposition of
an excise tax (including any interest or penalties related thereto) on the
Recipient by reason of Sections 280G and 4999 of the Code.
(f) Affiliated Transactions. Disclosure Schedule 3.6(f)
sets forth a summary of (i) all transactions or series of transactions to which
the Company or a Subsidiary is party and (ii) all assets or properties of the
Company or a Subsidiary, and in which, in either case, the Shareholder or any
Associate or Affiliate (as such terms are defined in Rule 405 promulgated
pursuant to the Securities Act of 1933, as amended) of the Company has a
financial interest, but excluding the Related Agreements, financing
transactions between such parties that will terminate on the date hereof, and
completed purchases of equipment from UpRight, Inc., to the extent that such
purchase were made in the ordinary course of business and consistent with past
practices. Except as set forth on Disclosure Schedule 3.6(f) or in the
exclusionary provision set forth in the immediately-preceding sentence, no
Affiliate or Associate of the Company owns any direct or indirect interest of
any kind in, or controls or is a director, officer, employee, member or partner
of, or consultant to, or lender to or borrower from or has the right to
participate in the profits of, any person or entity that is a supplier,
customer, competitor, landlord, tenant, creditor or debtor of the Company or a
Subsidiary.
(g) Legal Requirements.
(i) Compliance with Laws. Neither the Sellers
nor any Subsidiary has violated any term of any judgment, writ, decree, order,
law, statute, rule or regulation to which any of them are subject or a party,
or by which the Business or any of their assets are bound or affected
(collectively, "Legal Requirements"). No event has occurred that may
constitute or result in a violation of a Legal Requirement. No Seller or
Subsidiary has received notice of any actual, alleged or potential violation of
a Legal Requirement.
(ii) Licenses. The Company and the Subsidiaries
have all governmental licenses, permits, approvals, authorizations, exemptions,
classifications, registrations and certificates, and all consents or agreements
with governmental authorities (collectively "Licenses") necessary to conduct
the Business in substantially the manner and to the extent that the Business
has been conducted. All of the Licenses are listed on Disclosure Schedule
3.6(g)(ii). Disclosure Schedule 3.6(g)(ii) also lists every License that is in
effect or has been applied for or is pending and identifies those Licenses and
applications for Licenses (collectively, "Transferrable Licenses") that will be
unimpaired as a result of Buyer's purchase of the Stock and describes any
action to be taken such that the Transferrable Licenses will be enforceable by
the Company or a Subsidiary after the Closing. Sellers have delivered to Buyer
true and complete copies of all of the Licenses.
All Licenses are in full force and effect. To the
Sellers' knowledge, no event has occurred that may constitute or result in a
violation of a License, or result in the revocation, suspension, modification
or nonrenewal of any License. No Seller has received any notice of any actual,
alleged or potential violation, revocation, suspension, modification or
nonrenewal of any License.
(iii) Certain Acts. Neither any Seller nor, to
the Sellers' knowledge, any of their former or current officers, directors,
employees, agents or representatives has made or agreed to make, directly or
indirectly, with respect to the Business or the assets of the Company or a
Subsidiary, any (A) bribes or kickbacks, illegal political contributions,
payments from corporate funds not recorded on the books and records of the
Company or a Subsidiary, or funds to governmental officials (or any such
official's family members or affiliates) for the purpose of affecting their
action or the action of the government they represent, to obtain favorable
treatment in securing business or licenses or to obtain special concessions, or
illegal payments from corporate funds to obtain or retain business or
(B) payments from corporate funds to governmental officials for the purpose of
affecting their action or the action of the government they represent, to
obtain favorable treatment in securing business or licenses or to obtain
special concessions. Without limiting the generality of the foregoing, neither
any Seller nor, to the Sellers' knowledge, any of the foregoing persons or
entities, has made or agreed to make, directly or indirectly, (whether or not
said payment is lawful) any payment to obtain, or with respect to, sales other
than usual and regular compensation to its employees and sales representatives
with respect to such sales.
(h) Environmental Matters.
(i) Compliance. The Company and the
Subsidiaries are in compliance with all applicable Environmental Laws (defined
below) and none of them has received any communication (written or oral), from
any person that alleges that the Company or a Subsidiary is not in compliance
with applicable Environmental Laws. As used herein, "Environmental Laws" mean
all federal, state, or local statutes, regulations, ordinances or orders
relating to the regulation or protection of public health, safety or the
Environment (defined below), including, without limitation, statutes and
regulations relating to Environmental Releases (defined below), to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, recycling or handling of Hazardous Materials, and to the protection
of environmentally sensitive areas. As used in this Agreement, "Environment"
means ambient air, soil, surface water, sediment, ground water, wetlands, land
or subsurface strata, and natural resources.
(ii) Environmental Permits. The Company and the
Subsidiaries have obtained all environmental, health and safety permits and
governmental authorizations (collectively, the "Environmental Permits")
necessary to conduct the Business, and all such Environmental Permits are in
good standing and the Company and the Subsidiaries are in compliance with all
terms and conditions of the Environmental Permits. Except as set forth on
Disclosure Schedule 3.6(h)(ii), all improvements to be constructed or equipment
to be installed to fully comply with the requirements of each Environmental
Permit have been fully constructed and installed and are fully operational. No
notice to, approval of or authorization or consent from any governmental or
regulatory authority is necessary for the transfer of or modification to any
Environmental Permit and the consummation of the transactions contemplated by
this Agreement and the Related Agreements will not violate, alter, impair or
invalidate, in any respect, any Environmental Permit.
(iii) Environmental Claims. No Environmental
Claim (defined below) pending or overtly threatened (A) against the Company or
a Subsidiary, (B) against any person or entity whose liability for any
Environmental Claim the Company has or may have retained or assumed either
contractually or by operation of law or (C) against any real or personal
property or operations which are now or have been previously owned, leased,
operated or managed, in whole or in part, by the Company or a Subsidiary.
As used herein, "Environmental Claim" means any and
all administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, Liens, investigations, proceedings or notices of
compliance or violation (written or oral) by any person or entity (including
any governmental authority) alleging potential liability (including, without
limitation, potential liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (A) the presence, or Environmental Release
(defined below) or threatened Environmental Release into the environment, of
any Hazardous Material (defined below) at any location presently or formerly
owned, operated, utilized, leased or managed by the Seller with respect to the
Business; or (B) circumstances reasonably forming the basis of any violation
of, alleged violation of or other liability arising under, any Environmental
Law; or (C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Environmental Release of any Hazardous Materials.
(iv) Environmental Releases. There have been no
releases, spills, emissions, leaks, injections, deposits, disposals,
discharges, dispersals or migrations into the Environment ("Environmental
Releases") of any Hazardous Materials that would be likely to form the basis of
any Environmental Claim against the Company or a Subsidiary, or against any
person or entity whose liability for any Environmental Claim the Company has or
may have retained or assumed either contractually or by operation of law.
As used in this Agreement, "Hazardous Materials"
means any "hazardous substance," "pollutant or contaminant," and "petroleum"
and "natural gas liquids" as those terms are defined or used in Section 101 of
the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"), and any other substances regulated because of their effect or
potential effect on public health and/or the Environment including, without
limitation, polychlorinated biphenyls ("PCBs"), lead paint, asbestos, and
radioactive materials.
(v) Underground Storage Tanks. Except as set
forth on Disclosure Schedule 3.6(h)(v), no underground storage tanks containing
petroleum products or wastes or other hazardous substances regulated by 40 CFR
280 or any other Environmental Laws are currently or have been located on the
Leased Premises. Except as set forth on Disclosure Schedule 3.6(h)(v), neither
the Company nor any Subsidiary has ever owned or leased any real property not
included in the Leased Premises having any underground storage tanks containing
petroleum products or wastes or other hazardous substances regulated by 40 CFR
280. As to each such underground storage tank identified on Disclosure
Schedule 3.6(h)(v) (each a "UST"), set forth on Disclosure Schedule 3.6(h)(v)
are:
(A) the location of the UST,
information and material, including any available drawings and photographs,
showing the location, and whether the Company or a Subsidiary currently owns or
leases the property on which the UST is located (and if the Company or a
Subsidiary does not currently own or lease such property, the dates on which it
did and the current owner or lessee of such property);
(B) the date of installation and
specific use or uses of the UST;
(C) copies of tank and piping tightness
tests and cathodic protection tests or similar studies or reports for each UST;
(D) a copy of each notice to or from a
governmental body or agency relating to each UST;
(E) the records with regard to the UST,
including without limitation repair records, financial assurance compliance
records and records of ownership; and
(F) to the extent not otherwise set
forth pursuant to the above, a summary description of instances, past or
present, in which, to the Sellers' knowledge, the UST failed to meet applicable
standards and regulations for tightness or otherwise and the extent of such
failure, and any other operational or environmental problems with regard to the
UST, including, without limitation, spills, including spills in connection with
delivery of materials to the UST, Environmental Releases from the UST and soil
contamination. Except to the extent set forth on Disclosure Schedule
3.6(h)(v), the Company and the Subsidiaries have complied with all Environmental
Laws regarding the installation, use, testing, monitoring, operation and
closure of each UST.
(vi) Environmental Assessments. Except as set
forth on Disclosure Schedule 3.6(h)(vi), there are no environmental reports,
audits, investigations or assessments of the Company or a Subsidiary or any
real or personal property or operations which are now or have been previously
owned, leased, operated or managed, in whole or in part, by the Company.
(vii) Environmental Disclosure. Disclosure
Schedule 3.6(h)(vii) sets forth all relevant facts with respect to potential or
actual environmental liabilities of the Company and the Subsidiaries that might
have a material adverse effect upon the financial condition, properties or
assets of the Company or a Subsidiary or which may adversely affect the
operation of the Business and all relevant facts with respect to any written
notices of any kind from any governmental body or third party alleging or
finding a violation of any Environmental Laws. Disclosure Schedule 3.6(h)(vii)
also lists all sites, other than the Real Property and the Leased Premises, in
which the Company or a Subsidiary has or ever has had any ownership or
leasehold interest, or with respect to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used or processed by the Company
or any other person for whose conduct the Company or a Subsidiary is held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
3.7. Acquisition of Notes. The representations and warranties in this
Section 3.7 are made as of the date of this Agreement.
(a) Purchase Entirely for Own Account. The Shareholder
is acquiring the Notes for investment for its own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof in
violation of the Securities Act of 1933. The Shareholder has no present
intention of selling, granting any participation in, or otherwise distributing
the Notes otherwise than pursuant to an effective registration statement under
the Securities Act of 1933 or in a transaction exempt from the registration
requirements under the Securities Act of 1933 and applicable state securities
laws.
(b) Buyer's Reliance. The Shareholder acknowledges that
the issuance of the Notes will not be registered under the Securities Act of
1933 or any state securities laws on the basis that the Notes as provided for
herein are exempt from registration under the Securities Act of 1933 and such
state laws. The Shareholder acknowledges that the availability of such
exemptions is predicated in part on the Shareholder's representations set forth
in this Section and that Buyer is relying on such representations.
(c) Receipt of Information. The Shareholder has received
all the information it considers necessary or appropriate for deciding whether
to consummate the transactions described herein and to accept the Notes. The
Shareholder has had an opportunity to ask questions and to receive answers from
Buyer regarding the terms and conditions of the issuance of the Notes and the
business properties, prospects and financial condition of Buyer and to obtain
additional information (to the extent Buyer possessed such information or could
acquire it without unreasonable effort or expense) reasonably necessary to
verify the accuracy of any information furnished to any the Shareholder or to
which the Shareholder had access.
(d) Investment Experience. The Shareholder, alone or
with its representative, acknowledges that it is able to fend for itself and
bear the economic risk of the investment, and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the investment.
(e) Accredited Investor. The Shareholder is an
Accredited Investor as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act of 1933.
(f) Restricted Security. The Shareholder acknowledges
that the Notes may not be sold, transferred or otherwise disposed of without
registration under the Securities Act of 1933 or an applicable exemption
therefrom and that in the absence of an effective registration statement
covering the Notes or an available exemption from registration under the
Securities Act of 1933, the Notes must be held indefinitely.
3.8. Other.
(a) Documents Delivered. The minute books and stock
transfer records of the Company and the Subsidiaries (the "Corporate Records")
that have been made available to Buyer and its agents are complete and
correct. The Corporate Records contain accurate and complete records of all
meetings held of, and corporate action taken by the respective boards of
directors and shareholders of the Company and the Subsidiaries, and any
committee or representative thereof. All of the Corporate Records are in the
possession of the Company or a Subsidiary.
(b) No Brokers Fees; No Commissions. The Shareholder
has engaged Comann & Montague to serve as financial advisor to the
Shareholder. The Shareholder shall be solely responsible for the fees and
expenses of Comann & Montague and shall not utilize assets of the Company to
pay such fees and expenses. As of the date of this Agreement and except for
the involvement of Comann & Montague on behalf of the Shareholder, negotiations
relative hereto and the transactions contemplated hereby have been carried on
by Sellers directly with Buyer without any act by Sellers that would give rise
to any claim against the Company, a Subsidiary, Buyer or their respective
Affiliates for a brokerage commission, finder's fee or other similar payment.
ARTICLE 4
Representations and Warranties of Buyer
Buyer represents and warrants to Sellers as follows:
4.1. Entry Into Agreements.
(a) Organization and Good Standing. Buyer is a
corporation duly organized and validly existing under the laws of the State of
Delaware.
(b) Corporate Power and Authority; Validity and
Authorization. Buyer has full corporate power and authority to execute,
deliver and perform this Agreement and the Related Agreements and this
Agreement and each Related Agreement to which Buyer is a party has been duly
authorized, executed and delivered by Buyer, enforceable against Buyer in
accordance with its terms.
(c) No Conflict. Neither the execution, delivery or
performance of this Agreement or the Related Agreements, nor the consummation
of the transactions contemplated hereby or thereby will (i) result in any
violation of the terms of, (ii) contravene or conflict with, (iii) accelerate
the performance of the obligations required under, (iv) constitute a default
under, (v) give any right of termination or cancellation under or (vi) give any
right to make any change in any of the liabilities or obligations under, the
certificate of incorporation or bylaws of Buyer, any Order, or any material
agreement, contract, note, bond, debenture, indenture, mortgage, deed of trust,
lease, license, judgment, decree, order, law, rule or regulation or other
restriction applicable to Buyer or to which Buyer is a party or by which Buyer
or its property or assets are bound or affected.
4.2. No Brokers Fees; No Commissions. Except as directed by Sellers and
noted in Section 3.8(b), all negotiations relative hereto and the transactions
contemplated hereby have been carried on by Buyer directly with the Sellers
without any act by Buyer that would give rise to any claim against the Sellers
or their Affiliates for a brokerage commission, finder's fee or other similar
payment.
4.3. Acquisition of Stock. Buyer is acquiring the Stock for investment for
its own account, not as a nominee or agent, and not with a view to the resale
or present distribution of any part thereof in violation of the Securities Act
of 1933. Buyer has no present intention of selling, granting any participation
in or otherwise distributing the Stock and Buyer has no contract, undertaking,
agreement or arrangement with any person to sell, transfer, grant
participations to such person or to any third person, with respect to any of
the Stock.
ARTICLE 5
Post-Closing Agreements
The parties (as applicable) covenant and agree that after the
consummation of the transactions described in this Agreement, the parties (as
applicable) shall do the following:
5.1. Further Actions.
(a) Each party hereto shall do such further acts and
execute and deliver such further instruments of transfer and conveyance,
documents and certificates as may be reasonably requested by any party hereto
to more effectively convey and transfer to Buyer the Stock, to aid and assist
in reducing to possession or exercising rights with respect to the Stock, or to
consummate any of the transactions contemplated hereby or in the Related
Agreements.
(b) After the Closing Date, the Shareholder shall use
commercially reasonable efforts to obtain (i) agreements, duly executed by any
and all mortgagees of the Leased Premises, stating that, notwithstanding any
default by the landlord of any of such leased Premises under any mortgage on
such Leased Premises, the mortgagee will not disturb Buyer's tenancy as long as
Buyer is not in default under the lease pertaining to such Leased Premises,
consenting to the grant of leasehold mortgages on such Leased Premises, or
collateral assigns of the leases of the Leased Premises, to Buyer's lenders,
and stating such other matters as Buyer's lenders shall reasonably request; and
(ii) estoppel certificates with respect to each of the Contracts requested by
Buyer, executed by the parties to such contracts (other than Company),
confirming that no defaults, outstanding claims, or demands exist against the
Company.
5.2. Cooperation. The Shareholder shall use commercially reasonable efforts
to aid Buyer in establishing itself as the new owner of the Company and the
Subsidiaries and, in connection therewith, shall use commercially reasonable
efforts to maintain the Company's and the Subsidiaries' goodwill and reputation
with all suppliers, customers, distributors, creditors and others having
business relations with the Company or a Subsidiary and in the business
community generally.
5.3. Tax Administration.
(a) The Shareholder shall prepare or cause to be prepared
and shall timely file or cause to be timely filed all Tax Returns required to
be filed by or on behalf of the Company and the Subsidiaries and their
respective operations and assets on or before the Closing Date (taking into
account applicable extensions of time) and shall cause to be paid any Taxes
shown to be due thereon. Such Tax Returns shall be prepared in a manner
consistent with prior practice and in accordance with applicable law. The
Shareholder shall also prepare or cause to be prepared for the Company and the
Subsidiaries, in a manner consistent with prior practice and in accordance with
applicable law, all Tax Returns required to be filed by or with respect to the
Company or any Subsidiary which relate to taxable periods ending on or prior to
the Closing Date (" Pre-Closing Date Tax Returns") and shall remit or cause to
be remitted to Buyer any and all Taxes due on the Company's or any Subsidiary's
behalf and to the applicable taxing authority on behalf of the Shareholder, to
the extent such Taxes have not been reserved for in the Company Financial
Statements or in the schedules to the Closing Payment Certificate, with respect
to such Pre-Closing Date Tax Returns. The Shareholder shall deliver or cause
to be delivered all such Pre-Closing Date Tax Returns to Buyer not less than 20
days prior to the due date therefor and in any event not later than January 31,
2001. Buyer shall review and comment upon such Tax Returns, and upon Buyer's
approval thereof (which shall not be unreasonably withheld), Buyer shall cause
the Company to file such Pre-Closing Date Tax Returns. Expenses relating to the
preparation of the Tax Returns described in the preceding sentences shall be
borne by the Shareholder except to the extent of taxes (including federal,
state or local taxes arising at the corporate level) and reasonable costs and
expenses solely relating to the Election, which shall be paid by Buyer as
provided in Section 5.7. Except as otherwise provided herein, Buyer shall be
responsible for preparing and filing or causing to be prepared and filed all
Tax Returns required to be filed by or on behalf of the Company and the
Subsidiaries, and their respective operations and/or assets after the Closing
Date (taking into account applicable extensions of time) and shall, subject to
this Section 5.3(a) and Section 5.3(b) hereof, pay or cause to be paid any
Taxes shown to be due thereon. The Shareholder shall include the income of the
Company on its consolidated federal income Tax Returns for all periods through
the Closing Date and pay any federal income Taxes attributable to such income,
to the extent such Taxes have not been reserved for in the Company Financial
Statements or in the schedule to the Closing Payment Certificate. The Company
will furnish Tax information to the Shareholder for inclusion in the
consolidated federal income Tax Return for the period ending on the Closing
Date in accordance with generally accepted accounting principals, consistently
applied. The Shareholder shall prepare such Tax Return in a manner consistent
with generally accepted accounting principals, consistently applied and in
accordance with applicable law. The income of the Company shall be apportioned
to the period up to and including the Closing Date and the period after the
Closing Date by closing the books of the Company as of the end of the Closing
Date.
(b) With respect to any Tax Return required to be filed
by Buyer for a taxable period of the Company or any Subsidiary beginning before
and ending after the Closing Date, Buyer shall provide the Shareholder with a
statement setting forth Buyer's reasonable determination of the amount of Tax
shown on such Tax Return for which the Shareholder is responsible or that are
allocable to the Shareholder pursuant to this Section 5.3 (the " Statement") at
least 30 days prior to the due date for filing of such Tax Return (including
extensions). Not later than five business days before the due date (including
extensions) for payment of Taxes with respect to such a Tax Return, the
Shareholder shall pay to Buyer an amount equal to the Taxes shown on the
Statement as being the responsibility of the Shareholder or allocable to the
Shareholder pursuant to this Section 5.3 or in the schedules to the Closing
Payment Certificate, in each case less amounts reserved therefor on the Company
Financial Statements as of the Closing Date. No payment pursuant to this
Section 5.3(b) shall excuse the Shareholder from its indemnification
obligations pursuant to Section 6.2 hereof should the amount of Taxes as
ultimately determined (on audit or otherwise), for the periods covered by such
Tax Returns and which are the responsibility of the Shareholder, exceed the
amount of the Shareholder's payment under this Section 5.3(b). The Shareholder
may object to Buyer's determination of the amount of Tax for which the
Shareholder is responsible pursuant to this Section 5.3 by delivering a written
notice to that effect to Buyer at any time before the Shareholder's payment for
such Tax is due to Buyer. The notice shall describe in reasonable detail the
basis for such Shareholder's objection. Such notice shall not affect the
Shareholder's obligation to pay the Tax as determined by Buyer. Buyer and the
Shareholder then shall seek to resolve the dispute, either by agreement or
pursuant to arbitration by an independent accountant mutually selected by such
parties. If the parties or such arbitrator determines that the Shareholder
paid to Buyer more than the actual amount of Tax, then Buyer promptly shall
refund to the Shareholder the excess, together with interest thereon at nine
percent per annum for the period beginning on the date of the Shareholder's
payment to Buyer and ending on the date Buyer refunds such amount to the
Shareholder. The costs of the arbitrator shall be charged to the party whose
initial position (as reflected in Buyer's determination of the Tax or in the
Shareholder's objection notice) was determined to be least accurate (even if
Buyer is obligated to refund an amount to the Shareholder).
(c) The Shareholder may not file any amended Tax Returns
or refund claims in respect of any taxable period of the Company or any
Subsidiary ending on or prior to the Closing Date without the prior written
consent of Buyer, which shall not be unreasonably withheld. Buyer shall not,
and shall cause the Company and each Subsidiary to not (and shall not permit or
cause the Company or any Subsidiary to) amend any Tax Return of the Company or
any Subsidiary in respect of any taxable period of the Company or any
Subsidiary ending on or prior to the Closing Date without the prior written
consent of the Shareholder, which shall not be unreasonably withheld. Each
party (the "Tax Indemnifying Party" or "Tax Indemnitor") shall indemnify the
other party (the "Tax Indemnified Party" or "Tax Indemnitee") for any liability
the Tax Indemnified Party incurs as a result of any such amendment filed by the
Tax Indemnifying Party; provided, however, that the Tax Indemnifying Party
shall not be required to indemnify the Tax Indemnified Party for any liability
the Tax Indemnified Party incurs as a result of any amendment filed with the
Tax Indemnified Party's consent or any amendment filed in connection with any
requirement arising out of any audit of the tax return to which the amendment
relates or any prior Tax Return.
(d) The parties shall cooperate fully with and make
available to one another in a timely fashion such Tax data and other
information as may be reasonably required for the preparation by Buyer or the
Shareholder, as applicable, of any Tax Returns required to be prepared and
filed hereunder. The Shareholder and Buyer shall make available to the other,
as reasonably requested, all information, records or documents in their
possession relating to Tax liabilities of the Company and the Subsidiaries for
all taxable periods of the Company, as the case may be, ending on, prior to or
including the Closing Date and shall preserve all such information, records and
documents until the expiration of any applicable Tax statute of limitations or
extensions thereof; provided, however, that if a proceeding has been instituted
for which the information, records or documents is required prior to the
expiration of the applicable statute of limitations, such information, records
or documents shall be retained until there is a final determination with
respect to such proceeding.
(e) For purposes of the foregoing, if a taxable period
begins before and ends after the Closing Date (the "Interim Period"), Taxes for
the portion of such taxable period ending on the Closing Date will be
determined by an interim closing the books of the Company and the Subsidiaries
and determining the amount of relevant Taxes that would have been due had such
taxable period ended on the Closing Date, without regard to any events
occurring after the Closing Date. Any Taxes for such taxable period in excess
of the foregoing amount will be deemed to be attributable to the portion of
such taxable period occurring after the Closing Date. To the extent any Taxes
are not susceptible to such allocation, such Taxes shall be allocated by
apportionment on the basis of elapsed days.
(f) After the Closing Date, Buyer shall promptly notify
the Shareholder in writing of any written notice of a proposed assessment or
claim in an audit or administrative or judicial proceeding involving the
Company which, if determined adversely to the Company or any Subsidiary would
be grounds for indemnification under Section 6.2; provided, that a failure to
give such notice will not affect a Buyer Indemnitee's right to indemnification
under Section 6.2 except to the extent, if any, that, but for such failure, the
Shareholder could have avoided or mitigated the Tax liability in question.
(g) Except as provided in Section 5.3(h) below, in the
case of an audit or administrative or judicial proceeding that relates to any
Taxable period of the Company or any Subsidiary ending on or prior to the
Closing Date, the Shareholder shall have the right at its own expense to
control the conduct of such audit or proceeding; provided that within 30 days
after the Shareholder has received the written notice from Buyer that is
required under Section 5.3(f) above, and prior to taking any action with
respect to such audit or administrative or judicial proceeding, the Shareholder
acknowledges in writing its liability under Section 5.3(g) of this Agreement to
the Buyer Indemnitees; provided, further, that the Shareholder may not agree to
a settlement or compromise to any such audit or proceeding that may reasonably
be expected to have an adverse effect on the tax liability of the Company or
any Subsidiary for a taxable period after the Closing Date without the prior
written consent of Buyer, which consent shall not be unreasonably withheld;
provided, further, that if Buyer does not consent to such settlement or
compromise, the Shareholder's liability to indemnify Buyer Indemnitees as a
result of such audit or proceeding shall be limited to the amount that the
Shareholder would have paid had Buyer consented to such settlement or
compromise. Buyer also may participate in any such audit or proceeding at its
own expense and, if the Shareholder does not assume the defense of any such
audit or proceeding, Buyer may defend the same at its own expense in such
manner as it may deem appropriate, including, but not limited to, settling such
audit or proceeding, without any effect to any Buyer Indemnitee's right to
indemnification under Section 6.2.
(h) Notwithstanding the above, any contest and/or
settlement of any issue raised in an official inquiry, examination or
proceeding that relates to the validity or effect of the Election will be
conducted by Buyer and the Company.
(i) In the case of an audit or administrative or judicial
proceeding that relates to the Interim Period, Buyer shall, at its own expense,
control the conduct of such audit or proceeding; provided that Buyer may not
agree to a settlement or compromise in any such audit or proceeding without the
prior written consent of the Shareholder, which consent shall not be
unreasonably withheld. The Shareholder also may participate in any such audit
or proceeding at its own expense.
5.4. Restrictive Covenants. The Shareholder and its Affiliates acknowledge
that (i) Buyer, as the purchaser of the Stock, is and will be engaged in the
Business; (ii) the Shareholder and its Affiliates are intimately familiar with
the Business; (iii) the Business is currently conducted throughout the United
States of America; (iv) the Shareholder and its Affiliates have had access to
trade secrets of, and confidential information concerning, the Business;
(v) the agreements and covenants contained in this Section are essential to
protect the Business and the goodwill being acquired by Buyer; and (vi) the
Shareholder and its Affiliates have the means to support themselves other than
by engaging in a business substantially similar to the Business and the
provisions of this Section will not impair such ability.
(a) Noncompete. For a period commencing on the date
hereof and terminating on the five-year anniversary of the date hereof (the
"Restricted Period"), neither the Shareholder nor any of its controlled
Affiliates shall, anywhere in the Target Area (defined below), directly or
indirectly, acting individually or as the owner, shareholder, partner, or
employee of any entity, (i) engage in the operation of any equipment rental or
leasing business that is competitive with Buyer, the Company or a Subsidiary,
or their respective Affiliates; (ii) render any services to or for the benefit
of, or assist in or facilitate the solicitation of customers for, or receive
remuneration in the form of commissions or otherwise from, any business engaged
in such activities; or (iii) receive or purchase a financial interest in, make
a loan to, lease property to, or make a gift in support of, any such business
in any capacity, without limitation, as a sole proprietor, partner,
shareholder, principal, agent, trustee or lender; provided, however, that the
Shareholder may (A) sell equipment manufactured by the Shareholder or its
Affiliates; (B) grant dealerships (provided, that during the twelve-month
period beginning on the date hereof, the Shareholder shall not, and shall cause
its controlled Affiliates to not, grant or permit to be established any new
dealership located within a 50 mile radius of the 17 Company and Subsidiary
locations in existence as of the date hereof; (C) establish Shareholder-owned
sales offices for the sale of equipment manufactured by the Shareholder or its
Affiliates to a customer who is the end-user of such equipment; (D) provide
financing for the purchase of equipment manufactured by the Shareholder or its
Affiliates pursuant to bona fide sales arrangements; (E) own, directly or
indirectly, solely as an investment, securities of any business traded on any
national securities exchange or NASDAQ, provided that neither the Shareholder
nor any of its Affiliates is a controlling person of, or a member of a group
which controls) such business and further provided that the Shareholder and its
Affiliates do not, in the aggregate, directly or indirectly, own five percent
(5%) or more of any class of securities of such business; and (F) own, directly
or indirectly, solely as an investment, securities of any business other than
those described in item (E) above, provided that neither the Shareholder nor
any of its Affiliates is a controlling person of, or a member of a group which
controls, such business and further provided that the Shareholder and its
Affiliates do not, in the aggregate, directly or indirectly, own 20% or more of
any class of securities of business or group of related businesses, provided
further, that the aggregate amount of investments made by the Shareholder and
its Affiliates pursuant to this item (F) shall not exceed $2.5 million in any
entity or group of related entities or $10.0 million in the aggregate,
determined based on the value of the investment at the time it is made. The
Shareholder and Buyer acknowledge and agree that one hundred thousand dollars
($100,000.00) of the Closing Payment shall be allocated to the covenant not to
compete set forth in this Section. The Shareholder and Buyer shall use this
allocation for all Tax reporting purposes, including without limitation
preparation of IRS Form 8594 for their respective federal income Tax Returns,
and not to assert any other allocation in connection with any Tax Return, audit
or similar proceeding. For purposes of this Agreement, "Target Area" shall
mean the United States of America.
(b) Confidential Information. During the Restricted
Period and thereafter, the Shareholder and its controlled Affiliates shall keep
secret and retain in strictest confidence, all data and information relating to
the Business ("Confidential Information"), including without limitation,
know-how, trade secrets, customer lists, supplier lists, details of contracts,
pricing policies, operational methods, marketing plans or strategies, bidding
information, practices, policies or procedures, product development techniques
or plans, and technical processes; provided, however, that the term
"Confidential Information" shall not include information that (i) is or becomes
generally available to the public other than as a result of disclosure by the
Shareholder or any Affiliate thereof in violation of this Agreement, (ii) is
general knowledge in the equipment rental business and not specifically related
to the Business or (iii) the disclosure of which is required by law.
(c) Non-Solicitation. Without the consent of Buyer,
which may be granted or withheld by Buyer in its sole discretion, the
Shareholder and its Affiliates shall not solicit (other than through a general
solicitation that is not specifically targeted at the employees of Buyer, the
Company or any Subscriber) any employees of the Company or a Subsidiary to
leave the employ of the Company or the Subsidiary and join the Shareholder or
any Affiliate in any business endeavor owned or pursued by the Shareholder.
Without limiting the foregoing, prior to the eighteen-month anniversary of the
date hereof, the Shareholder and its Affiliates shall not hire any persons who
seek employment from the Shareholder or its Affiliates within 180 days after
such person's termination of employment with Buyer, the Company or their
respective Affiliates.
(d) Rights and Remedies Upon Breach. If the Shareholder
or any of its Affiliates breach, or threaten to commit a breach of, any of the
provisions of this Section (the "Restrictive Covenants"), Buyer shall have the
following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to
Buyer at law or in equity:
(i) Specific Performance. The right and remedy
to have the Restrictive Covenants specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or threatened breach of
the Restrictive Covenants would cause irreparable injury to Buyer and that
money damages would not provide an adequate remedy to Buyer. Accordingly, in
addition to any other rights or remedies, Buyer shall be entitled to injunctive
relief to enforce the terms of the Restrictive Covenants and to restrain the
Shareholder and/or its Affiliates from any violation thereof.
(ii) Accounting. The right and remedy to require
the Shareholder or Affiliate thereof to account for and pay over to Buyer all
compensation, profits, monies, accruals, increments or other benefits derived
or received by the Shareholder or Affiliate thereof as the result of any
transactions constituting a breach of the Restrictive Covenants.
(iii) Severability of Covenants. The Shareholder
acknowledges and agrees that the Restrictive Covenants are reasonable and valid
in geographical and temporal scope and in all other respects. If any court
determines that any portion of the Restrictive Covenants is invalid, the
remaining portions shall not thereby be affected and shall be given full
effect, without regard to the invalid portion. If any court determines that
any of the Restrictive Covenants, or any part thereof, is unenforceable because
of the duration or geographic scope of such provision, such court shall reduce
the duration or scope of such provision, as the case may be, to the extent
necessary to render it enforceable and, in its reduced form, such provision
shall then be enforced.
(iv) Enforceability in Jurisdiction. Buyer and
the Shareholder intend to and hereby confer jurisdiction to enforce the
Restrictive Covenants upon the courts of any jurisdiction within the geographic
scope of the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of Buyer and the
Shareholder (and their Affiliates) that such determination not bar or in any
way affect Buyer's right to the relief provided above in the courts of any
other jurisdiction within the geographic scope of the Restrictive Covenants as
to breaches of such covenants in such other respective jurisdictions, such
covenants as they relate to each jurisdiction being, for this purpose,
severable into diverse and independent covenants.
5.5. 401(k) Termination. The Shareholder shall take all actions necessary
to complete termination of the Company's 401(k) plan. As soon as possible
following the Closing Date, the Shareholder shall notify the trustee(s),
participants, plan administrator, payroll administrator, custodian and all
other affected parties, as necessary, that the Company's 401(k) Plan has been
terminated and that all contributions shall cease on and after the Closing
Date. The Shareholder Representatives shall (or shall cause appropriate third
parties to) distribute all of such Plan's assets to the participants as soon as
administratively feasible after the Closing Date in accordance with applicable
laws. To the extent permitted by law and the terms of the United Rentals, Inc.
401(k) Investment Plan, Buyer shall permit (but not require) such participants
to elect to roll over such assets directly to the United Rentals, Inc. 401(k)
Investment Plan. The Shareholder Representatives shall also take all actions
necessary to allow participants in such Plan who have outstanding Plan loans as
of the Closing Date and who become employees of Buyer to continue repaying
their Plan loans pending the distribution of their account balances, and to
allow such participants who become eligible to participate in the United
Rentals, Inc. 401(k) Investment Plan to elect to roll over the outstanding Plan
loans directly to the United Rentals, Inc. 401(k) Investment Plan. The
Shareholder shall be solely responsible for all costs and expenses incurred to
terminate the Company's 401(k) Plan.
5.6. UCC Termination Statements . As soon as practicable, the Shareholder
shall deliver to Buyer, at the Shareholder's sole cost and expense, UCC-3
termination statements that have been executed by the appropriate creditors
with respect to the obligations identified on Disclosure Schedule 5.6.
5.7. 338(h)(10) Election.
(a) Not later than November 15, 2000, the Shareholder
shall deliver to Buyer, in writing, the following information about the Company
and each Subsidiary (on a company-by-company basis): (i) the adjusted Tax basis
of each asset, (ii) the adjusted tax basis of the Shareholder in the Stock and
the adjusted Tax basis of the Company in the capital stock of each Subsidiary,
(iii) net operating losses and net operating loss carryforwards, capital losses
and capital loss carryforwards, and Tax credits and Tax credit carryforwards,
and other similar Tax attributes, if applicable, (iv) deferred gains and/or
losses from deferred inter-company transactions, and (v) such other Tax
information reasonably requested by Buyer upon not less than 10 day's prior
written notice. The foregoing information shall be determined as of the date
hereof. In addition to the foregoing, the Shareholder shall reasonably
cooperate with Buyer to coordinate making available to Buyer computer records
and electronic data regarding the Company's and the Subsidiaries' fixed assets
and fixed asset management systems.
(b) (i) At the election of Buyer, Buyer and the
Shareholder each shall file an election under Section 338(h)(10) of the Code
and under any comparable provisions of state, local, or foreign law with
respect to the purchase of the Shares (the "Election"). No later than the
120th day after the Closing Date, but in any event not prior to the 45th day
after the Shareholder delivers to Buyer the information reasonably required by
Buyer to permit Buyer to determine whether to make the Election, Buyer shall
notify the Shareholder whether Buyer will make the Election and shall provide
the Shareholder with Buyer's calculation of the Election Tax Costs. If the
Election is made, the Election Tax Cost (as determined hereunder) shall be paid
as additional Purchase Price by Buyer to the Shareholder (pro rata) and Buyer
and the Shareholder shall report, in connection with the determination of
Taxes, the transactions contemplated by this Agreement in a manner consistent
with the Election, the computation of the Election Tax Cost, the Aggregate
Deemed Sales Price (defined below) and the Deemed Sales Price Allocation
(defined below). The Shareholder and Buyer shall take no action which is
inconsistent with the Election or its validity under the Code and the
applicable Treasury Regulations.
(ii) Within five business days after written
notice is received from Buyer to the effect that the Election will be made and
requesting such forms, the Shareholder shall execute and deliver to Buyer five
copies of Internal Revenue Service Form 8023 provided by Buyer and any similar
forms under applicable state, local and foreign law (the "Election Forms").
(iii) If Buyer chooses to make the Election, Buyer
shall deliver to the Shareholder a written notice of its intention to file the
Election, together with Buyer's calculation of (A) the Aggregate Deemed Sales
Price, (B) the allocation thereof among the assets of the Company in accordance
with the principles of Treasury Regulations Section 1.338-4T (the "Deemed Sales
Price Allocation") and (C) the Election Tax Cost. The term "Aggregate Deemed
Sales Price" shall mean an amount resulting from the Election, determined
pursuant to applicable Treasury Regulations. The term "Election Tax Cost"
shall mean any additional Tax liability that will accrue to the Shareholder as
a result of the Election.
(iv) Buyer shall be responsible for the
preparation and filing of all forms and documents required in connection with
the Election. Buyer shall provide the Shareholder with copies of (A) any
reasonably necessary corrections, amendments, or supplements to Form 8023,
(B) all attachments required to be filed therewith pursuant to applicable
Treasury Regulations, and (C) any comparable forms and attachments with respect
to any applicable state, foreign, or local elections included as part of the
Election. The Shareholder shall execute and deliver to Buyer within five days
of receipt by the Shareholder such documents or forms as are required properly
to complete the Election. The Shareholder's obligations under the
immediately-preceding sentence shall not be limited or delayed by any
then-existing disagreement between the parties regarding the Election Tax Cost
or any other matter.
(v) The Shareholder and Buyer shall cooperate
fully with each other and make available to each other such Tax data and other
information as may be reasonably required by the Shareholder or Buyer in order
for the parties to (A) timely file the Election and any other required
statements or schedules (or any amendments or supplements thereto), (B) compute
the Modified Aggregate Deemed Sale Price and the Deemed Sale Price Allocation
and (C) compute the Election Tax Cost.
(vi) If Buyer makes the Election pursuant to
Section 5.7(b), Buyer shall pay to the Shareholder in cash the amount of the
Election Tax Cost (as then determined by Buyer) not later than the fifth
business day after making the Election. If, within thirty (30) days after
receipt by the Shareholder of Buyer's computation of the Election Tax Cost the
Shareholder shall have delivered to Buyer a written notice (an "ETC
Disagreement Notice") setting forth specific objections to Buyer's amount or
calculations of the Election Tax Cost, then during a period of 30 days
following delivery by the Shareholder of such ETC Disagreement Notice, Buyer
and the Shareholder shall attempt to resolve, in writing, any differences they
have with respect to any matter specified in the ETC Disagreement Notice and to
agree on the amounts of the calculations made in determining the Election Tax
Cost. If at the end of such 30 day period, Buyer and the Shareholder have
failed to reach written agreement then either Buyer or the Shareholder may
submit such disagreement to the Independent Accountant. The Independent
Accountant shall on or prior to the date that is 30 days after any information
reasonably requested by the Independent Accountant to be provided shall have
been received by the Independent Accountant, deliver to Buyer and the
Shareholder, a written statement stating that the calculations made in
determining the Election Tax Cost are correct or setting forth its resolution
of any specific items of disagreement and a calculation of any unpaid Election
Tax Cost based upon such resolution, which statement shall be final and binding
on the parties to this Agreement with respect to the amount of the Election Tax
Cost. Buyer shall pay any such unpaid Election Tax Cost to the Shareholder in
cash not later than the fifth business day after the later to occur of (x) the
date on which Buyer makes the Election and (y) the date on which Buyer receives
the Independent Accountant's statement. All fees and expenses payable to the
Independent Accountant incurred in connection with such disagreement and all
other expenses incurred in connection therewith shall be borne 50% by Buyer and
50% by the Shareholder.
5.8. Subsidiaries. The Shareholder shall use commercially reasonable
efforts, as soon as practicable after the date of this Agreement, to obtain and
deliver to Buyer certificates of existence and good standing for each
Subsidiary from the state under whose laws such Subsidiary was organized.
Without limiting the foregoing, the Shareholder shall promptly pay all
franchise taxes for the Subsidiaries for all periods ending prior to the date
hereof and shall file all necessary franchise tax records, public information
reports or similar reports for the Subsidiaries for such periods.
<PAGE>
ARTICLE 6
Indemnification
6.1. Survival; Etc.
(a) No Effect on Liability. None of (i) the consummation
of the transactions contemplated by this Agreement or the Related Agreements,
(ii) the delay or omission of any party to exercise any of its rights under
this Agreement or any Related Agreement or (iii) any investigation or
disclosure that any party makes, any notice that any party gives, or any
knowledge that any party obtains as a result thereof, or otherwise, shall
(A) affect the liability of the parties to one another for any Breach (defined
below) of this Agreement or any Related Agreement or (B) prevent any party from
relying on the representations or warranties contained in this Agreement or any
Related Agreement.
(b) Breach. As used herein, a party's "Breach" shall
mean any representation or warranty being untrue as of the time it was made by
such party or any breach of any of such party's covenants or agreements.
(c) Survival. The representations and warranties of
Buyer and the Shareholders made in this Agreement shall continue and survive
the consummation of the transactions described herein and therein until
September 30, 2003, other than (i) the representations and warranties set forth
in Section 3.6(h), which shall continue and survive until September 30, 2005,
and (ii) the representations and warranties set forth in Sections 3.1(b),
3.1(c), 3.1(d), 3.3, 3.5(b), 3.5(d), 3.5(e), 3.6(e), and 3.6(g), each of which
shall continue and survive until the expiration of the statute of limitations
applicable to the subject matter of such representation and warranty. No party
shall have any liability under this Article 6 unless written notice of a claim
hereunder is given prior to the expiration of the applicable survival period.
The parties' liability under this Article 6 shall terminate, except as to
claims previously asserted, upon expiration of the applicable survival period.
6.2. Indemnification of Buyer. Subject to the other provisions of this
Article, the Shareholder shall defend, indemnify and hold Buyer, together with
its respective directors, officers, employees, shareholders, subsidiaries,
agents, advisors, attorneys, accountants, consultants and Affiliates (including
without limitation the Company and the Subsidiaries) (collectively, the "Buyer
Indemnitees"), harmless from and against, and promptly reimburse the Buyer
Indemnitees for, any loss, expense, damage, deficiency, liability, claim or
obligation, including without limitation investigative costs, costs of defense,
settlement costs (subject to approval as provided below) and attorneys' and
accountants' fees (collectively, "Losses") that any Buyer Indemnitee incurs or
to which any Buyer Indemnitee becomes subject (directly or indirectly,
including without limitation by virtue of the occurrence of any Losses at the
Company and including without limitation future costs and expenses reasonably
expected to be incurred in connection with any Loss), which Losses arise out of
or in connection with (i) any Breach by any Seller of any provision of this
Agreement, (ii) any claim asserted by any third party that, assuming the truth
thereof, would constitute a Breach by any Seller of any provision of this
Agreement, (iii) any obligation in connection with any transaction listed on,
or improperly omitted from, Disclosure Schedule 3.6(f), (iv) the Proceedings,
whether or not listed on Disclosure Schedule 3.5(c), (v) any Tax in excess of
the applicable funded reserve for accrued but unpaid Taxes owed by the Company
or a Subsidiary for any period (or portion of a period) prior to the date
hereof, (vi) any promissory note, installment sales contract or similar
arrangement of any customer of the Company or a Subsidiary entered into or
agreed to prior to the date hereof and pursuant to which the Company or a
Subsidiary is or may be contingently liable as a guarantor or other obligor
either with limited or full recourse, or (vii) any claim, suit or other legal
action arising against the Company, Buyer or their Affiliates after the Closing
Date based on events occurring or circumstances existing prior to August 10,
2000, that would have been required to be listed on Disclosure Schedule 3.5(c)
if such claim, suit or other legal action had been asserted prior to the
Closing Date or (viii) any Adjustment in excess of $500,000.
6.3. Indemnification of Shareholder. Subject to the other provisions of
this Article 6, Buyer shall defend, indemnify and hold the Shareholder,
together with its directors, officers, employees, shareholders, subsidiaries
(other than the Company and the Subsidiaries), agents, advisors, attorneys,
accountants, consultants and Affiliates (collectively, the "Shareholder
Indemnitees"), harmless from and against, and promptly reimburse the
Shareholder Indemnitees for, Losses that any Shareholder Indemnitee incurs or
to which any Shareholder Indemnitee becomes subject (directly or indirectly and
including without limitation future costs and expenses reasonably expected to
be incurred in connection with any Loss), which Losses arise out of or in
connection with (i) any Breach by Buyer of any provision of this Agreement, or
(ii) any claim asserted by any third party that, assuming the truth thereof,
would constitute a Breach by Buyer of any provision of this Agreement.
6.4. Indemnification. The indemnifying party (the "Indemnitor" or
"Indemnified Party") shall promptly pay or reimburse to the indemnified party
(the "Indemnitee" or "Indemnifying Party") the amount of all Losses, minus the
amount of any insurance proceeds actually received by the Indemnified Party as
a result of the Losses, after the amount of any such Loss (less insurance
proceeds actually received) and the Indemnitor's liability therefor is
established by (a) agreement in writing between Indemnitor and the Indemnitee
or (b) by a final judgment of a court of competent jurisdiction (any Loss (less
insurance proceeds actually received) so determined is referred to herein as
an " Established Loss"). If the Indemnitor does not pay to the Indemnitee the
amount of the Established Loss on or before the 30th day after the
determination described in item (a) or (b) above, then on the 31st day after
such determination, the amount of the Established Loss payable by the
Indemnitor shall bear interest at a rate of interest per annum that shall, from
day to day, equal the lesser of (i) the variable rate of interest published in
the Money Rates section of The Wall Street Journal (or the comparable section
of such newspaper) as the prime rate of interest on corporate loans at large
United States money center commercial banks and (ii) the maximum rate allowed
under applicable law. If any Established Loss is outstanding and unpaid on the
date on which the Indemnitee is obligated to pay any amount to the Indemnitor
(either pursuant to this Agreement or any other agreement between the
Indemnitor and the Indemnitee), then the Indemnitee may set off such
Established Loss against the amount due and payable to the Indemnitor.
Notwithstanding anything to the contrary contained in this Agreement, in no
event shall Losses or Established Losses include any exemplary, punitive,
special, indirect, consequential, remote or speculative damages unless such
damages are payable to a third party.
Buyer's indemnification obligations under this Article 6 are for the
exclusive benefit of the Shareholder, enforceable only by the Shareholder, and
the Shareholder's indemnification obligations under this Article 6 are for the
exclusive benefit of Buyer, enforceable only by Buyer.
6.5. Limitation on Shareholder's Indemnity.
(a) Basket. The Shareholder shall not have any liability
to any Buyer Indemnitee for indemnifiable Losses until the Indemnitee's Losses
(together with other Buyer Indemnitees' Losses) exceed $900,000, and then the
Indemnitor shall indemnify the Indemnitees pursuant to this Article 6 to the
full amount of all Losses in excess of such one-time deductible amount suffered
by any Buyer Indemnitee. The Shareholder's liability to indemnify each Buyer
Indemnitee for any Loss resulting from a breach of Sections 3.1(b), 3.1(c),
3.2(c), 3.3, 3.4(c), 3.5(b), 3.5(c) or 3.6(g), or to indemnify each Buyer
Indemnitee under Section 6.2(vii) or 6.2(viii), shall be absolute and shall not
be limited by the terms of the first sentence of this Section 6.5.
(b) Maximum Indemnity. The Shareholder shall not be
required to indemnify Buyer Indemnitees under this Article 6 in an aggregate
amount greater than $20,000,000; provided however, that notwithstanding
anything in this Agreement to the contrary, the limitation set forth in this
subsection shall not apply to Losses (i) arising out of or related to a Breach
of the representations and warranties set forth in Sections 3.1(b), 3.1(c),
3.1(d), 3.3, 3.5(b), 3.5(c), 3.6(g)(i), or 3.6(g)(iii), (ii) for which the
Shareholder is obligated to indemnify any Buyer Indemnitee under Section 6.2
(vii) to the extent such Losses arise out of any claim, suit or other legal
action against the Company or any Subsidiary based on any allegation that any
product or service sold, rented, leased, provided or otherwise furnished by the
Company or any Subsidiary was: dangerous, defectively operated, labeled with
defective warning labels or not labeled or otherwise marked with appropriate
warnings, or delivered or made available with defective operator training or
otherwise without adequate operator training, (iii) that are indemnifiable
under Section 6.2(iv), or (iv) that are attributable to Shareholder's fraud or
wilful misconduct.
6.6. Notice and Opportunity to Defend.
(a) Notice, Etc. If any Indemnified Party receives
notice of any third-party claim or commencement of any third-party action or
proceeding (an "Asserted Liability") with respect to which any Indemnifying
Party is obligated to provide indemnification pursuant this Article 6, the
Indemnified Party shall promptly give all Indemnifying Parties notice thereof.
The Indemnified Party's failure so to notify an Indemnifying Party shall not
cause the Indemnified Party to lose its right to indemnification under this
Article, except to the extent that such failure materially prejudices the
Indemnifying Party's ability to defend against an Asserted Liability that such
Indemnifying Party has the right to defend against hereunder (and except as
otherwise set forth in this Article). Such notice shall describe the Asserted
Liability in reasonable detail, and if practicable shall indicate the amount
(which may be estimated) of the Losses that have been or may be asserted by the
Indemnified Party. Each of the Indemnifying Parties may defend against an
Asserted Liability on behalf of the Indemnified Party utilizing counsel
reasonably acceptable to the Indemnified Party, unless (i) the Indemnified
Party reasonably objects to such assumption on the grounds that counsel for
such Indemnifying Parties cannot represent both the Indemnified Party and the
Indemnifying Parties because such representation would be reasonably likely to
result in a conflict of interest or because there may be defenses available to
the Indemnified Party that are not available to such Indemnifying Parties,
(ii) the Indemnifying Party is not capable (by reason of insufficient financial
capacity, bankruptcy, receivership, liquidation, managerial deadlock,
managerial neglect or similar events) of maintaining a reasonable defense of
such action or proceeding, or (iii) the action or proceeding seeks injunctive
or other equitable relief against the Indemnified Party.
(b) Defense Costs. If any Indemnifying Party defends an
Asserted Liability, it shall do so at its own expense and shall not be
responsible for the costs of defense, investigative costs, attorney's fees or
other expenses incurred to defend the Asserted Liability (collectively,
"Defense Costs") of the Indemnified Party (which may continue to defend, at its
own expense). If the Indemnified Party assumes the defense of an Asserted
Liability by reason of clauses (i), (ii) or (iii) of Subsection (a) above, or
because the Indemnifying Party has not elected to assume the defense, then such
Indemnifying Party shall indemnify the Indemnified Party for its Defense Costs;
provided, however, the Indemnifying Parties shall not be liable for the costs
of more than one counsel for all Indemnified Parties in any one jurisdiction.
An Indemnifying Party may settle any Asserted Liability only with the consent
of the Indemnified Party, which consent shall not be unreasonably withheld.
(c) Third Party Claims. The parties shall cooperate with
each other with respect to the defense of any claims or litigation made or
commenced by third parties subsequent to the date hereof with respect to which
indemnification is not available (for any reason) under this Article, provided
that the party requesting cooperation shall reimburse the other party for the
other party's reasonable out-of-pocket costs and expenses of furnishing such
cooperation.
6.7. Delays or Omissions, Etc. Except as provided in Section 6.1 and
Section 6.6(a), no delay or omission to exercise any right, power or remedy
inuring to any party upon any breach or default of any party under this
Agreement or any Related Agreement shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Neither the exercise of nor the failure to exercise any remedy
under this Agreement or any Related Agreement will constitute an election of
remedies or limit in any manner enforcement of any remedies. All remedies
either under this Agreement or any Related Agreement or by law or otherwise
afforded to the parties shall be cumulative and not alternative.
ARTICLE 7
Miscellaneous
7.1. Governing Law; Attorneys' Fees. This Agreement shall be governed by,
construed, interpreted and applied in accordance with the laws of the State of
Delaware, without giving effect to any conflict of laws rules that would refer
the matter to the laws of another jurisdiction.
Each party hereto hereby irrevocably submits to the jurisdiction of the
state or federal courts located in New Castle County, Delaware, for the
purposes of any action arising out of this Agreement or any of the Related
Agreements, or the subject matter hereof or thereof, brought by any other party.
To the extent permitted by applicable law, each party hereby waives and
agrees not to assert, by way of motion, as a defense or otherwise in any such
action, any claim (i) that it is not subject to the jurisdiction of the
above-named courts, (ii) that the action is brought in an inconvenient forum,
(iii) that it is immune from any legal process with respect to itself or its
property, (iv) that the venue of the suit, action or proceeding is improper or
(v) that this Agreement or any Related Agreement, or the subject matter hereof
or thereof, may not be enforced in or by such courts.
The prevailing party in any action or proceeding relating to this
Agreement or any Related Agreement shall be entitled to recover reasonable
attorneys' fees and other costs from the non-prevailing parties, in addition to
any other relief to which such prevailing party may be entitled.
7.2. Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the permitted assigns, successors, heirs,
executors and administrators of the parties hereto. This Agreement may not be
assigned without the written consent of all other parties and any attempted
assignment without such consent shall be null and void; provided, however,
Buyer may assign all of its rights and obligations hereunder to one of its
Affiliates.
7.3. Entire Agreement; Amendment. This Agreement (including the Disclosure
Schedules and Exhibits hereto), the other documents delivered pursuant hereto
and referenced herein constitute the full and entire understanding and
agreement between the parties and supersede any other agreement, written or
oral, with regard to the subject matter hereof. This Agreement supersedes the
letter of intent dated August 9, 2000, between United Rentals, Inc. and the
Shareholder. Except as expressly provided herein, neither this Agreement nor
any term hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by the parties hereto.
7.4. Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid with return receipt requested, telecopy (with
hard copy delivered by overnight courier service), or delivered by hand,
messenger or overnight courier service, and shall be deemed given when received
at the addresses of the parties set forth below, or at such other address
furnished in writing to the other parties hereto.
If to the Company: Horizon High Reach, Inc.
1440 Searidge Drive
Newport Beach, California 92660
Attn: Shaun Flanagan
Tel: (949) 640-6233
Fax:(949) 640-6033
If to Buyer: United Rentals (North America), Inc.
Five Greenwich Office Park
Greenwich, CT 06830
Attn: John N. Milne
Tel: (203) 622-3131
Fax: (203) 622-6080
with a copy to: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: Tom D. Harris
Tel: (214) 651-5000
Fax: (214) 651-5940
If to the Shareholder: W.R. Carpenter North America, Inc.
7433 N. First Street
Fresno, California 93720
Attn: Graham Croot, Chief
Financial Officer
Tel: (559) 353-3953
Fax: (559) 353-3958
with a copy to: Heller Ehrman White & McAuliffe LLP
333 Bush Street, Suite 3100
San Francisco, California 94104
Attn: James Olson, Esq.
Tel: (415) 772-6391
Fax: (415) 772-6268
7.5. No Third Party Beneficiary, Etc. There shall be no third party
beneficiary hereof. Neither the availability of, nor any limit on, any remedy
hereunder shall limit the remedies of any party hereto against third parties.
7.6. Reformation; Severability. In case any provision hereof shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement thereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
7.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Any counterpart may be delivered
by facsimile; provided that attachment thereof shall constitute the
representation and warranty of the person delivering such signature that such
person has full power and authority to attach such signature and to deliver
this Agreement. Any facsimile signature shall be replaced with an original
signature as promptly as practicable.
7.8. Titles and Subtitles. The titles of the paragraphs and subparagraphs
hereof are for convenience of reference only and are not to be considered in
construing this Agreement. References to "Sections" herein are references to
sections of this Agreement. The words "herein," "hereof," "hereto" and
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision.
7.9. Expenses. Except as otherwise expressly provided herein, each party
hereto will bear its respective costs and expenses incurred in connection with
the preparation, execution and performance of this Agreement, the Related
Agreements and the transactions contemplated herein or therein, including
without limitation all fees and expenses of agents, representatives, counsel
and accountants; provided, however, that the Shareholder shall be solely
responsible for the third-party expenses of the Company incurred in connection
with the transactions contemplated herein and such expenses shall not be paid
out of the assets of the Company.
7.10. Sellers' Knowledge. When a representation or warranty in Article 3 is
made to the knowledge of the Sellers, it means receipt of notice by, or actual
knowledge of, such fact or matter by any of the following individuals: Graham
Croot, Randall Fortel, Shaun Flanagan, Rick Penkert, and Kevin Parr. No
representation or warranty made by the Sellers may be qualified or limited by
reference to the knowledge of the Sellers unless due inquiry has actually been
made by the persons described in this Section 7.10.
' ' ' ' '
<PAGE>
This Agreement has been executed and delivered as of the date first
written above.
The Company:
HORIZON HIGH REACH, INC.
By:
Randall Fortel, Chief Financial Officer
and Secretary
The Shareholder:
W.R. CARPENTER NORTH AMERICA, INC.
By:
Graham Croot, Chief Financial Officer
and Vice President
The Buyer:
UNITED RENTALS (NORTH AMERICA), INC.
By:
John N. Milne, Vice Chairman
<PAGE>
EXHIBIT A
CERTIFICATE OF CLOSING PAYMENT CALCULATION
This Certificate is provided pursuant to Section 1.2(a) of the Stock
Purchase Agreement dated September 28, 2000, among Horizon High Reach, Inc. and
its shareholder, W. R. Carpenter North America, Inc. and United Rentals (North
America), Inc. We hereby certify that the calculations set forth in this
Certificate and the information in the attached schedules are accurate and
correct.
-
A BASE PURCHASE PRICE $50,000,000
MINUS:
Determination Time' Funded Debt (Schedule 1)............___,___.__...
PLUS OR MINUS:
C The difference between July 30, 2000, Net Working
Capital and Determination Time Net Working Capital ___,___.__
(Schedule 2).
PLUS:
D Invoice Value of Rental Equipment or other
Capitalized Personal Property or Equipment Purchased $___,___.__
After July 30, 2000 (Schedule 3).............
MINUS:
E Original Cost of Equipment and Inventory or other
Capitalized Personal
Property or Equipment at July 30, 2000, that is $___,___.__
missing, nonexisting, sold, or
not available for rent at Determination Time
(Schedule 4)..
CLOSING PAYMENT TO SHAREHOLDER (SUM OF ROW A MINUS
ROW B PLUS OR MINUS ROW C PLUS ROW D MINUS ROW E:)......$___,___.__.
Certified By: Accepted By:
W. R. CARPENTER NORTH AMERICA, INC. UNITED RENTALS (NORTH AMERICA), INC.
By: By:
Graham Croot, Chief Financial John N. Milne, Vice Chairman
Officer and Vice President
'For purposes of preparing this Exhibit A, "Determination Time" means August
10, 2000.
<PAGE>
EXHIBIT B
OPINION OF COUNSEL TO SELLERS
The Opinion Letter may be governed by the Legal Opinion Accord of the ABA
Section of Business Law (1991). Capitalized terms used but not described
herein shall have the meanings assigned thereto in the Stock Purchase Agreement
(the "Agreement").
1. The Company is a corporation incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to own its properties and to engage in its
business as presently conducted.
2. The Agreement has been duly authorized by all necessary corporate
action on behalf of the Company and has been duly executed and delivered by (as
applicable) the Company and the Shareholder. Each Related Agreement has been
duly authorized by all necessary corporate action on behalf of the Company and
the Shareholder and has been duly executed and delivered by (as applicable) the
Company and the Shareholder. The Shareholder has received the consent to the
sale of the Company to United from the holders of the 10.625% Senior
Subordinated Notes of the Shareholder pursuant to the Indenture dated as of
June 10, 1997 (the "Indenture"). The Information Statement pursuant to which
the Shareholder solicited such consent complied as to form in all material
respects with the Securities Exchange Act of 1934, the Trust Indenture Act of
1940 and the Indenture.
3. If a court were to apply the law of California to the interpretation
and enforcement of any of the Related Agreements, such Related Agreement would
be a valid and binding obligation of (as applicable) the Company and the
Shareholder, enforceable against (as applicable) the Company and the
Shareholder in accordance with its terms, subject, as to enforcement, (i) to
bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws
of general applicability relating to or affecting creditors' rights and (ii) to
general principles of equity, whether such enforceability is considered in a
proceeding in equity or at law.
4. The authorized capital stock of the Company consists of 1,000 shares of
common stock, no par value, of which 1,000 shares are issued and outstanding.
All of the issued and outstanding shares of capital stock of the Company (the
"Stock") have been duly authorized and validly issued and are fully paid and
nonassessable. To our knowledge, (i) none of the shares of the Stock were
issued in violation of preemptive rights of any person or entity, and (ii)
there are no outstanding preemptive, conversion or other rights, or other
options, warrants or agreements granted by, issued by, or binding on, the
Company or the Subsidiaries for the issuance, purchase, redemption or
acquisition of their equity securities.
5. If a court were to apply the Uniform Commercial Code as in effect in
California to determine the effect of the transfer of the Stock, and United
pays the consideration for the Stock as provided in the Agreement and does not
have knowledge of any adverse claim to the Stock, then upon delivery of the
Stock to United, United will acquire the Stock free and clear of all adverse
claims.
6. Neither the execution and delivery of the Agreement or any Related
Agreement to which the Company or the Shareholder are a party, nor the
consummation of any or all of the transactions contemplated thereby (a)
conflicts with any provision of the certificate of incorporation (or, as
applicable, articles of incorporation) or bylaws of the Company, (b) after
giving effect to the third-party consents obtained by the Sellers and delivered
as required by the Agreement, results in a creation or imposition of any Lien
upon the assets or Stock of the Company or any Subsidiary or violates any
contract listed in Disclosure Schedule 3.4(d) to the Agreement (the "Listed
Agreements"), (c) to our knowledge, violates any statute, law, regulation or
rule, or any judgment, decree or order of any court or governmental body
applicable to the Company, any Subsidiary or the Shareholder.
7. No consent, approval or authorization of, or declaration, filing or
registration with, any governmental body is required (other than such as
disclosed in Disclosure Schedule 3.1(e) or otherwise have been obtained or
made) in connection with the execution, delivery and performance of the
Agreement or any Related Agreements to which any Seller is a party or the
consummation of the transactions contemplated in such agreements.
8. To our knowledge, except as set forth in the Disclosure Schedules to
the Agreement, (i) no action, suit, proceeding, litigation, or investigation is
pending or threatened (a) against the Company, the Shareholder or any
Subsidiary, or (b) against any officers or directors of the Company or any
Subsidiary, with respect to the Company or the transactions contemplated by the
Agreement and the Related Agreements, and (ii) no order, writ, injunction,
judgment or decree of any court or government agency or instrumentality exists
to which the Company, the Shareholder or any Subsidiary is a party relating to
or affecting the Company or any Subsidiary or the transactions contemplated by
the Agreement and the Related Agreements.
<PAGE>
EXHIBIT C
OPINION OF COUNSEL TO BUYER
The Opinion Letter may be governed by the Legal Opinion Accord of the
ABA Section of Business Law (1991). Capitalized terms used but not described
herein shall have the meanings assigned thereto in the Stock Purchase Agreement
(the "Agreement").
1. Buyer is a corporation incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to own its properties and to engage in its business as
presently conducted.
2. The Agreement has been duly authorized by all necessary corporate action on
the part of Buyer and has been duly executed and delivered by Buyer. Each
Other Agreement to which Buyer is a party has been duly authorized by all
necessary corporate action on the part of Buyer and has been duly executed
and delivered by Buyer.
3. The Agreement and each Other Agreement to which Buyer is a party is
enforceable against Buyer subject to the General Qualifications.
